Earlier quoted context omitted.
But it is a false sense of security. Joe User doesn't know a thing about how this magical box of tricks called a computer works. He just assumes that his data is safe on it, and won't get into the wrong hands, and that his passwords will always be protected by asterisks or what-not. Sure, you may encrypt them using keychain, which is good, and yes, if someone has physical access to their machine and user account then…
Soft boundaries within the user account do nothing to protect you from exactly those scenarios either. Your protection is to lock your OS user account.
My suggestion is to seriously re-evaluate this approach in light of the actual use-case of how people perceive these passwords.
It appears as though many, many users don't expect these passwords to be visible. This is an important thing to take into consideration.