Posted on 04/16/2010 7:05:20 AM PDT by Evil Slayer
Aren’t low short-term interest rates wonderful?
If you are a bank, the answer is yes, particularly because the low rates are accompanied by somewhat higher longer-term rates.
If you are a saver, however, your view might be very different.
This month some interest rate spreads have reached record levels. The difference between what the Treasury pays on a one-year bill — less than half a percentage point — and what it pays on 10-year bonds — a little below 4 percent — expanded to the largest on record this month. In banking jargon, that is a very steep yield curve.
For banks, that is a license to make money with very little risk, particularly since they can get people to open savings accounts that pay close to nothing.
This week I checked the Web sites of the four largest banks in the country — Bank of America, JPMorgan Chase, Citigroup and Wells Fargo — to see what they were offering on an ordinary savings account, say, one with $5,000 in it.
Chase, the retail operation of JPMorgan Chase, and Wells Fargo were offering 0.05 percent. That $5,000 would produce monthly interest of almost 21 cents. If you left such an account untouched for 20 years, and rates stayed where they are, the glories of compound interest would lead to a profit of $50. Before taxes, of course.
At that rate, if you wanted to put away enough to produce a retirement income of $50,000 a year, without touching the principal, you would need $100 million on deposit.
To be sure, you could get a better rate with that kind of money. But not that much better. JPMorgan Chase’s overall cost of funds in the first quarter of this year was only 0.83 percent.
(Excerpt) Read more at finance.yahoo.com ...
Start buying silver and gold.
I would but, right now, I need the money to pay the bills and live on. My grocery store doesn't deal with gold for bread.
I’m talking about any savings, not money that you need to live on. Silver is pretty good. I have one piece of gold that my dad gave me. It’s a little smaller than a dime and worth over $300. I don’t buy gold because of that. But, silver on the other hand, isn’t to bad and is going up. I buy a little here and there. Figure at some point the dollar might be worth nothing.
This is a story that should be told more often. Small savers, and any investor with cash amounts in their accounts, have been subsidizing all the government mistakes and Wall Street bailouts by receiving a fraction of a percent of interest on savings for years
It's cost me several thousand simply receiving less than .5% on cash amounts in an investment account rather than something half reasonable like 3% - 5% (once got 20% in the Carter years).
This is particularly punishing for conservative savers who use mostly savings accounts and bank CDs.
Yes, I remember those days too. It is a possibility that we may return to higher interest rates if inflation starts to kick in. Probably not as high as 20% but in double digits. Right now, I am having to use money I have in my Money Market account to supplement my Social Security and and my small retirement income. I used to have it in a CD but when it came due, the 5.3% I was getting for it went down to 1.5% so I didn't renew it. The pennies I get on my MM account each month isn't even close to living on. I figure I have, probably, 5 years left of my savings along with my other income to keep paying my bills and put food on the table. I am not counting on SS to be around much longer and my company retirement will probably go under as well. After that, I will just have to leave it up to God to provide for me.
And every conservative saver is truly subsidizing all the mistakes and incompetence of both Congress and the financial industry.
I often think of my late mother who saved $200,000+ on her teacher’s retirement and SS, earning $10,000 - $14,000 annually from her bank CDs in the early 1990s. Today she’d have earned little more than $3,000 to $4,000 on the same amounts.
Paper money becomes worthless when politicians have unencumbered ability to print.
For those of us who have been around for the last 50 years or so, did we ever think we would see the day when the best interest rate on a ONE YEAR T-Bill would be less than one half percent?
Politicians created the economic problem we have today by printing too much money.
Now those same politicians are saying we need to print even more money to get out of the problem we created.
Of course, being good politicians they blame everyone but themselves for our current unpleasantness.
Agreed, but would point out that silver is a over $17 an ounce, with junk coins selling at about 20x face. Allow me to thump the tub yet once again for "poor man's silver" (my term) - the lowly nickel. A few bucks worth thrown in a jar soon adds up with no major impact on your spending. The darn things now have an intrinsic value of over 6c and, IMO, will be replaced by a steel coin within a year at the rate nickel is appreciating. (The Treasury is already asking for blanket authority to change the metallic content of all coins, so you know currency debasement will soon reach down to the coinage.)
Silver coins started out the same way - rapidly disappearing when the clad stuff came out (Gresham's Law), then starting to trade for x amount times face. Small potatoes here (for now) but an easy and low-cost way of converting your paper "money" into something a little more tangible.
Hadn’t thought about nickels. I’ve been buying junk silver, a little here and a little there. Pretty soon your talkin real money.
I hear you. It just bugs me to pay 20x face for the stuff. Consider: $300 worth of nickles is $3,000 at only 10x face. It might take a while, but perhaps not as long as you or even I think. And . . . it will probably give you a better return than money in a savings account. Like the old Brylcreeme jingle said, "A little dab'll do ya". :-)
Savings accounts are for the birds now. If you get 2% on your money your doing good. I'll have to check on the nickels. I know what you mean about the junk coins. I as buying dimes for around $1.20 or so. You can get them a bit cheaper on ebay than you can at the online coin shops.
Who's real money?
Your real money?
His real money?
Her's?
Or you're real money?
That was Burma Shave. As kids we always would look for them on a trip.
Reader's Digest had a list of customer submitted jingles that didn't make the cut. I don't remember any of the originals, but the one has always stuck in my mind was:
LISTEN BIRDS,
THESE SIGNS COST MONEY
SO ROOST A WHILE
BUT DON'T GET FUNNY
I loved those a child. When we traveled it was always fun to find them and read them as we drove along. I hadn’t thought about those signs in years, ah the memories of a simpler time.
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