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Old 04-21-2011, 07:09 AM   #1
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Rates to Stay Low

This article strikes me as about right. With the Federal Govt. getting serious about cutting spending, the Federal Reserve will likely keep its 'exceptional accommodation' in place for a long time to help offset the fiscal drag. Anyone waiting (hoping) for higher rates, may still be waiting a long time.

Bernanke, Bond Market, Signals No Shift With Deficit Cutting

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The economy already looks set to suffer a fiscal hit to growth of about one percentage point next year as a temporary cut in payroll taxes and other stimulus measures expire, said Mark Zandi, chief economist in West Chester, Pennsylvania, at Moody’s Analytics. Any budget pact would be on top of that.
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Old 04-21-2011, 08:41 AM   #2
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Of course, an alternative way to say all this is: "The war on savers wages on..."
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Old 04-21-2011, 09:33 AM   #3
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I wonder if we're heading down the same path as Japan ... 20+ years later they STILL have rates too low.

Meanwhile a 15 year adjustable mortgage I've carried will be paid off this summer. Rate has simply been too low to pre-pay.
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Old 04-21-2011, 11:07 AM   #4
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Of course, an alternative way to say all this is: "The war on savers wages on..."
And on retirees who count on interest payments.
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Old 04-21-2011, 01:33 PM   #5
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Of course, an alternative way to say all this is: "The war on savers wages on..."
I'm not sure there is an alternative. Higher rates wouldn't help savers if it also sends the economy in the tank, especially if those savers also happen to be workers. And term interest rates would almost certainly fall in response to Fed tightening, not rise, which is something very few people recognize.
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Old 04-21-2011, 01:34 PM   #6
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I wonder if we're heading down the same path as Japan ... 20+ years later they STILL have rates too low.
That is what the Fed is trying to avoid.
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Old 04-21-2011, 02:21 PM   #7
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And on retirees who count on interest payments.
Yeah, that's scary! We're sitting good now on an IRA CD at 4.65% that matures in 2014. Another large CD at 4.5% that matures in 2014 as well. What then? I'm thinking rates have to be back up by 2014 but I'm not so sure anymore. Best I see advertized now is 2.5% for a 5 year CD. On the IRA CD, I have to take a RMD every year. Kills me!
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