8 ms·

Inflationary Hikes

78 points by otoburb 5y ago

aidenn0 5y ago
> retail depositors are willing to receive 0% interest even when market rates are much higher I'm unconvinced. I have a pile of cash that I would readily move to a bank that offered substantially higher CD rates than I am currently making. With online banking becoming normalized, competition for retail deposits should be much higher than it has been in quite a while.
- thoughtstheseus 5y ago
  Few people try to make a profit on cash holdings. They prefer safety, liquidity, and convenience. Is that 50-100 bps worth it to keep shifting all your accounts around? Perhaps you should just invest a little more into a different asset class and less into cash.
  - aidenn0 5y ago
    Currently people are losing money (in real terms) on cash holdings; the spread between inflation and interest rates is what people are paying for the liquidity. So the idea that retail depositors won't chase higher rates is saying that retail depositors don't care how much it costs to park cash in a bank, which seems absurd to me. 100bps would certainly be enough for me to move my savings around annually, given that ACH transfers are nearly free.
    - thoughtstheseus 5y ago
      If it makes sense for you, do it. The average bank balance is ~$10k, so a 100 bp gain is $100 dollars. A 100 bps gain would triple the current yield for online savings accounts. I’m skeptical that would be enough motivation. Most people just want to pay their bills on time. They’re not building optimal financial portfolios.
    - oarabbus_ 5y ago
      >given that ACH transfers are nearly free. Are they not completely free to the ACH end user? Unless you are referring to an indirect cost of the transfer time? I've never had to pay a fee for ACH.
      - aidenn0 5y ago
        Yes, with ACH it's possible for the money to be tied up for some time, which deprives you of interest.
    - imtringued 5y ago
      >So the idea that retail depositors won't chase higher rates is saying that retail depositors don't care how much it costs to park cash in a bank, which seems absurd to me. Welcome to a global economy with imbalanced trade. Export surpluses leave the exporting nation with too much foreign currency while simultaneously draining the industrial base of the importing country. If the exporting nation invests their money into the stock or housing market they are exposing themselves to a bubble, if they just hold onto the money they avoid the risk.
  - jrsj 5y ago
    Yeah I’d rather hold assets for anything I don’t have a possibility of immediately needing. Even with more volatile assets like stocks, generally I can expect that it will be worth more at some point in the not too distant future than today, whereas cash is always worth less. As a result I intentionally have 0 cash savings. Enough to live on for 2-3 months in my checking account, plus I have available credit for emergencies, everything else goes into assets I can expect to appreciate in high single digits worst case. If anything I feel like most people have a much less aggressive allocation than they can probably afford to (although I also have little debt, just a car loan, and a relatively low cost of living which makes this easier)
    - CheezeIt 5y ago
      Yes, with credit cards, there’s little reason to keep money in checking unless you have a low credit limit. I hold physical cash for real tail risk, and you can always deposit that if need be.
    - tmn 5y ago
      Just as you expect your asset to be worth more at some point in the future, you can expect your cash to worth less at some point in the future. These follow from each other. To say the cash is always worth less is not coherent with your stated asset model.
- foobarian 5y ago
