Do you think we will ever see decent interest rates on savings again? I can remember when money markets were paying 13/14 %. I realize that inflation was high, but rates have been close to zero for about 9 years. IIRC the rate was still about 5% before 2008.
Interest on savings
- Thread starter Idnar7
- Start date
Blue Collar Guy
Thinks s/he gets paid by the post
NO
- Joined
- Nov 17, 2015
- Messages
- 13,953
I think they'll go back to low-mid single digits in time, but not for years. More likely get to about 2% and hold there for a while.
Remember, a big driver of the bull market has been lack of anywhere else to put cash (especially after the RE bust) to grow money. Make it even a bit attractive to put your money in a good CD ladder or MM savings account, and the balance tips again. If you could make 6% with no risk in the bank, why put it in an index fund for a chance at 7%. The markets shudder at the thought of capital fleeing.
Remember, a big driver of the bull market has been lack of anywhere else to put cash (especially after the RE bust) to grow money. Make it even a bit attractive to put your money in a good CD ladder or MM savings account, and the balance tips again. If you could make 6% with no risk in the bank, why put it in an index fund for a chance at 7%. The markets shudder at the thought of capital fleeing.
Fedup
Thinks s/he gets paid by the post
I think the stock market may crash when we hit 6%, at least according to Warren Buffet, stocks will not be cheap in comparison.
Blue Collar Guy
Thinks s/he gets paid by the post
I have to google this. Mr Omaha said 6 % interest and the market crashes? omg. Let me report back with my google results.
. Can you give me the link? im not finding this info thanks.
Last edited:
brucethebroker
Thinks s/he gets paid by the post
No crystal ball, but I don't see how it will happen without a crash. Too many people hooked on easy money (low mortgages and auto loans). Torches and pitchforks when that dries up.
Dash man
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
The only way to pay off the growing national debt is through inflation. The Fed typically raises rates to control inflation, but then the interest payments on the debt will increase. So rates will be kept low while inflation will be allowed to grow a little bit to deflate the dollar slowly over time.
FiveDriver
Full time employment: Posting here.
Idnar--
If your memory is good enough to recall those 13% MM rates, I'm sure you'll remember the general Economic Climate back in the early 80's also.
The rampant inflation of that time (anybody save Gerry Ford's Whip Inflation Now buttons ??). Mortgage Rates were also 12 - 13% and the Housing Sector was stagnant. As I remember it, the Auto Industry was in the doldrums too as Detroit couldn't react to the gas shortages with efficient vehicles. When 2 of the major pillars of the Economy were staggering......there's not much to be hopeful about.
If your memory is good enough to recall those 13% MM rates, I'm sure you'll remember the general Economic Climate back in the early 80's also.
The rampant inflation of that time (anybody save Gerry Ford's Whip Inflation Now buttons ??). Mortgage Rates were also 12 - 13% and the Housing Sector was stagnant. As I remember it, the Auto Industry was in the doldrums too as Detroit couldn't react to the gas shortages with efficient vehicles. When 2 of the major pillars of the Economy were staggering......there's not much to be hopeful about.
euro
Thinks s/he gets paid by the post
- Joined
- Oct 4, 2015
- Messages
- 2,338
This! We do tend to remember the "upside" and forget the "downside".....
scrabbler1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Nov 20, 2009
- Messages
- 6,699
I remember in 1989, after I changed local banks, I opened a linked MM savings account linked to my checking account. On the monthly statement, it showed the annual interest rate which in May of 1989 was around 7.6%, nice. But, sadly, that rate dropped every month the rest of the year so by the end of the year I remember it being around 2% (if even that high). This, along with my savings being rebuilt after my moving to a co-op apartment I had just bought, led me to begin investing elsewhere with my after-tax dollars, starting with a muni bond fund which not only paid a higher return but was also triple-tax-free.
gcgang
Thinks s/he gets paid by the post
- Joined
- Sep 16, 2012
- Messages
- 1,571
+1
You can make the case that cash loses when there's any inflation, and loses less when interest rates, and inflation, are low.
Today you earn 1%, maybe 25% tax, 2% inflation, down 1.25% real.
When you earn 10%, less 2.5% for taxes, 12% inflation, down 4.5% real.
Be careful what you wish for.
