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I'm having a hard time wrapping my head around the concept that it's the duty of the Federal Reserve Board to not only guarantee you an investment income but to also guarantee that your heirs receive your nest egg in its entirety.
It sounds like a 'have your cake and eat it too' situation.
Point noted, but from my perspective it appears that the FED does manage the rate to benefit Goldman Sachs much more than to benefit myself and other little-guy savers. Why should GS (and other Wall Street bankers) get bailed out of their bad loans/CDS's/etc. while I have to make a piddling return? Who decides which sector of society to get the primary benefits? Why did AIG pay back 100% of the CDS's that they had with GS while the rest seemed to get less than 100%? Why was AIG given $85 billion (that is $85,000 million!!!!) in TARP money (from which they quickly paid back GS) while Lehman Brothers was sent to the grave?
Gee, there seems to be a revolving door between GS and the federal government.....
Last edited by Teak; 08-12-2009 at 02:29 AM..
Reason: added one sentence, eh?
Question for each poster. Would higher interest rates be good for YOU, or good for America, or good for the world and keep us out of WWIII? From whose standpoint do you judge the merit of your economic favoritism?
If I answer: good for me, than I am a true capitalist in the Adam Smith definition.
If I answer: good for America, than I am a politician looking to get re-elected.
If I answer: to keep the USA out of WWIII, then I am puzzled how that will do so.
Basically, I believe that the USA is a failing empire. It might not be in my lifetime, but it is coming. We spend; China saves. Our students major in rock guitar and hip-hop; the Chinese study physics and engineering. The Chinese now hold ~$2 trillion in US debt (that is $2,000,000 million!, or $2 million million).
They continue to buy our T-bills and T-bonds with the pathetic interest rates because they want us to keep buying their junk that is sold at Walmart. But, they use their savings to buy resources: coal, oil, gas, gold, platinum, nickel, and etc. They are buying agricultural land in Africa, and timber in SE Asia. What do we spend the borrowed money on? Unsustainable pensions, health insurance, old cars, bonuses for GS executives, welfare, military stuff that gets blown up, executive jets for Congressmen (who fly to Antarctica to "see global warming in action"), and etc.
Where will this lead?
Someday, the US$ will be replaced as the currency of choice for the world's savers and all of that US debt will be called due. China and India will have sufficient domestic demand to keep their factories humming and we will have over-compensated and over-entertained retirees who complain about the immigrants that we have to allow in to do the service industry jobs that pay minimum wage. If you haven't noticed, the middle class is disappearing with ~90% moving downwards, and maybe only 10% moving upwards.
Personally, I think that the current generation of retirees will have the best retirement ever and that it will go downhill from here. We baby boomers are probably going to kill the system. SS taxes of, what, 15-18% on top of minimum wage does not get you much.
Good, because all Chinese kids aren't imminent Nobel laureates and how things shape up once there is an accumulation of wealth so that Chinese kids can be overindulged trust fund babies like the rest of the developed world.
As for being a failed empire, good, the U.S. is inherently incapable of maintaining imperial ambitions because we are structurally prohibited from having a consistent foreign policy that extends over generations (cold war excepted). Hopefully, like the other empires of Western Europe we can settle down and concentrate on what we are inherently good at, industrial development and commerce.
ok, so aside from what SHOULD happen, what do people think WILL happen 6 & 12+ months from now as far as interest rates go? anyone think they will be back up to around 5% in the near future? when they do start rising, how high will they go-will we see 8%+ again in the next decade?
Point noted, but from my perspective it appears that the FED does manage the rate to benefit Goldman Sachs much more than to benefit myself and other little-guy savers. Why should GS (and other Wall Street bankers) get bailed out of their bad loans/CDS's/etc. while I have to make a piddling return? Who decides which sector of society to get the primary benefits? Why did AIG pay back 100% of the CDS's that they had with GS while the rest seemed to get less than 100%? Why was AIG given $85 billion (that is $85,000 million!!!!) in TARP money (from which they quickly paid back GS) while Lehman Brothers was sent to the grave?
Gee, there seems to be a revolving door between GS and the federal government.....
Teak, it sounds like you're mixing up the Federal Reserve Board's various interest rates, the TARP funds doled out by the US Department of Treasury and the Federal Reserve Bank's decisions on which financial institutions deserve to survive.
I think we've already discussed the Federal Reserve Board's interest rates.
I agree that the TARP stuff has a bad smell about it; my hope about TARP is that it (debatably) prevented a financial meltdown of the entire US banking system.
As for the Fed saving AIG and GS while letting Lehman Brother fail...I agree that it stinks. The close ties between GS and the US Treasury Department and the Federal Reserve Bank definitely give at the very least the appearance of a conflict of interest.
The yardstick presented by the Fed is that some companies (AIG, Goldman Sachs, etc) are "too big to fail" while others (Lehman Brothers) aren't worth saving. I'm left to wonder why the Fed let these companies get so big and so unsupervised that their failure could threaten to collapse the US economy.
ok, so aside from what SHOULD happen, what do people think WILL happen 6 & 12+ months from now as far as interest rates go? anyone think they will be back up to around 5% in the near future? when they do start rising, how high will they go-will we see 8%+ again in the next decade?
The real answer is that nobody really knows what the interest rate should be 6 and 12 months from now. The Federal Reserve Board sets its rates reactively to recently historical events, not proactively to imagined future events. And no one knows when we'll pull out of the economic hole that we're currently in.
The real answer is that nobody really knows what the interest rate should be 6 and 12 months from now. The Federal Reserve Board sets its rates reactively to recently historical events, not proactively to imagined future events. And no one knows when we'll pull out of the economic hole that we're currently in.
Yeah, I probably am mixing up the various interest rates, but fundamentally, they are all very low and, thus, give a poor rate of return to savers.
This just in from USA Today (arguably, NOT the best source of business information, but for-what-its-worth):
Money isn't everything, at least to investors in money market funds. Yields are at all-time lows, and nearly a quarter of funds yield nothing at all.
The average money fund yielded an annualized 0.08% the week ended Aug. 4, the latest data from iMoneyNet, which tracks funds, show. At that rate, a $10,000 investment would return 15 cents a week.
Three-month Treasury bills, a typical money fund investment, yield 0.18%. Six-month T-bills yield 0.27%. And 90-day commercial paper, short-term IOUs issued by top-rated companies, yields about 0.34%.
The average money fund takes about 0.4 of a percentage point yearly for expenses, which means investors get little interest from the funds.
"They're taking more of the funds' yield to pay expenses than to pay investors," says Peter Crane, editor of newsletter Money Fund Intelligence.
– USA Today
Last edited by Teak; 08-14-2009 at 08:48 PM..
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