  How important are retail deposits at this point, with all this new QE money flowing in. It almost seems like a drop in the bucket for the big financial companies. Even if not, aren't they getting most of the benefit from dark pattern fees instead of from doing what banks are supposed to do - invest the pooled money wisely and extract a better return than individuals could?
  - supertrope 5y ago
    https://www.wsj.com/articles/banks-to-companies-no-more-deposits-please-11623238200 https://www.wsj.com/articles/banks-to-companies-no-more-depo...
  - aidenn0 5y ago
    I'm responding to TFA which claims that banks have such a large supply of retail deposits that higher rates will just lead to banks extending more credits. If retail deposits don't matter than TFA is completely irrelevant.
  - blitzar 5y ago
    They are irrelevant. Banks need deposits to opperate. They can borrow unlimited quantities for 0 at the fed or go through the hassle and expense of having millions of retail deposit accounts. The chose free money on one phone call every time over dealing with retail every time. If the fed stops being the source of funds, expect a free toaster if you open a savings account and a pre 2008 style competition for deposits, in particular fixed term deposits. A long way off still. > benefit from dark pattern fees instead of from doing what banks are supposed to do - invest the pooled money wisely and extract a better return than individuals could Banks make fuck all on your dark patterns and shittons on investing the money.
    - diordiderot 5y ago
      For big banks overdraft fees represent 5~10% of revenue, for small banks it's 40~50%
      - 5y ago
- supertrope 5y ago
  Online banks offer a risk free higher yield but it comes at the cost of local branches. If you’re closing on a house and the extra business day to get a cashier’s check delivered costs you a deal you’ll be pissed.
  - ptmcc 5y ago
    If you're closing on a house you will probably use a wire transfer not a cashier's check, and online banks readily offer wire transfers.
- missedthecue 5y ago
  Competition in banking is peculiar. Banking only works well with a stable deposit base. For this reason, banks don't like to chase after the customer that will take their money across the street for a ten basis point increase in yield.
- jrsj 5y ago
  You can make 8% or so with USDC on a platform like Nexo, that’s what I do now. There’s more risk because it’s not FDIC insured but the rates are too attractive for me not to take advantage of it.
  - tempestn 5y ago
    Not just not insured - presumably that rate is compensating you for actual credit risk.
    - jrsj 5y ago
      Loans are all collateralized at least
  - aidenn0 5y ago
    Non-insured returns of around 8% are available in other places too...
  - vineyardmike 5y ago
    Are you not worried about dealing with the complex tax implications of this? I’ve been eyeing it but the legal uncertainty about this product and the corresponding headache of taxes hold me off.
    - jrsj 5y ago
      Taxes arent that bad, it’s only considered a capital gain when you sell or exchange. So not really any worse than crypto generally although potentially annoying if you don’t keep it in mind. As for the legality, I don’t think there’s much risk of them being declared illegal or anything. Eventually the space will be more regulated etc and most likely yields will decline but it’s still better than you’re going to get in a money market account or with bonds or something like that
      - vineyardmike 5y ago
        I meant the taxes from dealing with usdc et Al. If it’s a security, then any trade of usdc for another coin is a taxable event, and all “interest” payments are… what? Not sure if that’s just considering income like mining or what.
- fitzn 5y ago
