Are savings accounts ever going to be profitable again? Right now they are so low interest that they make a bad investment. I heard baby boomers had high interest savings accounts at 10% interest, wow!
Right now they are not because the Fed has pumped so much money into the market, indirectly grabbing up equity. That drives prices of assets up, and thus the return on new investments goes down. It would be like if you saw a great investment opportunity, reasonably priced, and then I came in and up-bid you using counterfeit money. Maybe you can only buy half as much as before with your money, so the rate of return goes down. What the Fed does has big reverberations and consequences in the economy. They intentionally tried to prop up asset prices. You can prop up asset prices but you can't prop up the rate of return from those assets, so interest rates go down. Not good for grandma with her retirement savings in the bank. Another thing people don't think about, insurance companies have to charge higher premiums if the interest rates on the money they are holding in the investment pool goes down. This is all ultimately an effect of inflation, in a very indirect sort of way.
No, the answer is No. All the other Gibberish is just that, mostly likely print from a right wing think tank that wants you to believe that there are so many economic reasons for it. That is BS too. The FED and their Zionist owners, leaders, along with the few other megga rich who are not Zionists want it all and they will stop at nothing to squeeze every dime out of you. it started in the 80s when Regan allowed them to cut their own tax from 90% to 30%, then deregulate all the labor laws so they can crush labor, good pay, and good benefits. Then allowed them to move their businesses to China and reap the profits. These people are 80% republican. The FED and its people are 90% republicans (but label as NOT POLITICAL) that is a lie. Most everything from bankers is a LIE. But, people will turn on MSM, believe it, and worse off, turn on FOX news and believe it. The FED failed to normalize rates back to 7%, or near it, before caving to Trumps demands. This in itself will create a recession, but that wasnt enough, they added in trillions in debt around the world by all CBs. It is a dooms day coming. 100% for sure the DOLLAR will collapse. They just dont want to tell the truth, how can they now. I started buying GOLD 5 years ago to prepare, you ?
Only when interest rates go up, and business is fighting against that as hard as it can. They love cheap interest. Prepper Conspiracy is a hoot, fun to read.
Today a lot of assets are for sale. Are people trying to cash out? It would be good in the short-term to sell all your assets at a high price. Then when interest rates go up again save your money and live off the interest.
Eventually interest rates will go back up. This post financial crisis low interest rate era is a historical anomaly.
Earth. See Interest Rates Over the Last 100 Years https://www.gobankingrates.com/banking/interest-rates/see-interest-rates-last-100-years/
Yes, of course they will. The only question is "How Much"? Of course, all bets are off if we Yanks "invent" another Great Recession because we've Overloaded Debt with with a tsunami bum money-loans ...
First and predominant falsehood from the site linked: Contrary perhaps to popular-opinion, the above is not the predominant factor. The FRB does not "control the economy". Supply&Demand do, and particularly that second element - which is you and me an one helluva-lotta other people. And even then, who is predominant controlling factor is a bit of a mystery. Supply? Demand? There are far too many factors that "influence" Supply&Demand and by far the most important factor is Demand. Is Demand susceptible to "control"? Many factors influence Demand. Not just interest-rates. Most predominant (in my book) is the intrinsic necessity to keep-up-with-the-Joneses. Which is pertinently human - consumers don't give a damn about interest rates of borrowed money unless they skyrocket. They do care about their respective "standard of living" compared to the whole population - which is a benefit but can be also a negative-factor of our daily existence. There is - quite simply - not just One Culprit when the economic Fit-hits-the-shan ...
As I never tire of saying (to those who have never taken a course in Economics): *The interest rate is one (and only one) factor in Demand. And it is not the most important. *Keeping-up-with-the-Joneses is a far, far more important inducement and it is purely a sociological factor that stimulates Demand.
Never 10% unless it was a CD for. Even during the 21% interest rates of the early 1970's. 2 - 2.5% maybe, 3%-5% if you maintained a high balance.
But when they go up, will it be due to rapid inflation, or the Fed not being able to afford to keep interest rates down any longer? (When the Fed lends out money below what the normal market interest rates would otherwise be, it ends up causing inflation. This is their main tool they use to try to lower interest rates. It causes inflation because it changes the ratio of Reserve Assets they are holding to number of dollars they have issued.)
Agreed. If demand is dependent on interest rates, that inherently assumes consumers need to borrow money to be able to spend it. I don't think that's a healthy economy.
Well I think the Feds won't be able to keep rates down forever. Frankly I'm surprised they've gotten away with it as long as they have.
I've explained in the past why they likely were able to get away with it. Firstly, the inflation already happened, during the growth of the housing bubble. To prevent deflation (which would have happened after the housing bubble popped) the Fed intentionally used inflation. To state it in other words, the housing bubble was monetized. (Bad loans converted into money by being bought up by the Fed) That would be why there was not vissible inflation after the Fed began expanding the money supply. As mortgage equity that didn't really exist was wiped out, more new dollars replaced them accordingly. Second, economic growth was slow. Profits were down, rates of return from investments were low, so that made it not too difficult to have lower interest rates. Lots of investors were sitting on loads of cash, afraid to invest it or take risk, so that pushed down interest rates. What I mean is maybe the market interest rates would not have been that much higher than they were even if the Fed had not been trying to set those low target rates.
In a normal situation, the central bank (or Fed) trying to hold interest rates down too low for too long would start creating inflation. If you want to look at it this way, it "costs a lot of money" to subsidize lower interest rates to borrowers than what the normal market rates are. The Fed can't just "magically" set interest rates in the economy, it carries a big cost.
Someone, I forget who, said we're entering uncharted economic territory. No one knows what's going on.
Certainly not if banks can help it. Banks are the only institutions in the world that can borrow money at 2% while charging 25% to loan it out. Perhaps if some clever capitalist starts offering better interest rates for borrowing money, the banks will have to go up to compete.
