Low interest rates - Good or Bad?

[imoldernu]

An interesting article on the effects of interest rates.

Negative Real Interest Rates – The Invisible $290 Billion Tax On Savers | Problem Bank List

Excerpt:

Whatever happened to the concept of earning interest on savings? Since the start of the financial crisis in 2008, the Federal Reserve has aggressively suppressed interest rates to near zero.
The Fed’s rationale for lowering interest rates was to get the economy back on track by lowering borrowing costs for both consumers and businesses. Lower raters on mortgages would stimulate home refinances and purchases and stabilize the housing market. Lower rates for businesses would encourage them to expand investment and production which would result in increased jobs. Lower rates for the government means that massive trillion dollar deficits can be financed for virtually free.
The debate on whether or not Fed policies have helped or hurt will go on for years. The recovery from the recession of 2008-2009 is the slowest on record, housing values are still depressed and the jobless rate remains high.

more....

 

[Midpack]

I have my popcorn, and I've pulled up a chair to watch (another 'war on savers' thread)...

http://lmgtfy.com/?q=war+on+savers

 

[Animorph]

Just become a borrower.

 

[HFWR]

Pithy meme: Don't fight the Fed...

One could argue that savings-type accounts have never been a great place to "invest".

To take that further, the concurrent thread about the loss of middle-class jobs, and corporation making record profits would seem to indicate that Americans need to be "owners" as well as or in place of "lenders".

 

[audreyh1]

Buy IBonds.

 

[NW-Bound]

War on savers? No, not me!

I am too chicken to fight any war. I have no loyalty when it comes to money. I will change side. I want to borrow, but they say "no can do". No income stream, they say.

Been looking into buying hickory nuts and hand-shelling them to get an income stream, but kind of hard to crack nuts while simultaneously making posts here.

 

[imoldernu]

Here's an opinion...
I don't think the Fed Plan for recovery is good, (as per the article), but, in my personal situation...
selfish personal situation... low interest rates won't affect me as much as inflation could.

Speculation about the longer term low rates, ranges from as low as 6 months, to 5 years. While much of my savings is in Ibonds and CD's, I can live with a low return, much more easily than with high inflation. With most of our retirement higher expenses behind us, and no plans for major expenses of remodeling, traveling, entertainment, cars or "belongings" in the next 10 years, (if we're lucky ) our baseline expense is going down.

If the net trade off for low interest rates turns out to be a larger National debt, then it's a cost that will be passed on to future generations.

That said, I am much more concerned for the future of my children, who are as old or older than many, if not most... of the members here.

In the long run, as I see it now, if the economy actually does turn around, even with a 2% growth rate, I believe that it would turn into the rising tide that lifts all boats, including the Stock Market.

Just an opinion.

 

[Texas Proud]

Pithy meme: Don't fight the Fed...

One could argue that savings-type accounts have never been a great place to "invest".

To take that further, the concurrent thread about the loss of middle-class jobs, and corporation making record profits would seem to indicate that Americans need to be "owners" as well as or in place of "lenders".

But it is not just savings accouts that have been hit by the low rates... all interest rates no matter how far out you want to go have been lowered... so investing in intermediate or long bonds are not that great...

 

[HFWR]

But it is not just savings accounts that have been hit by the low rates... all interest rates no matter how far out you want to go have been lowered... so investing in intermediate or long bonds are not that great...

But, strictly speaking, buying a bond makes you a lender, not an owner.

And, in my case, a recent refi has my house payment almost low enough that my scrawny state pension will cover it.

 

[RonBoyd]

The problem I have with these kind of articles can be summarized this way:

A physicist, chemist and economist are stranded and starving on an island. A can of soup washes ashore. The physicist proposes to smash it open with a rock. The chemist suggests building a fire and heating the can first. The economist says: "Assume we have a can-opener ..."

Or, if they're thrown down a well: "Assume we have a ladder."

The great economic historian Peter Temin tells another in his latest book, "The Roman Market Economy":

An economist meets a colleague on campus who asks, "How are your children?" "Compared to what?" the economist replies.
​

Also this:

Hyperinflation in Hell