Watch your money: Some U.S. savings bonds paying ZERO interest

Did you know that some U.S. savings bonds are paying ZERO interest?

A lot of folks are surprised to hear that. You don’t expect something like that. That’s not what the show-pride-in-America campaigns that fueled bonds sales since World War II promised.us savings bonds

But here we are. Watchdog Nation learned about this from Stansel Harvey, a retired hospital chief executive. Watchdog Nation also heard from a dozen other I Bond holders who didn’t know about this. I Bonds have a combination fixed rate and variable rate. Learn more here.

Part of being your own watchdog is, of course, watching your money. But savings bonds, well, they are almost created to be forgotten. They aren’t like stocks that go up and down every day in a mini-drama perfect for TV. (The drama of the closing bell!) No, bonds are boring, but then again, they’re supposed to be. That’s why people invest in them. Bonds get left in a bank safe deposit box and promptly forgotten.

Harvey says he feels burned by U.S. savings bonds he bought a decade ago. He takes it personally because when the government began issuing Series I bonds, he was a member of a committee that traveled the region promoting them. He recalls marketing the new bonds as a way to beat inflation.

Inflation, yeah. Deflation, no.

Who would think that if inflation ever dropped to less than zero, it would reduce the bond’s earning rate to less than its fixed rate?

Last year, when energy prices collapsed with the economy and the consumer price index dropped below zero, I bonds dropped to zero for the first time since they were issued in 1998.

Harvey is so teed off that he accuses the federal government of “a deceptive trade practice.” He adds, “In fact, if a bank marketed a bond the way they marketed these bonds, they would be called into question.”

The government, of course, vehemently disagrees. But since the government decides who is guilty of deceptive trade practices, what do you think will come of this?

Joyce Harris of the Bureau of Public Debt told me that the lack of inflation “sort of wipes out that fixed rate.” She explained that the lack of inflation pulled down both rates on the bonds to zero.

She denied any government deception.

“It’s quite transparent,” she said. “It’s just a matter of understanding what you’re buying in any investment… I can honestly tell you that we’re not trying to be deceptive. We’re trying to be transparent in all of our Treasury securities.”

I did a much more detailed study of this in the Oct. 16, 2009 Fort Worth Star-Telegram by Dave Lieber. Check it out here.

This is a fine example of what Watchdog Nation is all about. Knowing what you are doing. Keeping track. Remembering to check the status of your holdings.

If you don’t look out for yourself, nobody else will.