U.S. consumers are cutting debt and trying to conserve more money. A double dip recession is the main concern for the federal Reserve which intends on keeping interest rates as low as possible. Banks benefit from the interest rates being so low. This means they get to have much more money. Banks are making a bit of money. The gap between what a consumer pays and what the bank pays is large enough to make additional money with. Savers, investors, pensions and endowments have to pay for the Fed monetary policies with an “invisible tax”.
Now saving is unimportant
U.S. banks are paying savers the lowest average rates on record. Bloomberg did a study with Market Rate Insight suggesting that 0.99 percent was about how much in July was paid towards interest on checking, savings, money market and certificates. Market Rates measured anything that was a rate or bonus paid by 1,300 banks and credit unions in the whole American country. There were more savings rates that were tracked. These were between January 2004 and July 2010. There is a correlation between unemployment and savings rates. The report concludes that when the unemployment rate goes down, interest rates on savings will go up.
Harder to fix debt with bansk
Banks get a reward while citizens are punished with the near zero rate of interest from the Fed. . Larry Doyle at Daily Markets writes that miniscule interest rates are squeezing individuals who live on fixed incomes. You don’t get any money out of savings accounts. Banks do not have to pay hardly anything to borrow money. This means they will continue to raise interest rates on credit cards in order to get more money.
Low interest rates is what we call an invisible tax
The Fed’s policy can be part of the economic problem. The New York Times had an article by Gretchen Morgenson explaining this. . Since the Treasury lent about $14 trillion with a near zero rate of interest, he began there. Usually rates are around 3 percent. That makes current rates too low by 2.5 points. 2.5 percent of $14 trillion adds up. In fact, savers, investors, pensions and endowments will then lose about $350 billion a year. The money lost is more than 2 percent of gross domestic product and almost 3 percent of disposable personal income.
Discover more info on this subject
Bloomberg
bloomberg.com/news/2010-08-24/u-s-banks-paying-depositors-record-low-interest-rates-market-rates-says.html
Daily Markets
dailymarkets.com/stock/2010/08/24/invisible-taxes-loan-sharking-usury/
New York Times
nytimes.com/2010/08/22/business/22gret.html?_r=2 and amp;ref=gretchen_morgenson
