While there is nothing good about elderly savers being “crucified on a cross of ZIRP”, as David Stockman recently put it, there is a much more dangerous side-effect to Fed Chief Ben Bernanke’s zero interest rate policy – seniors reaching for yield. As detailed in this story at the Washington Post, retirees are particularly vulnerable to a growing number of scams aimed at separating them from their money much fast than the central bank ever could.

Senior citizens are being lured into riskier investments — and often outright scams — as carefully laid retirement plans have been scuttled by five years of low interest rates.

Government regulators and advocacy groups say unscrupulous dealers are taking advantage of a growing fear among seniors that they will run out of money in their final years of life. That’s in large part because many seniors have parked their cash in safe investments, such as government bonds, where returns have barely kept pace with inflation. As a result, their savings are stagnating as their life expectancy grows — and that is making many older Americans increasingly desperate.

In Georgia, regulators nabbed a man who bilked seniors out of $16 million by promising to generate high returns with investments in foreign currencies. In South Carolina, regulators are pressing charges against a former insurance agent who they say was able to scam 17 people out of more than $1 million by advertising certificates of deposit with returns of just 4 percent. A similar scheme in Virginia attracted more than $11 million from seniors hoping to beat bank interest rates that have fallen below 1 percent.

“What we really have now is a combination of the fraudulent seller with the needy buyer,” said A. Heath Abshure, commissioner of the Arkansas Securities Department and president of the North American Securities Administrators Association. “Right now, because of interest rates, the fraudulent sellers aren’t having any issues finding a buyer who wants to believe the lie.”

Prior to the increase in older “needy buyers”, those over 60 already accounted for 30 percent of all investment fraud, about double their 15 percent share of the population, and that’s just going to get worse since we’re likely to have zero interest rates for years to come.

It never ceases to amaze me that, if you had, say, a quarter of a million dollars in the bank, you’d be doing well to generate more than $1,000 a year in income in an insured account. It used to be that you could expect that money to return $1,000 a month, a development that radically alters the finances of many seniors.