Back when the dollar was sound, American families invested in
simple - and safe - instruments like savings bonds. Now, thanks to
Washington's inflationary policies, they have to chase higher - and
riskier - returns.
The American Institute for Economic Research (AIER) first
published a book called "How to Invest Wisely" in 1947. Since then
there have been vast changes in the United States and world
economies, especially in the financial markets. One of the biggest
changes has been the relentless erosion in the purchasing power of
Six decades ago, the phrase "sound as a dollar" meant something.
It didn't have the ironic ring it has today. At that time, Americans
believed that the dollar was "good as gold." Most families' wealth
consisted of savings accounts, savings bonds, life insurance
policies, and money tucked away in cookie jars and shoe boxes.
Today, even working-class and middle-class families typically are
invested in the stock market. Some of the pension funds they will
need when they retire may, in fact, be invested in high-risk stocks,
mutual funds, real estate investment trusts (REITs) and even hedge
Have Americans simply become riskier over the years? No. They've
been forced to chase higher returns because inflationary policies of
the federal government have undermined their traditional forms of
Two generations ago, the investments of most Americans were safe
and paid relatively low interest rates. Interest on passbook savings
accounts, for example, was typically calculated on the minimum
balance during the calendar quarter and was posted at the end of the
quarter. This meant that any funds withdrawn or deposited during the
quarter earned no interest.
Today, families have a wide variety of "fixed-dollar" options,
including money market funds, upon which checks may be written, with
interest accrued daily.
Much of what we now take for granted was made possible by
advances in information technology. The increased speed and accuracy
of data processing has facilitated complex financial transactions,
even in small amounts, at greatly lowered costs. As a result, many
more people now own stock and other financial assets.
In 1947, direct and indirect ownership of company stock was
limited to a relatively small minority of the public. Brokerage
commissions were fixed at high rates. Funded pension plans were in
their infancy. And there were only a handful of mutual funds in
operation: 98 in 1950, according to the Investment Company
Today there are more than 8,000 mutual funds - more than the
total number of publicly traded US companies - and some 51. …