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U.S. interest rates have soared everywhere but savings accounts

405 points by mgh2 5y ago

pitaj 5y ago
T-Mobile Money offers a 1% checking account and saving account. Both FDIC insured. I'm not exactly sure how they can afford this, or how long it will last, but it's the highest rate account I've found so far, and you don't need to be a T-Mobile customer.
- shepherdjerred 5y ago
  One Finance gives 3%, but it only applies to direct deposit
throwthere 5y ago
Most people miss the fact that the fdic caps savings rates. Currently 0.81%.
- ceejayoz 5y ago
  That's not an obstacle; a lot of banks are getting around it by offering high-yield hybrid accounts that are checking behind the scenes, but have a savings-style interest rate. For example, Sofi offers 1.25% right now; https://www.sofi.com/banking/ https://www.sofi.com/banking/
pishpash 5y ago
Why is this surprising? Overnight rates are still 0.25%, and 1-month bills are 0.46%. Online savings accounts are at 0.6-0.65% now and have not fallen below 0.5% the whole pandemic. The oddity is why they've not fallen to 0% before, but that is because there is an effective duration of savings which may have been shortening recently as rates rise. As for brick-and-mortar banks still at 0%, going by their low-balance fees, 0.5% probably only covers their overhead, if that.
john_moscow 5y ago
Why would they? If there were many small banks competing with each other for the consumer's money, the free market mechanics would have quickly brought the interest rates up. But hey, who needs competition. Let the banking sector be run by a bunch of buddies that go to the same golf club, and if they cock up, they can always schmooze the regulator to give out a hefty bailout package. Who would have thought the consumer will get screwed?
olliej 5y ago
When I first moved to the US I was setting up my first US bank accounts. The credit union bragged about how high there savings account interest rates were. My honest reply was to say I was surprised they gave monthly rather than annual interest rates. When they corrected me to say that it was the annual interest rate I laughed, this was a savings account with fees even. Unsurprisingly the interest rates on everything other than mortgages was in line with those in NZ. Mortgage rates were vastly lower, but 4 or so years later the economy collapsed due to terrible mortgage practices.
timcavel 5y ago
Bitcoin fixes this.
- micromacrofoot 5y ago
  but the solution is chaos
apayan 5y ago
http://archive.today/VvfgN http://archive.today/VvfgN
Rapzid 5y ago
I hope everyone is maxing yearly I bond purchases ATM.
cheriot 5y ago
SoFi is offering 1.25% but Vanguard's short term treasury fund (VGSH) is at 2.35% if you're ok with mild capital risk.
- mgh2 5y ago
  Be careful of Sofi, like so many IPOed to raise money from covid, their stock tumbled ~-60% YTD: https://www.google.com/search?q=sofi+stock&oq=sofi+stock&aqs=edge.0.69i59j0i20i263i433i512j0i512l6j69i64.9644j1j4&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=sofi+stock&oq=sofi+stock&aqs... Founder's sexual misconduct: https://en.wikipedia.org/wiki/Mike_Cagney https://en.wikipedia.org/wiki/Mike_Cagney It is a known sales tactic to hook in customers betting that the hassle to switch later will keep them loyal. The 1.25% rate is if you set up direct deposit, with a $300 bonus. https://www.sofi.com/banking/ https://www.sofi.com/banking/ Don't be surprised if they lower the rate after the promotion time. Happened with HSBC w/ 5% APY before 2009 crisis, Robinhood and Marcus before covid.
  - smilebot 5y ago
    I guess the thing to learn from this is always keep shopping for a better deal?
  - cheriot 5y ago
    The founder was pushed out years ago so is that still relevant? High yield savings has always been about attracting customers. SoFi just got their banking charter so they want to build up deposits. The rest of the HYS crowd is around 0.5% and pocketing the difference.
- samspenc 5y ago
  Isn't the risk with any bond funds -- like Vanguard's short term treasury fund (VGSH) -- that their price goes down as yield goes up? I just checked on Google Finance and it looks like it has gone down 4.18% over the past 1 year and negative 3.72% over the past 6 months, so you would be upside down overall if you had invested in it recently?
