The covid-19 pandemic has only sharpened the dilemma
In the 1980s comedy, “Trading Places”, Jamie Lee Curtis plays a prostitute who has been saving for her future; she has $42,000 “in t-bills, earning interest”.
If she followed the same strategy today, she would be disappointed with the return.
The one-year Treasury bill yields 0.13%, so her annual interest income would be just $55. If she reinvested the income, it would take more than 530 years for her money to double.
Savers around the world face the same problem.
Bank accounts, money-market mutual funds and other short-term instruments used to offer a decent return.
Not any more
Rates are lower in nominal terms than they were 30 years ago because of a long-term decline in inflation, but they are also lower in real terms.