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Banks make more money from trading stocks on Wall Street.
The big ones get money from the Treasury/Fed so they don't have to bother with attracting depositors.
This is hogwash, banks primarily make money by lending and/or servicing loans.
Bank of America's deposits have increased by $200 billion vs last year, they don't need to offer high rates because they already have plenty of deposits and they are lending less. The same can be said of all the "big ones".
Regardless, every few weeks a post like this gets posted and the basic problem is that people don't understand the differences between real interest rates and nominal interest rates. Right now real interest rates are pretty high, where as nominal interest rates are pretty low. But real interest rates are the only thing that matters. What is better, making 2% when inflation is at 0% or making 5% when inflation is 4%? The vast majority of people would prefer the latter situation. And that is because they are suckers.
Even if you have 200k liquid being able to earn 25k on a checking account for 4% is awesome, especially since you have to keep some balance in a checking account anyway and 4% is better than 0% or .2% like most banks pay.
If you want to earn 4% just invest it in a low-medium risk corporate bond fund. What makes the checking accounts awesome is you're getting 4% on money you'd normally get absolutely nothing on. Plus even if you exceed 25k you still get pretty much what you'd get in HSBC or ING or some other savings account.
How do you earn 25k off of 200k @ 4%.....
I dropped out of school in the 10th grade, so maybe my math is not as good as yours but I come up with 8k.
Regardless, every few weeks a post like this gets posted and the basic problem is that people don't understand the differences between real interest rates and nominal interest rates. Right now real interest rates are pretty high, where as nominal interest rates are pretty low. But real interest rates are the only thing that matters. What is better, making 2% when inflation is at 0% or making 5% when inflation is 4%? The vast majority of people would prefer the latter situation. And that is because they are suckers.
Are you saying that we have 0% inflation now?
Seems like the real situation is ~5% inflation, and 0.1% interest rate on bank savings accounts (both annualised rates).
With rates this low and the Dollar dropping more every day, it seems like a better bet to just trade your dollars for foreign currencies.
I think there's a real risk developing that the Congress is going to impose punitive taxation on foreign exchange to prevent capital flight and/or widespread use of the dollar as a carry trade vehicle. I've seen a couple interesting articles on the topic in the last month.
I think buying and banking foreign currency abroad and having the ability to move there and live off those depatriated savings when TSHTF is becoming a better idea by the day. I'm no longer confident that the US is on a sustainable course, even in the medium term. Of course the question is where is a suitable safe-haven, and the answer will not necessarily remain a static one.
I think there's a real risk developing that the Congress is going to impose punitive taxation on foreign exchange to prevent capital flight and/or widespread use of the dollar as a carry trade vehicle. I've seen a couple interesting articles on the topic in the last month.
I think buying and banking foreign currency abroad and having the ability to move there and live off those depatriated savings when TSHTF is becoming a better idea by the day. I'm no longer confident that the US is on a sustainable course, even in the medium term. Of course the question is where is a suitable safe-haven, and the answer will not necessarily remain a static one.
I have seen the Malaysian ringgit appreciate in value against the US$ by ~10% in the past 3-4 months.
I dropped out of school in the 10th grade, so maybe my math is not as good as yours but I come up with 8k.
2x4=8 and then add zero's
I mean even if you have a lot of assets being able to earn 4% on 25k of it is still valuable, considering the alternative with a normal checking account is basically 0%. My post is sorta unclear. I certainly don't mean you can earn 25k in yearly interest on 200k at 4%, just that even if you have 200k in assets being able to earn a guaranteed 4% on an account that normally gives 0% is really valuable.
Seems like the real situation is ~5% inflation, and 0.1% interest rate on bank savings accounts (both annualised rates).
No, it was just an example. Right now the CPI's 12-month average is negative, if you include home prices (they should be included) then its around -7%.
If you think that inflation is 5%, then you are living on a different planet. I can't think of anything that is even going up in price right now, even gas has stabilized in price.
No, it was just an example. Right now the CPI's 12-month average is negative, if you include home prices (they should be included) then its around -7%.
If you think that inflation is 5%, then you are living on a different planet. I can't think of anything that is even going up in price right now, even gas has stabilized in price.
The CPI rose 0.4% in August. Using 12 as the number of months in a year, I get 4.8% as the annual percentage increase. The CPI rose only 0.2% in September, so that equates to 2.4% API. I think that it is to the government's benefit to understate inflation at this time, which is why I would calculate a higher number. It is certainly not 0%, or negative.
The CPI rose 0.4% in August. Using 12 as the number of months in a year, I get 4.8% as the annual percentage increase. The CPI rose only 0.2% in September, so that equates to 2.4% API. I think that it is to the government's benefit to understate inflation at this time, which is why I would calculate a higher number. It is certainly not 0%, or negative.
Huh? Taking a single month and multiplying it by 12 makes no sense. You'd think, that would be obvious by the major difference between August and September! CPI month to month is noisy, the 12 month average is the most stable number. The 12 month average is negative 1.3 percent.
There is a also a good deal of seasonality to the data, the summer months usually see the biggest increases and its usually related to fuel and transportation costs.
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