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I retired recently, a little sooner than expected, and have been trying to figure out how to get income from my savings. As we all know, bank interest is very low, and so are bond yields. The stock market, in my opinion is not safe now.
In summary, there are no good options.
But while I was figuring this out, I became curious about why things are this way. Of course I knew interest is low because of the Fed, but I didn't really know why, or how that effects the stock market, etc. I have always been angry about the low interest rates, and QE always seemed crazy to me ...
But now, after reading a lot about all that, I believe this country, and the whole world, are heading for a disaster.
And I didn't get this from the crazy conspiracy web sites. I don't even bother reading them. I am talking about mostly mainstream sources of financial news and opinions.
I hate to admit, but I never knew what the Fed was. I just assumed, from the name, that it was the US government central authority on money. NO. It is not even part of the US government -- the Fed, the central bank of the US, is privately owned. Fed officials are appointed by the US government, but the Fed is separate from the government.
Ok, if you are still reading this -- I did not figure it all out, it is immensely complicated, and I am not an economist. Even if I were, it would probably seem horribly complicated.
But here is my horrified conclusion so far, if you are interested:
Fed officials are of course big shots in the financial world, and they have many friends who are big shots in the financial world. They have IMMENSE power, since they can decide how much money will be in the economy, and what banks to shoot money into. Of course, they would NEVER EVER shoot money into a bank that they have ownership in, or their friends have ownership in -- that would be unethical, criminal, and we know that every government appointed official is pure as just-fallen snow.
The reason the Fed (short for Federal Reserve System) was created was to prevent bank panics, which used to happen often enough I guess. The Fed was born in 1913. So, when the Fed senses big banks are in trouble, it rushes in to the rescue, so there won't be a panic and a run on the banks.
How does it rescue the drowning banks? It shoots in big batches of money. How does it get so much money? No problem -- the Fed has the power to create money. Also, it can help itself to tax money, the money that we all paid to the government.
So let's say you are a Fed official, and your pals who own the big banks are in trouble. Let's say it's because they made stupid bone-headed investments in toxic mortgage-backed securities. Well the Fed rushes in, and buys the toxic junk, using our tax money. Clever!! What a neat trick that is! And even better, that's what really did happen in 2008.
The Fed has several clever tricks it can use to save the day and prevent rich bankers from ever having to suffer the consequences of their stupid policies.
QE (quantitative easing) just has to be everyone's favorite clever trick. The Fed had lowered short-term interest rates about to zero, and the economy still wasn't stimulated. (How could that be, doesn't everyone know that zero interest rates are guaranteed to stimulate any economy??)
So the Fed figured they would try what some other country's central banks had tried. Hey, if it didn't work for them, maybe it will work for us! I still feel confused about this and can't quite explain it, but what happened is the Fed somehow injected tons of money into the banking system. The reason was so the banks would feel like making loans. That along with very low interest rates should cause people to buy houses they can't afford, and that should stimulate the economy.
But hey, if it doesn't work, and the banks just sit on all that money because not enough people want to borrow it, that's ok too!! Because at least the Fed's beloved friends, the big bankers, made a giant killing!!
Isn't that smart?
But hey, you are thinking, how come the stock market did so great since the 2008 crash? Wasn't that because of the Fed's clever interventions?
Well yes maybe. Extremely low interest meant you couldn't make money on bonds or CDs, so lots of people jumped into stocks, driving up the prices. Even if the businesses were doing poorly, the stock prices could still rise, because of demand.
So now we have all kinds of pension plans invested in stocks. And stocks are in a giant bubble caused by low interest, and other funny stuff the Fed has been doing.
Well that's what I have been learning about the insanity they call the financial world. If you ask me, the Fed is a monster that could literally devour the world. It is, in fact, the most powerful organization in the world.
For some reason, lots of people seem to trust it. Either that or they have really no idea what it's all about.
I am amazed at how many people have never heard of stock/bond diversification.
You think the stock market is over valued? Fine. Money will run to the safety of bonds. Solution: Own both.
You have had the choice to either ride the wave or sit on the sidelines and complain about what caused the wave that other people have been riding. Your made the choice of the latter
I retired recently, a little sooner than expected, and have been trying to figure out how to get income from my savings. As we all know, bank interest is very low, and so are bond yields. The stock market, in my opinion is not safe now.
In summary, there are no good options.
But while I was figuring this out, I became curious about why things are this way. Of course I knew interest is low because of the Fed, but I didn't really know why, or how that effects the stock market, etc. I have always been angry about the low interest rates, and QE always seemed crazy to me ...
But now, after reading a lot about all that, I believe this country, and the whole world, are heading for a disaster.
And I didn't get this from the crazy conspiracy web sites. I don't even bother reading them. I am talking about mostly mainstream sources of financial news and opinions.
I hate to admit, but I never knew what the Fed was. I just assumed, from the name, that it was the US government central authority on money. NO. It is not even part of the US government -- the Fed, the central bank of the US, is privately owned. Fed officials are appointed by the US government, but the Fed is separate from the government.
Ok, if you are still reading this -- I did not figure it all out, it is immensely complicated, and I am not an economist. Even if I were, it would probably seem horribly complicated.
But here is my horrified conclusion so far, if you are interested:
Fed officials are of course big shots in the financial world, and they have many friends who are big shots in the financial world. They have IMMENSE power, since they can decide how much money will be in the economy, and what banks to shoot money into. Of course, they would NEVER EVER shoot money into a bank that they have ownership in, or their friends have ownership in -- that would be unethical, criminal, and we know that every government appointed official is pure as just-fallen snow.