  I'm kind of with you, but I read that sentence a little differently based on the rest of the article. First, the agreement: I personally would move a lot of money for a better rate, but it would have to be non-trivially better. I'm thinking if I'm getting 0.75% now, it'd have to be 2% or maybe 1.5%. Not positive. Maybe you'd have a lower threshold. The other point to me, though, was that Wang is arguing that the banks won't feel the need to increase their rates because they are already attracting so much money in deposits as it is. Whereas before they would have to pass on the higher interest rate to their customers in order to attract the deposits, they now are flush with cash themselves that they don't need to attract more deposits. And maybe ALL banks are feeling that way (again, in Wang's opinion, I think). So, the overall competition for deposits is low, which means higher rates are just increased profits for the banks. Not arguing correct or not on that, just sharing how I understood it.
  - PKop 5y ago
    You can get 10 to 12% on a "CD-like" 3-month deposit account in USDC at Crypto.com. Even the flexible account (no lockup) is 8% right now. And they have a Visa debit card that you can spend USDC directly from your account.
    - oarabbus_ 5y ago
      As a nitpick: you cannot actually spend/top-up the debit card using USDC with Crypto.com. However you can do so using DAI or certain other stablecoins. You can also do so using Ethereum and a select few cryptocurrencies.
      - PKop 5y ago
        Do you mean to say that when you top up with USDC, it converts to USD? It's 1 to 1 and instant so in practical purposes you are using your USDC directly. I have no issues doing so on my card.
        oarabbus_ 5y ago
        Crypto.com actually tops up 98.5 cents per stablecoin dollar, which is a bit frustrating, but other than that slippage, yes it converts to USD on the (prepaid debit) card.
- diordiderot 5y ago
  There a very serious class bubble on hackernews when people think about 'the average American' Travel to a series of Walmarts and McDonald's 1 hour+ outside of your local metro and ask people what interest rate they're getting
- christophilus 5y ago
  Have you looked at i-series bonds? I was getting 4% on mine last I looked. It’s a great place for a rainy day stash.
  - harambae 5y ago
    Everybody keeps saying this but I looked into it and the 4% is only up to a $10k limit - chump change for anyone on this forum. What are us faang employees supposed to do with the other couple hundred thousand to couple million dollars in cash that's not yet invested?
    - mrep 5y ago
      Why on earth do you want/need that much cash?
      - harambae 5y ago
        20% of my portfolio is what my adviser recommended to leave in cash. It's pretty standard (10 to 20%) Why do you even both with i-bonds when it's only 4% up to $10k? It's $400 per year. You could just skip going to dinner once.
- dazc 5y ago
  I am happy to receive 0% for the time when I believe the market is priced far too high and a sudden correction is on the cards. I have the peace of mind that my cash is not going to lose 30% of its value overnight and also look forward to an opportunity of picking up some nice assets for a huge discount at some future date in time.
  - ddorian43 5y ago
    Your cash position is steadily losing 5% a year to inflation. Probably even more the last year. The discount in the future may be lower than the current price.
    - dazc 5y ago
      My cash position is short term though. Less than a year for sure.
  - chrisgd 5y ago
    Since 2009, this comment is always repeated. At some point it may be true
    - Ma8ee 5y ago
      Like in 2008?
      - chrisgd 5y ago
        But when is the right time? If you bought nov 2008 you would have 6 more months of declines in a lot of names. This idea is even harder than holding on to your winners. Automate a transfer into a dated retirement account for 90% of your investments.
    - harambae 5y ago
      It already was true between 2009 and now (March 2020)
RyanShook 5y ago
What is a fed trader?
- thoughtstheseus 5y ago
  He’s a former trader for the federal reserve. Buying and selling financial assets for the fed.
