5 ms·

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 investme

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
  - ajdlinux 9y ago
    I'm in Australia, back before the GFC a high-interest bank savings account would pay ~6%, inflation was ~3%...
- refurb 9y ago
  Interest rates and inflation are linked. It's not very helpful to get a 17% interest rate when inflation is 16% (1970's in the US). Your real return is still only 1%.
  - rtpg 9y ago
    they're linked, but it's far from the only variable in the system. Recent fiscal policy and results shows gov'ts have a hard time influencing real inflation with interest policy.
  - Spooky23 9y ago
    Inflation in the early 2000s wasn't 6%.
Spooky23 9y ago
No, it ridiculous now in the bizarre fiscal policy environment that we were in. You can look at historical bank interest rates from the onset of FDIC insurance. As recently as 2005 you could obtain meaningful returns on zero risk investments as a retail investor. I had a 10 year, 5% CD mature in 2015, for example.
- msabalau 9y ago
  $100 in January 2005 had the purchasing power of $122.55 in 2015. Having $105 instead ain't great. Your "zero risk" investment tied up money for a decade, and you had less purchasing power at the end of it. Interest rates incorporate inflation expectations. What's bizarre now is the way we are playing footsie with deflation.
  - Spooky23 9y ago
    Fortunately, rates are annual and interest compounds. The end balance is $162.89. For the cash portion of my portfolio, that's a good investment. If you're an unsophisticated investor, stuff like this or savings bonds are smarter investments.

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
- ajdlinux 9y ago
  I'm in Australia, back before the GFC a high-interest bank savings account would pay ~6%, inflation was ~3%...
refurb 9y ago
Interest rates and inflation are linked. It's not very helpful to get a 17% interest rate when inflation is 16% (1970's in the US). Your real return is still only 1%.
- rtpg 9y ago
  they're linked, but it's far from the only variable in the system. Recent fiscal policy and results shows gov'ts have a hard time influencing real inflation with interest policy.
- Spooky23 9y ago
  Inflation in the early 2000s wasn't 6%.

Spooky23 9y ago

No, it ridiculous now in the bizarre fiscal policy environment that we were in. You can look at historical bank interest rates from the onset of FDIC insurance. As recently as 2005 you could obtain meaningful returns on zero risk investments as a retail investor. I had a 10 year, 5% CD mature in 2015, for example.

msabalau 9y ago
$100 in January 2005 had the purchasing power of $122.55 in 2015. Having $105 instead ain't great. Your "zero risk" investment tied up money for a decade, and you had less purchasing power at the end of it. Interest rates incorporate inflation expectations. What's bizarre now is the way we are playing footsie with deflation.
- Spooky23 9y ago
  Fortunately, rates are annual and interest compounds. The end balance is $162.89. For the cash portion of my portfolio, that's a good investment. If you're an unsophisticated investor, stuff like this or savings bonds are smarter investments.