The reason the Fed (short for Federal Reserve System) was created was to prevent bank panics, which used to happen often enough I guess. The Fed was born in 1913. So, when the Fed senses big banks are in trouble, it rushes in to the rescue, so there won't be a panic and a run on the banks.
How does it rescue the drowning banks? It shoots in big batches of money. How does it get so much money? No problem -- the Fed has the power to create money. Also, it can help itself to tax money, the money that we all paid to the government.
So let's say you are a Fed official, and your pals who own the big banks are in trouble. Let's say it's because they made stupid bone-headed investments in toxic mortgage-backed securities. Well the Fed rushes in, and buys the toxic junk, using our tax money. Clever!! What a neat trick that is! And even better, that's what really did happen in 2008.
The Fed has several clever tricks it can use to save the day and prevent rich bankers from ever having to suffer the consequences of their stupid policies.
QE (quantitative easing) just has to be everyone's favorite clever trick. The Fed had lowered short-term interest rates about to zero, and the economy still wasn't stimulated. (How could that be, doesn't everyone know that zero interest rates are guaranteed to stimulate any economy??)
So the Fed figured they would try what some other country's central banks had tried. Hey, if it didn't work for them, maybe it will work for us! I still feel confused about this and can't quite explain it, but what happened is the Fed somehow injected tons of money into the banking system. The reason was so the banks would feel like making loans. That along with very low interest rates should cause people to buy houses they can't afford, and that should stimulate the economy.
But hey, if it doesn't work, and the banks just sit on all that money because not enough people want to borrow it, that's ok too!! Because at least the Fed's beloved friends, the big bankers, made a giant killing!!
Isn't that smart?
But hey, you are thinking, how come the stock market did so great since the 2008 crash? Wasn't that because of the Fed's clever interventions?
Well yes maybe. Extremely low interest meant you couldn't make money on bonds or CDs, so lots of people jumped into stocks, driving up the prices. Even if the businesses were doing poorly, the stock prices could still rise, because of demand.
So now we have all kinds of pension plans invested in stocks. And stocks are in a giant bubble caused by low interest, and other funny stuff the Fed has been doing.
Well that's what I have been learning about the insanity they call the financial world. If you ask me, the Fed is a monster that could literally devour the world. It is, in fact, the most powerful organization in the world.
For some reason, lots of people seem to trust it. Either that or they have really no idea what it's all about.
For someone who doesn't believe in conspiracy theories, you are pretty much describing what so called conspiracy theorists have been saying for a while now.
I hate to tell you, but it gets worse. The real goal of the banking/global elite is to crash the world economy and create a financial crisis (or several) so they can have one world electronic currency where every transaction is tracked, one world government (dictatorship), etc.
It is all right there out in front of us if you just connect the dots. As you said, people trust institutions like the fed, precisely because they don't understand the complexity of it and they don't look too deeply into things. Same goes for other institutions.
all i know is when i started out as an investor the s&p 500 was in the 90's . today it is near 2200 .
despite wars ,great recessions , inflation ,assassinations , terrorist attacks , tsunami's and the collapse of major world country's and 40 years of events , company's have thrived and grown . our trend line has always been up in the long term ..
the earnings of the S&P 500 companies are in new all-time high ground. As is the Index itself: There is absolutely nothing random about this. Over time, the values of the shares must follow the fortunes of the companies.
anyone who fights the fact at the end of the day capital acts rationally even when investors don't will eventually be quite poorer for it .
the investors of the world who focus on the fact that money in the long term ends up being rational have all done quite well . the failed investors are the pessimists who focus on the times investor behavior is irrational and end up shooting themselves in the foot .
just think of those who bailed out in 2008-2009 trying to flee the markets . they sustained the very losses they were fleeing from .
those who stayed the course eventually had capital resume its rational journey .
the long term trend line has always been up here . fighting that fact by being a pessimist has been the wrong thing to do over and over .
Last edited by mathjak107; 08-30-2016 at 02:40 AM..
all i know is when i started out as an investor the s&p 500 was in the 90's . today it is near 2200 .
despite wars ,great recessions , inflation ,assassinations , terrorist attacks , tsunami's and the collapse of major world country's and 40 years of events , company's have thrived and grown . our trend line has always been up in the long term ..
the earnings of the S&P 500 companies are in new all-time high ground. As is the Index itself: There is absolutely nothing random about this. Over time, the values of the shares must follow the fortunes of the companies.
anyone who fights the fact at the end of the day capital acts rationally even when investors don't will eventually be quite poorer for it .
the investors of the world who focus on the fact that money in the long term ends up being rational have all done quite well . the failed investors are the pessimists who focus on the times investor behavior is irrational and end up shooting themselves in the foot .
just think of those who bailed out in 2008-2009 trying to flee the markets . they sustained the very losses they were fleeing from .
those who stayed the course eventually had capital resume its rational journey .
the long term trend line has always been up here . fighting that fact by being a pessimist has been the wrong thing to do over and over .
Maybe, but the Fed's actions since 2008 have been unprecedented, and out of control, and I would say completely insane. Maybe, to some extent, they mean well -- but you know the saying about good intentions.
I don't agree with the conspiracy theories. I think malicious stuff must be going on -- give any institution that much power and there will be corruption -- but I think that is secondary to the well-meaning arrogance.
Notice that political "liberals" are more likely to approve of QE, and conservatives seem more likely to be against it. The reason is because the political left likes central planning, while conservatives know that central planning sucks and eventually makes the system go haywire in unexpected ways.
Not that I am a real conservative, but I certainly agree with them regarding central planning.
I think the zillions of dollars poured into the banks since 2008 will cause some kind unexpected disasters. We can no longer predict the future based on the past.
Obama proclaims the economy is doing great.
The Fed says they can't raise interest rates because the economy is too "fragile"
Which is it ?
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