That the meaning of certain words changes over time isn’t so earth shaking. For example, if you want to know what the word “liberal” used to mean, google “classical liberalism.” The definition: “a political ideology that values the freedom of individuals — including the freedom of religion, speech, press, assembly, and markets — as well as limited government.” My how times have changed. Ask a modern conservative today what he or she stands for it would very closely resemble that definition. Confusing perhaps.

Moving along from politics to economics, the results of a recent Reason-Rupe Survey are confusing and perhaps even amusing. As reported by Brittany Hunter in the Mises Wire blog last month, according to the survey, “58 percent of Americans ages 18-24 said they viewed socialism favorably. However, when asked if they favored a free market economy or a government-managed economy, 64 percent of Millennials said they favored the free market.”

Hunter continues, “How is it possible for Millennials to favor both a socialist government and a capitalist economy? The answer is simple, Millennials simply do not understand what either of these words really mean, especially capitalism.”

It is understandable that Millennials do not understand what free markets are. None of us do - it is outside our realm of our experience. Left leaning “economist” Robert Reich writes about the “Myth of the Free Market” while author Ian Fletcher takes it a step further writing in the Huffington Post about “Why Free-market Economics Is a Fraud.” Newspaper editor Chris Powell says in best, “We don’t have markets anymore, only interventions.”

Perhaps the most obvious of those interventions are by Central Banks. The very word “central” should offer a clue that these institutions are not free market - nor are they capitalism. Perhaps the most aggressive CB is the Bank of Japan. Not only is the BOJ experimenting with negative interest rates, (where depositors are charged interest - not paid interest) the BOJ is also buying stocks. According to Bloomberg news, Japan’s central bank is poised to become the largest shareholder in 55 companies in the Nikkei 225 stock index. Whatever you want to call that, it’s not capitalism.

Here in the US we don’t have a market rate of interest either - rates are set or fixed by the Federal Reserve. Writing in the very left leaning Mother Jones earlier this week, Kevin Drum asserts, “No, the Federal Reserve Isn’t Keeping Interest Rates Too Low.” How does he know? He offers as proof, “In Europe, corporate bonds yields are now negative. John Williams of the San Francisco Fed estimates that the natural rate of interest in the US is currently running at about 0.5 percent. The market is telling us that the natural rate of interest at the moment is very, very low.” So, he quotes the Fed itself to make his case. That’s the equivalent of asking a tobacco company in the 1950s if smoking is harmful to your health.

So let’s see, in Europe, where rates are set by the European Central Bank, Drum says that yields are negative. Well, they’re negative because the ECB set them there by decree. Nothing free market about it. Then, in a stunning example of circular reasoning, Drum cites the Fed itself with regard to their “estimate” of the “natural rate of interest.” The mind boggles. Oh, and regarding his opinion that interest rates are not currently too low Drum says, “Versions of this kind of theory are pretty common in business circles, since business circles feature a lot of affluent white men who are generally ill-disposed toward the Democratic Party.” Really, that’s what he wrote. I hate to burst Drum’s bubble, but no matter what your race, if you’re affluent, you love low interest rates.

The fact is that artificially low interest rates hurt the not so affluent people - the middle class people. To quote Stanley Fisher, the vice chair of the Fed, “negative rates seem to work,” however, “if you’re a saver they’re very difficult to accept although they go along with quite decent equity prices.” That dashes the Mother Jones “affluent white men” theory. With regard to low or negative rates, what Fisher is saying is that if you have a savings account or a Certificate of Deposit, a savings vehicle primarily used by the middle class, “tough luck,” but if you’re rich enough to invest in the stock market “whoo hoo!”

If you’re a retiree, low interest rates are killing you and your standard of living. I personally know people that saved all their lives and planned on a 3% return a CD to supplement their social security. Not happening - so they live less well.

If you’re a public employee in West Virginia the Public Employees Insurance Agency (PEIA) low interest rates have adversely affected you. In the last session, the WV legislature had to cut benefits and increase deductibles and/or premiums in order ensure the stability of PEIA. To minimize their impact, additional funds were paid into PEIA by the state courtesy of the taxpayer. A local newspaper covered a story of protests regarding these developments. The protesters need to understand the real cause of the problem.

Public pension and insurance plans, in addition to taxpayer and/or employee contributions rely on funding that accrues through an expected rate of return on the investment of those funds. The expected rate of return is usually around 7.5%. However, because the Fed has set interest rates so low, plans are not able to earn their normal expected rate of return. Plans used to be able to buy relatively safe investment grade bonds that paid 4 to 6% (sometimes more) and then allocate a small portion of the remaining funds to riskier investments to make up the difference. This is no longer case. The result is that many plans are now underfunded making it difficult to meet obligations and pay benefits.

The problem is becoming more prevalent. This Bloomberg headline proclaims, “California Case Opens Door for Pension Benefit Reductions.” How about this Wall Street Journal headline, “Life Insurance Customers Push Back Over Surprise Cost Increases. Policyholders are filing suit, as big U.S. life insurers blame the Federal Reserve’s decision to keep interest rates lower for longer.” Like the aforementioned PEIA, premiums paid by middle class policy holders to life insurance companies are invested. Because interest rates are so low, life insurance companies are forced to restructure premiums higher in order to make up the short fall on the expected rated of return.

Kevin Drum and Mother Jones magazine notwithstanding, “affluent white men” aren’t the victims of artificially low interest rates. Just the opposite. According to analyst Chris Martensen, “I can point to the trillions of dollars of losses to savers, pensions, endowments and life insurance companies. You pick it, and I can show you trillions of losses in these categories. By the way, that’s about 99% of the people out there. They [the Fed] have created this extraordinary pool of losers. Grandma got thrown under the bus.” He accuses the Federal Reserve of “trying to pretend they have no clue how the super wealthy got wealthier.”

Interest rates are set by the Fed, not by the market. It doesn’t seem to occur to the Kevin Drums of the world that by allowing the Fed to intervene in markets, we can’t then blame capitalism when these interventions harm middle class families. The Fed is not free market, nor is it Democratic - but its policies directly affect our household net worth. Policies that make it difficult for state governments to honor their commitments to employees and retirees. As Sir Josiah Stamp said, “It is easy to dodge our responsibilities, but we cannot dodge the consequences of dodging our responsibilities.”

Interventions in markets are fraught with unintended consequences - consequences that are being borne by the middle class. And yet there is no accountability. Legislation that would require a full audit of the Fed is currently pending in Congress–legislation that has been pending for years. Perhaps now is the time to finally put this legislation on the books.