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If you want to have a serious discussion, maybe you should explain what method the Fed should be using to target rates, and how your method differs from something like the Wicksellian natural rate.
If you want to have a serious discussion, maybe you should explain what method the Fed should be using to target rates, and how your method differs from something like the Wicksellian natural rate.
How about the free market for starters? Banks have to pay whatever savers can get by shopping around their savings.
Once the Bankers successfully removed Glass-Steagall (the only safeguard left, designed to prevent a repeat of the massive pre-Great Depression Recession) all heck broke lose again, and again, and now once again.
It's not only the free money, but who gets the free money. Bankers give it to themselves! If I had access to free money, I too can be a billionaire.
But if Bankers had to pay the real rates and were unable to speculate with FDIC insured money (Glass-Steagall) everything would work fine as it did in the 1950s - 198Os, the greatest period for the rise of true middle class, not the forever in debt middle class (serfs) that we have today
How about the free market for starters? Banks have to pay whatever savers can get by shopping around their savings.
There's no "market" for central banks by definition. If you want to talk about getting rid of the Fed altogether, that's completely different than talking about whether the Fed rate is too low.
1) Not sure what your definition of "savers" is, but most people I know who are savers are excellent with money and aren't drowning it debt. Most have very little to no debt and didn't take on big mortgages or lots of leverage.
I would argue that most people who do happen to have substantial savings, and who aren't in debt, would have no legitimate reason to hold any significant portion of their net-worth in cash or cash equivalents... not now, not in 1982 (when interest rates were at a historic high), not ever. Full stop.
Cash is not an investment.
Cash is something to be used for (1) spending, or (2) conversion into an investment.
So my point is that those persons who are "excellent with money" should be benefiting from a low-interest-rate environment.
Quote:
Originally Posted by LeavingMA
2) I think what most people are referring to with the stock market increase isn't that its not "illegitimate", but that it has increased mostly due to very low interest rates and when that wears off or ends the increase in the market comes to an end. Basically it has been manipulated up further then it should have.
I would have agreed, were it to have been the case that inflation were of any substantial magnitude, or that price/earnings ratios were unreasonably high. Then indeed stock market valuations would have been artificially propped up. But please show me, where is inflation? And what's so high about current P/E?
Ah yes. An apologist for redistribution of wealth to the top 1%. And why not? They work so hard for the money. They go to the Fed's teller window, borrow a few billion dollars of free money, and then buy back their stock. Meanwhile they keep laying off people until there is no company left. But, as sad as this may seem, they do have billions of dollars of savers' money in their Swiss bank account which helps to allay their deep sadness.
What a wonderful capitalistic world we live in. The Banker gives free money to 1% of the population and the rest have to figure out how to survive. The game is called MONOPOLY.
I have no idea why you responded the way you did about something I replied to for someone else. Nowhere did I defend the Federal Reserve or the low interest rate environment.
I would argue that most people who do happen to have substantial savings, and who aren't in debt, would have no legitimate reason to hold any significant portion of their net-worth in cash or cash equivalents... not now, not in 1982 (when interest rates were at a historic high), not ever. Full stop.
Cash is not an investment.
Cash is something to be used for (1) spending, or (2) conversion into an investment.
So my point is that those persons who are "excellent with money" should be benefiting from a low-interest-rate environment.
Meh. I have a bit more than 10% of my net worth earning 0.95% at Ally Bank as my emergency fund. I don't care about the return. It's an emergency fund. It lets me sleep better at night. I won't feel the need to jump off the ledge if the market corrects 30% and I find myself unemployed for a year or two. My retirement portfolio is long term and I don't need to worry so much about market fluctuations there.
Exactly! Low interest rates are injurious to those people who happen to have zero debt, who have considerable amount of idle cash, and who aren't much invested in equities, real estate or longer-term bonds. And exactly how many people are in that cohort?
