Note: Next week we are going to examine the “causality” of low interest rates and easy monetary policy and their connection with the mediocre recovery we have experienced. I am going to argue that the US economy has recovered (to the modest extent that it has) in spite of monetary policy, not because of it, just as economies have in every recovery since the Medes were trading with the Persians. Current Fed policy is actually distorting the process, not helping it.
The Federal Reserve’s choice to keep interest rates near zero for years on end has exacted a direct and sometimes devastating human cost. Real people who worked hard all their lives and made sensible decisions about retirement are, to be blunt, getting the shaft.
I thought about this at the Camp Kotok economic retreat in Maine a few weeks ago. The little town of Grand Lake Stream is beautiful, remote, and poor. Our group’s annual visit gives a big boost to the local economy. The residents roll out the red carpet and make us feel very much at home.
Attending the event every year for over a decade, I’ve come to know many of the locals. They are fine people who love their home and want only to live there in peace. They are far more like the people I grew up with out in the West Texas country than many of the denizens here in downtown Dallas. I know they struggle financially but had never really asked them for details. This time I did.
My son Trey, my colleague Patrick Watson, and I were out in a small boat in the middle of a big lake. With us was our guide, Jeff Cochran. Jeff spent 30 years working hard at a Maine paper mill. Patrick and I were talking about economics, of course, and we drew Jeff into the conversation.
Jeff retired from the paper mill with a small pension that he had to roll into a 401(k) that at one time would have enabled a modest living. Now, thanks to the Fed, it doesn’t. He earns extra income as a fishing and hunting guide but is still drawing down his pension far faster than experts would advise. I asked him about that, and he admitted that he was truly living on the edge.
He’s not the only one. Many of his neighbors are in similar situations. People all over the country are just folks who played by the rules and then found out the rules could change. It’s easy for someone like me to look at aggregate numbers and pontificate. Then I see the people behind those numbers, and it all becomes very real. I have been carrying around a true sense of outrage ever since that morning at Grand Lake Stream.
The folks of Grand Lake Stream don’t sit around waiting for charity. They work hard and always with a smile. I’ve actually never been there except to attend Camp Kotok, but I need to go more often. For a lifelong Texan, upstate Maine is about as far out of bounds as you can get.
If you want a Maine fishing or hunting getaway, Jeff can fix you up. You can reach him by email at [email protected]. I also recommend either Leen’s Lodge or Canalside Cabins for lodging. All these people know each other and will take good care of you.
Consider the trip to Grand Lake Stream your own little economic stimulus plan. I guarantee it will be far more effective than anything the central banks are doing. And you might find it as restful and stimulating as I have.