crxgames 5y ago
Buy and hold gme. Got it
- b0tzzzzzzman 5y ago
  Squid is the new GME.
throw0101a 5y ago
Joseph "Fed Guy" Wang was on the Odd Lots podcast semi-recently: * https://player.fm/series/series-1504378/here-are-the-biggest-problems-facing-the-fed-right-now https://player.fm/series/series-1504378/here-are-the-biggest... * https://podcasts.apple.com/us/podcast/here-are-the-biggest-problems-facing-the-fed-right-now/id1056200096?i=1000537821449 https://podcasts.apple.com/us/podcast/here-are-the-biggest-p... The also had the president of the Dallas Fed, Rob Kaplan, as well: * https://player.fm/series/series-1504378/dallas-fed-president-rob-kaplan-on-the-economy-and-monetary-policy-right-now https://player.fm/series/series-1504378/dallas-fed-president... * https://en.wikipedia.org/wiki/Robert_Steven_Kaplan https://en.wikipedia.org/wiki/Robert_Steven_Kaplan And Minneapolis Fed President Neel Kashkari last year: * https://player.fm/series/series-1504378/minneapolis-fed-president-neel-kashkari-on-the-historic-challenges-for-monetary-policy https://player.fm/series/series-1504378/minneapolis-fed-pres... * https://en.wikipedia.org/wiki/Neel_Kashkari https://en.wikipedia.org/wiki/Neel_Kashkari Over the past year they've also had good episodes on the the US logistics systems (trucking, rail, ports, etc). Odd Lots is probably one of the better finance-y / business-y podcasts out there. Worth subscribing to just to see what their next topic will be. (Recently had one with a former US Mint president on how a $1 Trillion coin would done.) * https://www.bloomberg.com/oddlots https://www.bloomberg.com/oddlots
human 5y ago
I am nowhere near as educated as the author about how the macroeconomics work but I wonder if he isn’t short-sighted. I mean that in the sense that currently there isn’t any lack of depositors and the banks do not rely on money markets. However, we are probably at peak savings right as people are restarting to spend. On top of that, with the level of debt Americans have taken on (mostly mortgages), if the rates rise ever so slightly, they will have to dig into their savings to make ends meet and it might trigger a new cycle. We also should not underestimate what could happen if inflation persists and "inflation mentality" sets in. People will put their cash to use as fast as possible and buy real assets, equities and even supplies. This would further reduce deposits.
- alfiedotwtf 5y ago
  I think when rates dropped below 4%, people already pulled out of deposits and went into tangible assets. I hink it's going to be a long time before people flock back into long-term savings accounts
  - reducesuffering 5y ago
    On the contrary, retail deposits are as high as ever. https://mobile.twitter.com/LynAldenContact/status/1455315779377897472/photo/1 https://mobile.twitter.com/LynAldenContact/status/1455315779...
    - alfiedotwtf 5y ago
      Tbh I'm quite surprised. Loading up on debt vs deposits sounds like a better alternative in this climate
      - human 5y ago
        The nice thing is that you can do both! You can up your savings while taking on a bigger than ever mortgage. A real example for someone who earns 50k per year would be to have 20k in a savings account while getting a 500k mortgage. You’d be taking advantage of the system and making more money with your debt than with your savings. That’s assuming inflation on the price of your house at 4-5% while paying 1-2% interest rate.
paganel 5y ago
> Recall, bank security purchases are paid for through the creation of money. Funny that we needed to wait until the late 2000s - early 2010s to have this fact of economic life "officially" approved by the powers that be, people like Schumpeter were writing about it (and demonstrating it, imo) back in the 1940s, and I'm pretty sure there were people even before Schumpeter who acknowledged it, but, nevertheless, it remained a fringe economic theory for (at least) 70-80 years.

