Last week the Federal Reserve chairman told the world that U.S. savers should expect the new normal of near-zero interest rates to last through mid-2015. So compound interest is a concept with which today's early to mid 20-somethings will remain essentially unfamiliar.
For those of us who are slightly older, it seems as if Mr. Bernanke is on a mission to convince us that everything our grandparents told us about household economics was wrong.
My grandmother and grandfather were children of the Depression who built a successful dry-cleaning business with inspiration from—no kidding—a Wall Street Journal article. Then they built an insurance brokerage, and after much saving and hard work retired as the proverbial millionaires next door. They spent money on a house and a boat. But clothes always came from the secondhand shop, and Grandma remained an avid coupon clipper until she and Papa went into an assisted-living facility a few years back.
On family vacations to see them in the Seattle area, I always heard the lecture about the importance of saving, or "making your money work for you." Once on a couponshopping run, someone asked Grandma why she didn't buy in bulk. My father answered for her: "You wouldn't want your money all tied up in toilet paper."
So thriftiness prompted a few laughs, yes. But there were also real lessons about its virtues.
From a purely financial standpoint, Einstein's miraculous force is most easily expressed in the so-called Rule of 72. That is, at a 7.2% annual rate of return, your money will double in 10 years. The rate is quite feasible in a healthy market (especially in non-inflation-adjusted terms). For people of my grandparents' generation, it came to be seen as the norm. Lately the mainstream press, to its credit, is increasingly cottoning on to the punishing effect that Mr. Bernanke's interest rates have on older people living off savings.
But near-zero interest rates—especially when inflation is running a couple of points higher—are as bad for those of us still in our working years.
Thrift—that is, work and delayed gratification—is both a personal and societal good. It is supposed to allow us to be self-sufficient in future years, support older generations now, and finance the great engine of progress that has been the American economy. But why save when common instruments such as savings accounts, money-market funds and CDs guarantee that you'll lose out to inflation?
For those of us determined to remain savers, low rates force speculation in commodities like gold or oil that we hope won't lose too much value against the dollar. Call it the honest-saver's dilemma. It's one that unelected central bankers don't have the right to force on us, no matter how much their models may tell them low rates will goose the market or ease the deflation of the housing bubble.
That latter rationale is an admission of what serious economists have always known easy money to be: a redistribution of wealth to debtors from savers. Or, as a general rule, from the more virtuous to the less virtuous. This is true when the headline inflation rate is high, but also when it's merely higher than the predictable return on savings.
In an insightful 2009 essay, the Manhattan Institute's Steve Malanga connected the loose mores of the 1970s to the loose monetary policy of that period:
"The economic shocks that followed the tumultuous late 1960s, especially the devastating inflation of the 1970s, reinforced an emerging materialism. . . . The inflation hit hardest those who had embraced the work ethic, destroying lifetimes of savings in unprecedented price spikes and sending the message that 'saving and shunning debt was for saps,' Fortune observed."
Saps. Chumps. Whatever. That's what savers become when central bankers challenge Einstein's most powerful force, or our grandparents' hard-learned advice.
Mr. Pollock is a member of the Journal's editorial board.
A version of this article appeared September 17, 2012, on page A17 in the U.S. edition of The Wall Street Journal, with the headline: Bernanke and the Fed Repeal Einstein.