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Some on this forum claim it is impossible for any of us lowly common folk to predict the future. I do not subscribe to that point of view, and believe that some things can be predicted with reasonable accuracy by common sense.
Take interest rates for example. Interest rates have been ridiculously low now for 2 years now and it is time to look at the results.
It has done little or nothing to spur the economy; it has helped bankers immensely, by allowing them to borrow from the fed and redeposit the money at a profit.
Bank profits have increased along with bonuses, while workers suffer, which has angered the public.
Now let’s look at who it has damaged?
That would be the retired people who have to live off the interest of safe investments along with Social Security.
Now who are the single largest voting block?
Once again it is the retired.
Who are the most inspired voters?
That would be who ever is the most agitated.
Now if I were a retired person living on a fixed income and was counting on interest from savings to provide say another $5000 a year to make ends meet, and I was now only getting $50 a year, I might start to get a little tweaked. If it were the second year without a Social Security increase that would probably add fuel to my anger.
I might start to look at voting out anyone who was supporting low interest rates. Or maybe I would just take it out on whoever is the incumbent.
At any rate as soon as it becomes evident that the largest voting block is angry about interest rates, how long will it take for the politicians to begin pandering?
So where will interest rates be 6 mos. Ahead of the 2012 elections? My guess is substantially higher.
If not, I am willing to bet there will be a new party in charge afterwards, and they will be higher 6 mos. after.
Nothing personal, but this is a really hard post to parse.
[quote=jimhcom;16235092]Now if I were a retired person living on a fixed income and was counting on interest from savings to provide say another $5000 a year to make ends meet, and I was now only getting $50 a year, I might start to get a little tweaked.
I would suspect that they should be extremely angry at their broker for leaving their money in a simple savings account instead of a higher yield instrument.
Quote:
If it were the second year without a Social Security increase that would probably add fuel to my anger.
This is something that I don't understand. If the interest rate is flat along with the rate of inflation... how does one get angry about not getting a cost of living increase when the cost of living hasn't grown?!?
Quote:
I might start to look at voting out anyone who was supporting low interest rates.
Which is precisely why fiscal and monetary policy was removed from the political process.
[quote=ovcatto;16235332]Nothing personal, but this is a really hard post to parse.
Quote:
Originally Posted by jimhcom
Now if I were a retired person living on a fixed income and was counting on interest from savings to provide say another $5000 a year to make ends meet, and I was now only getting $50 a year, I might start to get a little tweaked.
I would suspect that they should be extremely angry at their broker for leaving their money in a simple savings account instead of a higher yield instrument.
Many lower income older people do not have brokers. They simply put their money in CD's. They are concerned with preservation of capital, and are not comfortable with higher yielding instruments with higher risk profiles.
Quote:
This is something that I don't understand. If the interest rate is flat along with the rate of inflation... how does one get angry about not getting a cost of living increase when the cost of living hasn't grown?!?
Which is precisely why fiscal and monetary policy was removed from the political process.
And how is that working... Not too well. At least for us anyway.
There is an old saying that you can only serve one master, and the Fed's master is the banking industry. They get rich, we get screwed.
Some on this forum claim it is impossible for any of us lowly common folk to predict the future. I do not subscribe to that point of view, and believe that some things can be predicted with reasonable accuracy by common sense.
Take interest rates for example. Interest rates have been ridiculously low now for 2 years now and it is time to look at the results.
It has done little or nothing to spur the economy; it has helped bankers immensely, by allowing them to borrow from the fed and redeposit the money at a profit.
Bank profits have increased along with bonuses, while workers suffer, which has angered the public.
Now let’s look at who it has damaged?
That would be the retired people who have to live off the interest of safe investments along with Social Security.
Now who are the single largest voting block?
Once again it is the retired.
Who are the most inspired voters?
That would be who ever is the most agitated.
Now if I were a retired person living on a fixed income and was counting on interest from savings to provide say another $5000 a year to make ends meet, and I was now only getting $50 a year, I might start to get a little tweaked. If it were the second year without a Social Security increase that would probably add fuel to my anger.
