5 ms·

Fear? Seems more that there are simply no safe investments with decent returns, interest rates are abysmal. I think folks are 'hoarding' simply to not run out

by gedy 9y ago

Fear? Seems more that there are simply no safe investments with decent returns, interest rates are abysmal. I think folks are 'hoarding' simply to not run out by the time they die. Low interest rates are painted as great for the economy, but they amount to a war on savers and fixed incomes.

tmh79 9y ago
Savers like "money in a bank account" savers, or savers as in "I have a bunch of money I want to put somewhere, where does it go between ETFs/Real Estate/etc". Low interest rates are great for the 2nd group because of the insane asset price inflation we've seen in the past few years, especially in housing, which is the largest store of wealth for most old folks in the US IIRC.
- gedy 9y ago
  Yes, but that's frequency considered a gamble to folks dealing with their life savings.
stupidhn 9y ago
There are two sides to every transaction, and whether low interest rates are good or bad depends on which side of the transaction you are on. Nobody is entitled to high rates on their savings.
- kovacs 9y ago
  Are people entitled to have the fruits of their work stolen from them?
  - stupidhn 9y ago
    >Are people entitled to have the fruits of their work stolen from them? Who is stealing what?
msabalau 9y ago
Oh, if we had high interest rates and inflation, people with fixed incomes and savers would be feeling horrible too. The idea that there would be safe investments with decent returns is inherently ridiculous. The closest one can come is oligarchs buying tax policy, or baby boomers making sure that housing stock is inadequate so the prioe of the their home goes up artificially at the expense of the young and poor.
- incompatible 9y ago
  To me it seems that getting a decent return was a lot easier prior to 2007. Banks would pay interest rates of 6% or so and inflation was low. The stock market only gradually became overvalued.
  - kasey_junk 9y ago
    Citation needed. In 2007 a 1 year cd was paying about half of that. Savings account rates have not kept up with inflation in my adult life time and I'm middle aged.
    - incompatible 9y ago
      I was in the UK at the time: http://swanlowpark.co.uk/savings-interest-annual.jsp http://swanlowpark.co.uk/savings-interest-annual.jsp, but I'm sure I got better rates by shopping around.
    - jamie_ca 9y ago
      Gotta go back further than that. ING Direct (Canada) peaked at 5% on a savings account in mid 2000, and was above 4% from when they opened up in '97 to April '01. https://www.tangerine.ca/en/rates/historical-rates/index.html https://www.tangerine.ca/en/rates/historical-rates/index.htm... 3.5% in 2007 matches your bank's 1 year CD pretty well. It's now under 1% since mid 2015, but my RRSP account is up 40% since September... go figure.
    - icedchai 9y ago
      I remember having a savings account at Emigrant Direct that was paying somewhere around 5%, back in 2006 or so. See https://www.fatwallet.com/forums/finance/579954 https://www.fatwallet.com/forums/finance/579954
passivepinetree 9y ago
Not just that, but I imagine (as others have noted) the fear of crippling medical bills is a huge part of it as well. America's heath care system has an uncertain future, and that may affect retirees' savings habits.
neolefty 9y ago
The rates are low precisely because there is an oversupply of saved money. In other words, capital is so easy to get that nobody has to pay much interest on it. It's a borrower's market and will continue to be as long as we have the concept of "saving for retirement".
- inetknght 9y ago
  It's a borrower's market because that saved money is in _businesses_ instead of _personal accounts_, no?
  - Spooky23 9y ago
    No. Businesses that generate cash export it overseas to avoid taxation. The Fed basically makes banks maintain huge capital reserves, and allows them to borrow money for nothing. The banks don't pay for your money because the Fed is printing it for them. Because they need to maintain these massive capital reserves, we get the benefit of printing money without circulating it.
emodendroket 9y ago
That doesn't explain why they are not spending their money, which is what the article mostly concerns.

by gedy 9y ago

tmh79 9y ago

Savers like "money in a bank account" savers, or savers as in "I have a bunch of money I want to put somewhere, where does it go between ETFs/Real Estate/etc". Low interest rates are great for the 2nd group because of the insane asset price inflation we've seen in the past few years, especially in housing, which is the largest store of wealth for most old folks in the US IIRC.

gedy 9y ago
Yes, but that's frequency considered a gamble to folks dealing with their life savings.

stupidhn 9y ago

There are two sides to every transaction, and whether low interest rates are good or bad depends on which side of the transaction you are on. Nobody is entitled to high rates on their savings.

kovacs 9y ago
Are people entitled to have the fruits of their work stolen from them?
- stupidhn 9y ago
  >Are people entitled to have the fruits of their work stolen from them? Who is stealing what?

msabalau 9y ago

Oh, if we had high interest rates and inflation, people with fixed incomes and savers would be feeling horrible too. The idea that there would be safe investments with decent returns is inherently ridiculous. The closest one can come is oligarchs buying tax policy, or baby boomers making sure that housing stock is inadequate so the prioe of the their home goes up artificially at the expense of the young and poor.

incompatible 9y ago
To me it seems that getting a decent return was a lot easier prior to 2007. Banks would pay interest rates of 6% or so and inflation was low. The stock market only gradually became overvalued.
- kasey_junk 9y ago
  Citation needed. In 2007 a 1 year cd was paying about half of that. Savings account rates have not kept up with inflation in my adult life time and I'm middle aged.
  - incompatible 9y ago
    I was in the UK at the time: http://swanlowpark.co.uk/savings-interest-annual.jsp http://swanlowpark.co.uk/savings-interest-annual.jsp, but I'm sure I got better rates by shopping around.
  - jamie_ca 9y ago
    Gotta go back further than that. ING Direct (Canada) peaked at 5% on a savings account in mid 2000, and was above 4% from when they opened up in '97 to April '01. https://www.tangerine.ca/en/rates/historical-rates/index.html https://www.tangerine.ca/en/rates/historical-rates/index.htm... 3.5% in 2007 matches your bank's 1 year CD pretty well. It's now under 1% since mid 2015, but my RRSP account is up 40% since September... go figure.
  - icedchai 9y ago
    I remember having a savings account at Emigrant Direct that was paying somewhere around 5%, back in 2006 or so. See https://www.fatwallet.com/forums/finance/579954 https://www.fatwallet.com/forums/finance/579954

passivepinetree 9y ago

Not just that, but I imagine (as others have noted) the fear of crippling medical bills is a huge part of it as well. America's heath care system has an uncertain future, and that may affect retirees' savings habits.

neolefty 9y ago

The rates are low precisely because there is an oversupply of saved money. In other words, capital is so easy to get that nobody has to pay much interest on it. It's a borrower's market and will continue to be as long as we have the concept of "saving for retirement".

inetknght 9y ago
It's a borrower's market because that saved money is in _businesses_ instead of _personal accounts_, no?
- Spooky23 9y ago
  No. Businesses that generate cash export it overseas to avoid taxation. The Fed basically makes banks maintain huge capital reserves, and allows them to borrow money for nothing. The banks don't pay for your money because the Fed is printing it for them. Because they need to maintain these massive capital reserves, we get the benefit of printing money without circulating it.

emodendroket 9y ago

That doesn't explain why they are not spending their money, which is what the article mostly concerns.