The great American bank robbery

The largest bank robbery in history is in process, but no police cars have been dispatched to the scene of the crime.

That's because no bank is being robbed. Instead, the banks are robbing their depositors.

While all depositors are victims, some people are suffering greater losses than others. I call them the "Solvent Seniors."

You are a Solvent Senior if you are old enough to be collecting Social Security, and your income on your savings is (or was) greater than your Social Security benefits.

We're talking about millions of people.

According to the "Basic Facts of Social Security," 48 percent of married couples and 28 percent of single people have more income from savings and other sources than from Social Security.

We're not talking about rich people here, just people who saved to maintain their independence and dignity in their old age.

Television economist Lawrence Kudlow raves on CNN about the opportunities in bank stocks and how much money banks can make with virtually no cost for deposits.

What Kudlow and the other talking heads don't mention is that the same conditions are a disaster for Solvent Seniors. Worse, this can become a long-term disaster.

If you're retired and get half your retirement income from interest on your savings, current interest rates translate into a whopping 23 percent drop in income from 2006, just a few years ago.

What neither political party nor the Federal Reserve will admit is that every dime our banking system is making through low deposit costs is coming out of the pockets of savers. Some would call this theft, even though it isn't being done with a gun. Others may say it's a tax that doesn't have to be called a tax. You decide.

Based on $7 trillion of bank deposits, what is happening amounts to a gigantic income transfer.

The income goes straight from Solvent Seniors and others to the bankers. No bullets fired, no blood on the floor, no awkward displays of public carnage.

Of course, the same below-inflation interest rates also make it easier for the federal government to pay the interest on our massive federal debt. Skeptical? Then consider recent history.

In early 2006 the yields on guaranteed investments such as Treasurys and CDs were nearly 1 percent better than the rate of inflation.

That's quite low by historical standards.

But now, even a five-year Treasury note is yielding 1 percent a year less than the trailing inflation rate. A six-month CD yields a whopping 3 percentage points less than the trailing inflation rate.At the beginning of 2006, the average six-month CD yielded 4.69 percent; this year it was 0.30 percent.

But that's not all.

While income is down this year, the longer this goes on, the greater the long-term impact.

One impact will be more seniors going broke. If the Solvent Seniors don't reduce their spending, they will run out of money before they die.

Questions: scott@scottburns.com