I might start to look at voting out anyone who was supporting low interest rates. Or maybe I would just take it out on whoever is the incumbent.
At any rate as soon as it becomes evident that the largest voting block is angry about interest rates, how long will it take for the politicians to begin pandering?
So where will interest rates be 6 mos. Ahead of the 2012 elections? My guess is substantially higher.
If not, I am willing to bet there will be a new party in charge afterwards, and they will be higher 6 mos. after.
Interest rates have been low for sometime now, it hasn't just been the last two years, more like the last 20.
Its what politicians have used to pay for the tax cuts, and yes, you have to pay for tax cuts, or cut programs.
They kept lowering interest rates to keep the economy going, instead of letting it naturally correct itself, all for political gain.
Now we are paying the piper, no more interest rates to lower, they are effectively 0.
Many lower income older people do not have brokers. They simply put their money in CD's. They are concerned with preservation of capital, and are not comfortable with higher yielding instruments with higher risk profiles.
I will concede that point.
[quote]The cost of living has increased. The government’s figures are skewed by using Substitutions and Hedonics.[/url]
I'm not buying your link for a myriad of reasons, one of which is the whole dismissal of substitute products.
Quote:
And how is that working... Not too well. At least for us anyway.
There is an old saying that you can only serve one master, and the Fed's master is the banking industry. They get rich, we get screwed.
And you think that by allowing the President or the Congress to set interest rates that there would be some drastically different outcome?
Interest rates have been low for sometime now, it hasn't just been the last two years, more like the last 20.
Its what politicians have used to pay for the tax cuts, and yes, you have to pay for tax cuts, or cut programs.
They kept lowering interest rates to keep the economy going, instead of letting it naturally correct itself, all for political gain.
Now we are paying the piper, no more interest rates to lower, they are effectively 0.
Rate is low for a long time, and it has nothing to do with tax cut. The US is one of the highest taxed country in the world. Combine Fed, State, local tax, and FICA can go more than 50% in some areas. I don't want to go into a lengthy discuss into this topic, but our tax is high.
The reason why interest rate is low has nothing to do with tax cuts. With our monetary system, our government don't need tax. Just print it. The reasons why the government collect tax is pay the interest own to the Federal Reserves and to make sure most of us don't get ahead. If you ever wonder why you work so hard, getting increase every year and don't seem to get very far, this is the reason.
The way how the Federal Reserves work is this:
1) Government need $1 billion, so they draft a bonds for 30 years
2) They turn the bond over to Federal Reserves and the Fed writes out a check for $1 billion out of thin air. Since it is a bond, you have to pay interest
3) Government collect tax and turn the tax over to Federal Reverses as interest
Who owns the Federal Reverses? Mostly banks and few other mega corporations.
The cost of living has increased. The government’s figures are skewed by using Substitutions and Hedonics.[/url]
I'm not buying your link for a myriad of reasons, one of which is the whole dismissal of substitute products.
And you think that by allowing the President or the Congress to set interest rates that there would be some drastically different outcome?
The fact that the government skews data is really not deniable, the fact is the cost of living is going up, and the Government is lying about it. Nobody said anything about the President or Congress setting interest rates. Interest rates need to be set by the free market. At present, the Fed is intervening to lower interest rates by purchasing treasuries that would otherwise demand higher rates to accommodate auctions.
Interest rates are down because inflation is so low; or vice versa. Who the hell really knows?
inflation WAS high from 02-08 because interest rates were low, and it didn't help that we ran big public deficits (war) , plus we maintained a trade deficit.
however, we malinvested all that credit by spending it on consumer crap (houses, Chevy Tahoes, granite countertops), instead of something that generates a return (like a business).
now that all this malinvested debt is collapsing, we can't create sustained inflation, we've had to lower interest rates and engage in "quantitative easing" (printing money and giving it to banks) to keep from destroying too much private debt (mortgage debt, for example).
If interest rates were 5% I could live on my savings. This helps the banks, hurts seniors
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