Low Interest Rate Damage

[Beryl]

That kind of arrangement is available. My kids for instance earn 5% on their savings account (up to the first $1000 on deposit). The banks hope to attract other profitable business from the family, as these are money losing accounts for them. I could try to open (and keep track of) many of these accounts if I wanted to chase this great rate, but it's not worth the time and effort to me. I'm surprised that it's worth the time and effort to the bank, but they must have some intention to make the relationship profitable eventually. I suspect they would be less interested in offering above market rates to people with small balances if it were mandated or if it were less likely that more business would be forthcoming in the future.

Pretty cool. This would be an incentive to save, I think. I agree that many will open a few of these accounts if they were available. I open (and close) accounts regularly to get rewards and short-term teaser rates. It is my new 'job' and it is fun.

I heard on the news that lots of bank were thinking about charging fees for large depositors since it cost them more to keep depositors money in the books. I don't know exactly how they work.

Yes, they have to carry policies that surpass the regular $250K insurance per account that smaller depositors (like me) rely on.

 

[traineeinvestor]

Low interest rates aren't all bad. Many people are actually benefiting from them - including pension managers and other investors who have pocketed good solid returns as the process of lowering interest rates pushed bond prices higher, current and future taxpayers who are funding smaller deficits, persons who benefit from government entitlement programs which would be more likely to be reduced if the government had to tighten it's belt to fund higher interest payments, equity and real estate investors whose asset values are at least partly a function of interest rate levels and borrowers generally. Probably a few others as well.

Sure, it would be nice to be able to get a nice safe real return on money presently sitting in bank deposits and CDs which is being slowly depreciated by inflation, but raising interest rates is going to cause a whole lot of pain (as parts of Europe are currently discovering - including European pension plans which are taking a (hopefully short term) hit on the value of their bonds).

 

[Nords]

Hmm.... how about low interest rates instead of the ultra-low ones we now have. What if the 1 year T-bill yielded 1/2 of the inflation rate, for starters.

Low interest rates aren't all bad. Many people are actually benefiting from them - including pension managers and other investors who have pocketed good solid returns as the process of lowering interest rates pushed bond prices higher, current and future taxpayers who are funding smaller deficits, persons who benefit from government entitlement programs which would be more likely to be reduced if the government had to tighten it's belt to fund higher interest payments, equity and real estate investors whose asset values are at least partly a function of interest rate levels and borrowers generally. Probably a few others as well.
Sure, it would be nice to be able to get a nice safe real return on money presently sitting in bank deposits and CDs which is being slowly depreciated by inflation, but raising interest rates is going to cause a whole lot of pain (as parts of Europe are currently discovering - including European pension plans which are taking a (hopefully short term) hit on the value of their bonds).

I'm OK with raising interest rates a little. But first could you drop them 1-2% so that we can pull off one more mortgage refinance? Thanks.

The more i think about this the more I go back to the age old advice of diversification. There is simply no way to control or predict the future so one gets exactly what one wants.

Every sad media financial story (or should I say, every sad financial story in the media) is based on a lack of diversification.