78 points by otoburb 5y ago

> retail depositors are willing to receive 0% interest even when market rates are much higher I'm unconvinced. I have a pile of cash that I would readily move to a bank that offered substantially higher CD rates than I am currently making. With online banking becoming normalized, competition for retail deposits should be much higher than it has been in quite a while.

thoughtstheseus 5y ago
Few people try to make a profit on cash holdings. They prefer safety, liquidity, and convenience. Is that 50-100 bps worth it to keep shifting all your accounts around? Perhaps you should just invest a little more into a different asset class and less into cash.
- aidenn0 5y ago
  Currently people are losing money (in real terms) on cash holdings; the spread between inflation and interest rates is what people are paying for the liquidity. So the idea that retail depositors won't chase higher rates is saying that retail depositors don't care how much it costs to park cash in a bank, which seems absurd to me. 100bps would certainly be enough for me to move my savings around annually, given that ACH transfers are nearly free.
  - thoughtstheseus 5y ago
    If it makes sense for you, do it. The average bank balance is ~$10k, so a 100 bp gain is $100 dollars. A 100 bps gain would triple the current yield for online savings accounts. I’m skeptical that would be enough motivation. Most people just want to pay their bills on time. They’re not building optimal financial portfolios.
  - oarabbus_ 5y ago
    >given that ACH transfers are nearly free. Are they not completely free to the ACH end user? Unless you are referring to an indirect cost of the transfer time? I've never had to pay a fee for ACH.
    - aidenn0 5y ago
      Yes, with ACH it's possible for the money to be tied up for some time, which deprives you of interest.
  - imtringued 5y ago
    >So the idea that retail depositors won't chase higher rates is saying that retail depositors don't care how much it costs to park cash in a bank, which seems absurd to me. Welcome to a global economy with imbalanced trade. Export surpluses leave the exporting nation with too much foreign currency while simultaneously draining the industrial base of the importing country. If the exporting nation invests their money into the stock or housing market they are exposing themselves to a bubble, if they just hold onto the money they avoid the risk.
- jrsj 5y ago
  Yeah I’d rather hold assets for anything I don’t have a possibility of immediately needing. Even with more volatile assets like stocks, generally I can expect that it will be worth more at some point in the not too distant future than today, whereas cash is always worth less. As a result I intentionally have 0 cash savings. Enough to live on for 2-3 months in my checking account, plus I have available credit for emergencies, everything else goes into assets I can expect to appreciate in high single digits worst case. If anything I feel like most people have a much less aggressive allocation than they can probably afford to (although I also have little debt, just a car loan, and a relatively low cost of living which makes this easier)
  - CheezeIt 5y ago
    Yes, with credit cards, there’s little reason to keep money in checking unless you have a low credit limit. I hold physical cash for real tail risk, and you can always deposit that if need be.
  - tmn 5y ago
    Just as you expect your asset to be worth more at some point in the future, you can expect your cash to worth less at some point in the future. These follow from each other. To say the cash is always worth less is not coherent with your stated asset model.
foobarian 5y ago
How important are retail deposits at this point, with all this new QE money flowing in. It almost seems like a drop in the bucket for the big financial companies. Even if not, aren't they getting most of the benefit from dark pattern fees instead of from doing what banks are supposed to do - invest the pooled money wisely and extract a better return than individuals could?
- supertrope 5y ago
  https://www.wsj.com/articles/banks-to-companies-no-more-deposits-please-11623238200 https://www.wsj.com/articles/banks-to-companies-no-more-depo...
- aidenn0 5y ago
  I'm responding to TFA which claims that banks have such a large supply of retail deposits that higher rates will just lead to banks extending more credits. If retail deposits don't matter than TFA is completely irrelevant.
- blitzar 5y ago
  They are irrelevant. Banks need deposits to opperate. They can borrow unlimited quantities for 0 at the fed or go through the hassle and expense of having millions of retail deposit accounts. The chose free money on one phone call every time over dealing with retail every time. If the fed stops being the source of funds, expect a free toaster if you open a savings account and a pre 2008 style competition for deposits, in particular fixed term deposits. A long way off still. > benefit from dark pattern fees instead of from doing what banks are supposed to do - invest the pooled money wisely and extract a better return than individuals could Banks make fuck all on your dark patterns and shittons on investing the money.
  - diordiderot 5y ago
    For big banks overdraft fees represent 5~10% of revenue, for small banks it's 40~50%
    - 5y ago
supertrope 5y ago
Online banks offer a risk free higher yield but it comes at the cost of local branches. If you’re closing on a house and the extra business day to get a cashier’s check delivered costs you a deal you’ll be pissed.
- ptmcc 5y ago
  If you're closing on a house you will probably use a wire transfer not a cashier's check, and online banks readily offer wire transfers.