Fedup
Thinks s/he gets paid by the post
He didn't say it will crash. I said it may crash. He said stocks will be evaluated against that, right now he said it's not over valued. Let me see if I can google for his comment. I thought it was 6%, it turns out he said 7-8%.I have to google this. Mr Omaha said 6 % interest and the market crashes? omg. Let me report back with my google results.
http://markets.businessinsider.com/news/stocks/warren-buffett-stocks-cheap-2017-2-1001785569
Last edited:
- Joined
- Nov 17, 2015
- Messages
- 13,953
"If interest rates were at 7 or 8%, then these prices would look exceptionally high," Buffett said. The Federal Reserve most recently raised its benchmark rate in December, to a range of 0.50% to 0.75
That's from an interview he did earlier this year.
That's from an interview he did earlier this year.
YVRRocketSurgery
Full time employment: Posting here.
Depending on your definition of decent interest rates on savings, I'd say we're likely at least 15 to 20 years from that.
To the point on how to address government debt, you can inflate it away but it will run counter to the 2% inflation targets of the Fed and BoC, you've got austerity (see how the Greeks are liking that), governments can default which would be pretty ugly if the US did so, and lastly you've got financial repression where real interest rates are kept artificially low and personal wealth is eroded.
To the point on how to address government debt, you can inflate it away but it will run counter to the 2% inflation targets of the Fed and BoC, you've got austerity (see how the Greeks are liking that), governments can default which would be pretty ugly if the US did so, and lastly you've got financial repression where real interest rates are kept artificially low and personal wealth is eroded.
Dash man
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Why do you say this? Through a large portion of the 80s and 90s, interest rates available on accounts and CDs was frequently higher than inflation, sometimes by a comfortable margin.
Ha
Blue Collar Guy
Thinks s/he gets paid by the post
than you, im reading this now.
NYEXPAT
Thinks s/he gets paid by the post
For the past few years we have been able to get 6%-7.25% on ST cd's ( in local currency) with less than 3% inflation. Because of the appreciation in the Dollar it did not make sense to buy them. Lately, we have seen the dollar stable
at a lower level and I am considering moving out of RE and into CD's for a good chunk of money.
at a lower level and I am considering moving out of RE and into CD's for a good chunk of money.
Mulligan
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- May 3, 2009
- Messages
- 9,343
I think people forget this, Ha. I remember in late 90s around 1998 getting a sweet 8% CD. As late as somewhere around 2006 I got a 6% CD. These were rates above inflation. But economy was humming along and banks needed the deposits, locally anyways..
Reminds my of years ago (1976) when we were being transferred to Cincinnati on a company relocation. A friend of mine had just moved to Cincinnati and told me he had to pay 18% to get a mortgage. We ended up buying a new home from a local builder who must have had a great connection with his bank. We got a great deal on a mortgage at 8.5%. Most we ever paid for a mortgage. That was back in the days of Jimmy Carter gas rationing when you got gas only on certain days, based on your birthday or address or license plate number or something like that. High interest rate period. My folks also had 8 and 9 % CD's. Oh, the good old days!
Last edited:
Idnar--
If your memory is good enough to recall those 13% MM rates, I'm sure you'll remember the general Economic Climate back in the early 80's also.
The rampant inflation of that time (anybody save Gerry Ford's Whip Inflation Now buttons ??). Mortgage Rates were also 12 - 13% and the Housing Sector was stagnant. As I remember it, the Auto Industry was in the doldrums too as Detroit couldn't react to the gas shortages with efficient vehicles. When 2 of the major pillars of the Economy were staggering......there's not much to be hopeful about.
Yes I remember my company relocated in 1984 when mortgage rates were 13.5 %. The only way they could get employees to move was to pay down 5% points. And I remember spending lunch hours waiting in line to buy 5 gallons of gas. And then they would put out the "out of gas" signs. IIRC stations were also closed on Sunday.
If your memory is good enough to recall those 13% MM rates, I'm sure you'll remember the general Economic Climate back in the early 80's also.
The rampant inflation of that time (anybody save Gerry Ford's Whip Inflation Now buttons ??). Mortgage Rates were also 12 - 13% and the Housing Sector was stagnant. As I remember it, the Auto Industry was in the doldrums too as Detroit couldn't react to the gas shortages with efficient vehicles. When 2 of the major pillars of the Economy were staggering......there's not much to be hopeful about.
Yes I remember my company relocated in 1984 when mortgage rates were 13.5 %. The only way they could get employees to move was to pay down 5% points. And I remember spending lunch hours waiting in line to buy 5 gallons of gas. And then they would put out the "out of gas" signs. IIRC stations were also closed on Sunday.
jazz4cash
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I just got an email notice form Goldman Sachs Bank (Formerly GE Capitol Bank) that they are raising their online savings rate from 1.05% to 1.2%. Not Bad.
Similar threads
