“Now for a few words about interest rates, the work of the Federal Reserve in driving them down, and some little-mentioned effects and lack of effects of an easy-money policy. Sure, in a time of business uncertainty and weakness, it’s good policy to lower the cost of money and to provide tons of liquidity so that businesses can stay afloat. But rarely do we see any discussion of other interests, class interests, in lower interest rates,” writes Ben Stein in this week’s .

“Reducing interest rates is great for stockholders and business owners and employees and new home buyers. And all of us stockholders and owners of homes we cannot afford like that a lot.”

“But there is a vast class of Americans for whom lower interest rates are poison: People who live off their savings. Not every American owns stocks or businesses, and many don’t own their own homes. But tens of millions of Americans have a big interest in getting as much income as they can from their savings. Mostly, they are retirees and others living on interest.”

“They are rarely polo-playing heirs and heiresses. Usually, they are just men and women who obeyed the social and personal urge to be frugal and to save so they would have interest to live on later in life, and maybe leave something for their children.”

“When Alan Greenspan lowers interest rates, the retirees in Palm Springs, California or Heber Springs, Arkansas, living on the interest from savings, often lose income. With rates on one-year CDs and money-market accounts cut roughly in half from what they were less than a year ago, some savers and retirees face dramatic, staggering cuts in their income. A million dollars invested in bills and notes at 6% is a very comfortable living for most people. At 3%, the million dollars is not enough to maintain the same level of comfort.”

“Longer-term investments may be too risky for older people unwilling to accept the risk to principal if inflation comes back.”

“Unfortunately, we have a situation where savers — doing what society says they should — cannot, with a safe, liquid investment, get a return that is greater than zero, after adjustment for inflation and taxes. That is, if we’re getting 3.5% in a money fund, and we pay 50% in federal and state tax, as we do in Gray Davis’s California or George Pataki’s New York, that leaves us with about 1.8 % interest, considerably less than the inflation rate of the past 12 months.”

“Social consequences of lower interest rates hit other classes in the economy as well. It used to be said, long ago in the Kennedy era and again in the Reagan era, that ‘… a rising tide lifts all boats.’ A very wise and fondly remembered economist named Herbert Stein (my father) added a footnote: ‘It doesn’t lift the boats that are under water.’ “