missedthecue 5y ago
Competition in banking is peculiar. Banking only works well with a stable deposit base. For this reason, banks don't like to chase after the customer that will take their money across the street for a ten basis point increase in yield.
jrsj 5y ago
You can make 8% or so with USDC on a platform like Nexo, that’s what I do now. There’s more risk because it’s not FDIC insured but the rates are too attractive for me not to take advantage of it.
- tempestn 5y ago
  Not just not insured - presumably that rate is compensating you for actual credit risk.
  - jrsj 5y ago
    Loans are all collateralized at least
- aidenn0 5y ago
  Non-insured returns of around 8% are available in other places too...
- vineyardmike 5y ago
  Are you not worried about dealing with the complex tax implications of this? I’ve been eyeing it but the legal uncertainty about this product and the corresponding headache of taxes hold me off.
  - jrsj 5y ago
    Taxes arent that bad, it’s only considered a capital gain when you sell or exchange. So not really any worse than crypto generally although potentially annoying if you don’t keep it in mind. As for the legality, I don’t think there’s much risk of them being declared illegal or anything. Eventually the space will be more regulated etc and most likely yields will decline but it’s still better than you’re going to get in a money market account or with bonds or something like that
    - vineyardmike 5y ago
      I meant the taxes from dealing with usdc et Al. If it’s a security, then any trade of usdc for another coin is a taxable event, and all “interest” payments are… what? Not sure if that’s just considering income like mining or what.
fitzn 5y ago
I'm kind of with you, but I read that sentence a little differently based on the rest of the article. First, the agreement: I personally would move a lot of money for a better rate, but it would have to be non-trivially better. I'm thinking if I'm getting 0.75% now, it'd have to be 2% or maybe 1.5%. Not positive. Maybe you'd have a lower threshold. The other point to me, though, was that Wang is arguing that the banks won't feel the need to increase their rates because they are already attracting so much money in deposits as it is. Whereas before they would have to pass on the higher interest rate to their customers in order to attract the deposits, they now are flush with cash themselves that they don't need to attract more deposits. And maybe ALL banks are feeling that way (again, in Wang's opinion, I think). So, the overall competition for deposits is low, which means higher rates are just increased profits for the banks. Not arguing correct or not on that, just sharing how I understood it.
- PKop 5y ago
  You can get 10 to 12% on a "CD-like" 3-month deposit account in USDC at Crypto.com. Even the flexible account (no lockup) is 8% right now. And they have a Visa debit card that you can spend USDC directly from your account.
  - oarabbus_ 5y ago
    As a nitpick: you cannot actually spend/top-up the debit card using USDC with Crypto.com. However you can do so using DAI or certain other stablecoins. You can also do so using Ethereum and a select few cryptocurrencies.
    - PKop 5y ago
      Do you mean to say that when you top up with USDC, it converts to USD? It's 1 to 1 and instant so in practical purposes you are using your USDC directly. I have no issues doing so on my card.
      - oarabbus_ 5y ago
        Crypto.com actually tops up 98.5 cents per stablecoin dollar, which is a bit frustrating, but other than that slippage, yes it converts to USD on the (prepaid debit) card.
diordiderot 5y ago
There a very serious class bubble on hackernews when people think about 'the average American' Travel to a series of Walmarts and McDonald's 1 hour+ outside of your local metro and ask people what interest rate they're getting
christophilus 5y ago
Have you looked at i-series bonds? I was getting 4% on mine last I looked. It’s a great place for a rainy day stash.
- harambae 5y ago
  Everybody keeps saying this but I looked into it and the 4% is only up to a $10k limit - chump change for anyone on this forum. What are us faang employees supposed to do with the other couple hundred thousand to couple million dollars in cash that's not yet invested?
  - mrep 5y ago
    Why on earth do you want/need that much cash?
    - harambae 5y ago
      20% of my portfolio is what my adviser recommended to leave in cash. It's pretty standard (10 to 20%) Why do you even both with i-bonds when it's only 4% up to $10k? It's $400 per year. You could just skip going to dinner once.
dazc 5y ago
I am happy to receive 0% for the time when I believe the market is priced far too high and a sudden correction is on the cards. I have the peace of mind that my cash is not going to lose 30% of its value overnight and also look forward to an opportunity of picking up some nice assets for a huge discount at some future date in time.
- ddorian43 5y ago
  Your cash position is steadily losing 5% a year to inflation. Probably even more the last year. The discount in the future may be lower than the current price.
  - dazc 5y ago
    My cash position is short term though. Less than a year for sure.
- chrisgd 5y ago
  Since 2009, this comment is always repeated. At some point it may be true
  - Ma8ee 5y ago
    Like in 2008?
    - chrisgd 5y ago
      But when is the right time? If you bought nov 2008 you would have 6 more months of declines in a lot of names. This idea is even harder than holding on to your winners. Automate a transfer into a dated retirement account for 90% of your investments.
  - harambae 5y ago
    It already was true between 2009 and now (March 2020)

