Thursday, February 16, 2012
Savings Rates and Interest on Loans
Americans are typically blamed as being bad savers, as if they're just fiscally irresponsible or worse, financially illiterate.
This is not so.
The reason why they don't save is simple: The Fed in its unwise policies over the last several years has synthetically kept interest rates low, by their absurd QE-3 misguided policies. These policies attempt to keep interest rates low in the SHORT to MEDIUM TERM, something that cannot be done in the LONG TERM.
Why put money in a bank when the interest rates are close to zero for a savings account? HDD went to Citi Bank this morning and enquired about savings account rates and was shocked at the Mickey Mouse numbers (non-whole numbers fractions rather).
Here's a snapshot of what was available - a laughable scenario really:
Day to Day Savings = 0.05% APY (Annual Percentage Yield)
3 Month CD (Certificate of Deposit) = 0.15% on minimum balance $500
6 Month CD yields the same, while 8 Month yields 0.25%, a measly one quarter of one percent - PATHETIC!
Link below shows more detail on this joke to savings customers -
The gospel of low interest rates was unmercifully drummed into the minds of many by it's arch-proponent, "Sir" Alan Greenspan, who in 2002 was "knighted" by the British monarchy. (see link)
Where in the Constitution is it mentioned that a US citizen can accept a knighthood from the former masters of this country?
U.S. Constitution - Article 1 Section 9 states categorically:
"No Title of Nobility shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince or foreign State."
Did Congress consent to "Sir" Greenspan?
"Low interest rates" Alan also works for Her Majesty's Treasury as an unpaid "consultant".
Who is this guy working for? While baby boomers face almost negligible interest rates on their savings and are FORCED to engage in risky volatile investing the stock market, "Sir" Alan live the life of a lord. And then there's the MYSTERY of the low interest rate maestro's PhD dissertation!
See Link (very interesting read indeed)
According to the article above, his PhD was:
"his degree was largely honorary and that the thesis was a cut-and-paste job, comprised of previously published, non-academic articles wrapped in a flimsy introduction."
HDD has one question for "Low interest rate" Alan:
Who exactly have you been working for? Below is the Fed Funds rate from 1956 to 2010:
By keeping a hyper-low interest rate environment it encourages more debt, less savings and forces people to INVEST in the stock market which of late has been quite volatile. It also provides a PERPETUAL flow of CHEAP finance for banks and corporations along with trillions of dollars flowing into stock investments.
And long term, the FED's misguided QE-3 will ensure that interest rates will RISE! They have to given that they are near zero now!
So bottom line: the Fed lends at near zero, we get near zero for our puny savings, BUT, we pay through the nose for loans for cars, mortgages and credit cards, even though banks are paying next to nothing for their finance through the FED a PRIVATE institution with a .GOV web site!