Around the world, shaky currencies are losing value. This isn't sly or perfidious manipulation by central banks. It's a flight to safety. If that weren't the case, the US dollar would be falling relative to the Euro, the Yen, the Pound and so forth. Instead, the reverse is happening - despite our near-zero interest rate.
The really sobering and frightening realization is how LITTLE control central banks actually have - rather than how much.
what folks forget is cash is an asset class like any other asset class. it is and never was risk free . there are times it can do okay and times it does quite poor.
in 15 out odf the last 50 years cd's have had negative real returns historically so this is nothing new . .
but the fact is most americans live hand to mouth and can't even come up with 10k .
what they lose in interest they make up for in savings from low rates with the average american family saving more then 3k a year now on just credit card debt compared to 2007 .
mortgage interest payments are down 30% from their 2007 peak. Interest payments on other debt, such as credit cards and car loans, are down 50%.
so there is little question for most americans the bit of interest they are giving up on their small savings is more than made up by what they save .
it isn't like the fed didn't do everything except drop leaflets from helicopters telling folks if you have substantial long term money in cash instruments at least buy good ole treasury bonds , you would have been enjoying wonderful rates of return if you listened when they told us .
i mean they came right out and told us , what the deal was going to be .
if you chose not to listen then you paid the price as always for holding an asset at the wrong time .
the fact is most americans are financially ignorant and have no interest in anything pertaining to their finances , they rather stay in tune with sports and tv shows . but they want some sort of perfect guaranteed investment so they can just get a nice return and never take a risk.
It seems that at least some Americans also like to watch economic snake-oil salesmen on YouTube and proceed to believe all that they see and hear there. Probably quicker and easier than seeking an actual understanding of economics, but comparatively useless aside from that.
.......in 15 out odf the last 50 years cd's have had negative real returns historically so this is nothing new . ..
Provide the source(s) for this?? You can't be talking about Long Term CDs (over 5 years), you have to be talking about 1 month CDs or something which shouldn't even be counted because the term is so low the person might as well just kept the monies into a savings account.
Why some people think putting your monies into CDs isn't an "investment" is totally beyond me and beyond the scope of pure logic.
When you INVEST in a CD, you are giving the Bank (or Credit Union) leeway to lend that money back out at a higher rate than they are providing to you for leaving the funds tied up for 5 years - 30 years.
So with a 20 year CD or even a 30 year Brokered CD today from Fidelity (https://fixedincome.fidelity.com/ftgw/fi/FILanding) the banks that are issuing these CDs through the Brokerage will pay you the 3.5% for 30 years while they lend those monies out for a higher rate, let's say 12% for a Personal Loan or 22% for a Credit Card.
But I would LOVE to see the source that Long Term CDs have not beat inflation for 15 of the last 50 years. That is a complete and utter lie, but like I said, let's see if you have a source for this.
And btw, don't post your T-Bill Chart, you mentioned CDs so show me where Long Term CDs(which are the real CDs anybody should even be concerned about) have failed to beat inflation for 15 of the last 50 years.
the fact is most americans are financially ignorant and have no interest in anything pertaining to their finances , they rather stay in tune with sports and tv shows . but they want some sort of perfect guaranteed investment so they can just get a nice return and never take a risk.
the problem is it doesn't exist .
Bully for those people who don't want to spend their lives worried about "asset classes" and how to protect their ass-ets from legal thievery. There is more to life than worrying about the proper mix of assets. Much, much more. Though some haven't figured this out.
Cash in the bank is the way I do it and the way my parents did it. The rest of the time I spend living my life.
But what the Central Banks have figured out, with the assistance of puppet politicians, is how to legally steal money from honest workers and transfer the wealth to themselves and their cronies. Absolutely legally and with no push back because once you control the Bank everything after that is easy. Just print money and give it to yourself. What could be easier.
The historical downside is that this thievery always leads to social upheaval and war(s). We are now witnessing this all over the world. The Central Banks have annihilated world economies.
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