RyanShook 5y ago

What is a fed trader?

thoughtstheseus 5y ago
He’s a former trader for the federal reserve. Buying and selling financial assets for the fed.

crxgames 5y ago

Buy and hold gme. Got it

b0tzzzzzzman 5y ago
Squid is the new GME.

throw0101a 5y ago

Joseph "Fed Guy" Wang was on the Odd Lots podcast semi-recently: * https://player.fm/series/series-1504378/here-are-the-biggest-problems-facing-the-fed-right-now https://player.fm/series/series-1504378/here-are-the-biggest... * https://podcasts.apple.com/us/podcast/here-are-the-biggest-problems-facing-the-fed-right-now/id1056200096?i=1000537821449 https://podcasts.apple.com/us/podcast/here-are-the-biggest-p... The also had the president of the Dallas Fed, Rob Kaplan, as well: * https://player.fm/series/series-1504378/dallas-fed-president-rob-kaplan-on-the-economy-and-monetary-policy-right-now https://player.fm/series/series-1504378/dallas-fed-president... * https://en.wikipedia.org/wiki/Robert_Steven_Kaplan https://en.wikipedia.org/wiki/Robert_Steven_Kaplan And Minneapolis Fed President Neel Kashkari last year: * https://player.fm/series/series-1504378/minneapolis-fed-president-neel-kashkari-on-the-historic-challenges-for-monetary-policy https://player.fm/series/series-1504378/minneapolis-fed-pres... * https://en.wikipedia.org/wiki/Neel_Kashkari https://en.wikipedia.org/wiki/Neel_Kashkari Over the past year they've also had good episodes on the the US logistics systems (trucking, rail, ports, etc). Odd Lots is probably one of the better finance-y / business-y podcasts out there. Worth subscribing to just to see what their next topic will be. (Recently had one with a former US Mint president on how a $1 Trillion coin would done.) * https://www.bloomberg.com/oddlots https://www.bloomberg.com/oddlots

human 5y ago

I am nowhere near as educated as the author about how the macroeconomics work but I wonder if he isn’t short-sighted. I mean that in the sense that currently there isn’t any lack of depositors and the banks do not rely on money markets. However, we are probably at peak savings right as people are restarting to spend. On top of that, with the level of debt Americans have taken on (mostly mortgages), if the rates rise ever so slightly, they will have to dig into their savings to make ends meet and it might trigger a new cycle. We also should not underestimate what could happen if inflation persists and "inflation mentality" sets in. People will put their cash to use as fast as possible and buy real assets, equities and even supplies. This would further reduce deposits.

alfiedotwtf 5y ago
I think when rates dropped below 4%, people already pulled out of deposits and went into tangible assets. I hink it's going to be a long time before people flock back into long-term savings accounts
- reducesuffering 5y ago
  On the contrary, retail deposits are as high as ever. https://mobile.twitter.com/LynAldenContact/status/1455315779377897472/photo/1 https://mobile.twitter.com/LynAldenContact/status/1455315779...
  - alfiedotwtf 5y ago
    Tbh I'm quite surprised. Loading up on debt vs deposits sounds like a better alternative in this climate
    - human 5y ago
      The nice thing is that you can do both! You can up your savings while taking on a bigger than ever mortgage. A real example for someone who earns 50k per year would be to have 20k in a savings account while getting a 500k mortgage. You’d be taking advantage of the system and making more money with your debt than with your savings. That’s assuming inflation on the price of your house at 4-5% while paying 1-2% interest rate.

paganel 5y ago

> Recall, bank security purchases are paid for through the creation of money. Funny that we needed to wait until the late 2000s - early 2010s to have this fact of economic life "officially" approved by the powers that be, people like Schumpeter were writing about it (and demonstrating it, imo) back in the 1940s, and I'm pretty sure there were people even before Schumpeter who acknowledged it, but, nevertheless, it remained a fringe economic theory for (at least) 70-80 years.