The Fed, honest shoppers and the truth about the unemployed

Federal Reserve to the Rescue

So, there was big news from the Federal Reserve on Wednesday.

The Fed said it will keep its key interest rate super low – as in near zero -- until the unemployment rate falls to 6.5 percent or the inflation rate reaches 2.5 percent, reported The Washington Post’s Zachary A. Goldfarb. The Fed says it will also begin buying $45 billion in Treasury bonds a month, on top of $40 billion a month it is already buying in mortgage bonds.

“It was a historic move that for the first time explicitly spells out the Fed’s goals for the nation’s economy and how it will respond to changing conditions,” Goldfarb wrote.

The move by the Fed has an impact on the interest rates consumers pay. For example, 30-year mortgage rates are averaging 3.4 percent, one of their lowest levels ever, reports the Associated Press.

If you aren’t sure how the Fed’s actions affect the economy, read this great explainer by the Associated Press.

I’m interested in what you think. The Color of Money Question of the Week: What do you think of the Fed’s move this week to stimulate the economy by linking its actions to specific economic targets? Send your comments to colorofmoney@washpost.com. Please include your name, city and state. Put “Federal Reserve to the Rescue” in the subject line.

Honest Holiday Shoppers

Police officers in New Hampshire will be sending Santa a good report on a lot of consumers.

The Associated Press reports that police set up a sting outside stores in Manchester, N.H., to see who would be naughty and who would be nice. Officers left a cash-filled purse and a bag holding a DVD player unattended in a shopping cart.

Turns out most people are nice. Shoppers who noticed the purse and bag left in the cart took steps to return the items. Under the law, a person who obtains lost or mislaid property must try to return it. Only two people were arrested after police said they took the items and put them in their cars, the AP reported.

“I think we should all have that expectation that everyone’s going to do the right thing,” said Manchester police Lt. Maureen Tessier.

What a great holiday story. It certainly restores my faith in our fellow man and woman.

Five Myths About the Unemployed

What are some of the misconceptions you have heard and may have repeated about the unemployed?

Older workers hurt job growth. All the available jobs are going overseas. Unemployed people are lazy.

Rick McGahey and Teresa Ghilarducci, economics professors at the Schwartz Center for Economic Policy Analysis at the New School in New York, debunked some of those unemployment myths in one of my favorite Washington Post features.

Here are a few myths that the professors shot down:

-- People receiving unemployment benefits aren’t in a rush to look for work. A report by Congress’s Joint Economic Committee found that people who receive unemployment benefits search harder and smarter for jobs than people who aren’t covered.

-- Older workers hurt younger workers’ job opportunities. “Young and old people aren’t substitutes — they are complements,” McGahey and Ghilarducci write. “What hurts young Americans is adult unemployment. The effect of chronic joblessness is generational: Children of the unemployed get less education and have more trouble finding jobs when they enter the workforce.”

Be Careful What You Say

Here’s a story you should read if you like posting online reviews of your interactions with businesses. A Fairfax County woman, who is being sued for defamation over negative reviews she wrote on Yelp and Angie’s List, must delete certain accusations and is barred from repeating them in new posts, reports The Washington Post’s Justin Jouvenal.

The preliminary injunction was hailed as a victory by a D.C. contractor, who took the woman to court claiming that her online reviews of the work he did on her home were false and cost him $300,000 in business. He is suing her for $750,000.

In Virginia, someone can be found liable for defamation if he or she states or implies a false factual statement about a person or business that causes harm to the subject’s reputation. Opinions are generally protected by the First Amendment.

Jouvenal reports that legal actions over reviews on Web sites such as Yelp are on the rise, as the sites have grown in popularity and online reputations have become more important for professionals and businesses. However, some reviewers and free speech advocates are concerned the lawsuits are masked attempts to stifle freedom of speech.

What do you think of this issue? Send your comments to colorofmoney@washpost.com. Put “Online Reviews” in the subject line.

Family Financial Fights

If you have some family financial drama going on, perhaps I can offer some advice on how to work through your issues -- or avoid them all together.

Send your Family Financial Fight stories to colorofmoney@washpost.com. Be sure to include your full name, city and state and put “Family Finance” in the subject line.

“Happy Birthday, Great Recession”

This month marks the fifth birthday of the Great Recession that started in 2007 and has since taken a huge financial toll on the U.S. economy.

For the Color of Money Question last week I asked: “What did you learn from the Great Recession?”

Here are a few responses:

“I was reminded that safeguarding one’s retirement nest egg requires active participation and interest on my part,” wrote Thomas Druitt of Paducah, Ky. “Simply buying stocks and/or bonds in a 401(k) account and then expecting the financial market to do the work for you is not a way to retire with comfort. I was reminded for the umpteenth time that people of all walks of life who are focused solely on turning a profit in the next 15, 30 or 60 days to the exclusion of all else are not to be trusted. I was reminded that elected officials, when presented with financial conditions requiring that hard decisions be made, will go a long way around the barn to attempt to avoid making them, a phenomenon still transpiring today.”

Steve Brodeur of Boston had a sobering lesson.

He wrote: “The not-so-Great Recession taught me that, despite saving 15 percent plus of my gross salary for over 30 years (so far), I won’t be able to retire at age 70 with my current lifestyle, much less the lifestyle I dreamt of and thought I was planning for at 65 years old.”

I was particularly struck by one reader who is not American and does not live in the United States but who nonetheless learned some important lessons from the Great Recession.

“I learned from the recession that I have to store more, such as putting my money in banks during prosperous times,” wrote Haojie Yang, a student from Wuhan, Hubei, China. “Only in that way can I have enough to spend in recession time. And always work hard to face any coming challenges.”

Tia Lewis contributed to this report.

You are welcome to e-mail comments and questions to colorofmoney@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Michelle Singletary writes the nationally syndicated personal finance column, “The Color of Money.”
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