  - 5y ago
twblalock 5y ago
After one year, I-bonds are pretty similar to savings accounts and they are indexed to inflation. Your money won't grow, but it won't shrink either -- and as Treasury bonds they are the lowest-risk investment that exists. If you buy some today, they will pay 7.12% for the next 6 months. After that they will probably be adjusted to pay even more, based on the current inflation rate. There are two major catches: you have to wait at least 1 year before you cash them out, and a person can only buy 10k in I-bonds per year. After the first year is over, selling I-bonds and getting access to the cash takes a few business days. I've been tiering my emergency savings based on how many redeemable I-bonds I have. I have enough money in the bank to cover emergencies I might need to pay for very quickly -- things like plumbing problems, car repair, etc. The rest of my emergency fund is going into I-bonds. If I have a longer-term need for savings, like losing my job, I don't need all of my savings right away and I can wait for the amount of time it takes to cash out I-bonds.
- DenisM 5y ago
  Where do you buy them?
  - blevin 5y ago
    https://treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm#irate https://treasurydirect.gov/indiv/research/indepth/ibonds/res...
- everybodyknows 5y ago
  For anyone who filed a 4868, and expects a refund, note that up to $5000 of it can be claimed in the form of paper I-bonds. This limit is independent of the $10000 online bond limit. There is a nuisance factor in that some portion will be delivered in small denominations -- down to $50. If you're using TurboTax, the necessary checkbox is well hidden. Look for a "more options" tab or some such, IIRC.
  - cbhl 5y ago
    This seems like oddly-timed tax advice -- the filing deadline (without extensions) was Apr 18 and today is Apr 23.
register 5y ago
I am in Europe. Is there any way to purchase I-bonds or an ETF that is based on that?
- lxgr 5y ago
  They’re available to U.S. citizens and residents only.
downrightmike 5y ago
Consumers have been beaten down an now don't expect interest on savings account to amount to much. There are a small group that chase the limited time 5% offers, but like all corps, banks are taking that margin for profits.
- mooreds 5y ago
  For now. Hopefully competition will come to savings accounts eventually. Wouldn't expect the rate to ever beat inflation, though, since it is risk free (thanks FDIC!).
  - gruez 5y ago
    >For now. Hopefully competition will come to savings accounts eventually. Looks like it's already here? According to one site[1], there are several banks offering above 0.6% interest. [1] https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/ https://www.bankrate.com/banking/savings/best-high-yield-int...
    - aaomidi 5y ago
      Sofi is 1.25 if you do DD with them. If this comment helped you here's my referral link: https://www.sofi.com/invite/money?gcp=0eff9a6a-1cc3-4073-b8fc-d81a3810f107&isAliasGcp=false https://www.sofi.com/invite/money?gcp=0eff9a6a-1cc3-4073-b8f...
- bitxbitxbitcoin 5y ago
  There’s the /r/churning crowd then there’s the DeFi crowd. Yield chasing is becoming more popular.
incomingpain 5y ago
Real yields matter. It's an inflation tax. If inflation is high and the interest rates are low. This tax is on you for holding currency or currency likes. Bonds for example are literally dumb to buy. Why are people buying them? They are legally required to buy them in some cases. What happens is that those 'savings accounts' are paying the inflation tax. Whereas someone with a mortgage at say 2% and inflation is 8%. You are earning 6%. This generally speaking can be defined as wealth transfers from retirees to a lower generation. Primarily Boomer -> Millennial. This will and is causing lots of animosity between the generations. The boomers quite obviously didnt save enough for retirement and thought they could indebt a lower generation? Hilarious failure.
- PopAlongKid 5y ago
  >Whereas someone with a mortgage at say 2% and inflation is 8%. You are earning 6%. Only if your income goes up 8% a year due to inflation.
  - incomingpain 5y ago
    >Only if your income goes up 8% a year due to inflation. Those inflation numbers are still rising. However, who will ultimately be able to find a new job and increase their $? Not retirees obviously.
  - ilammy 5y ago
    Nominal value of the mortgaged property is likely going up at at least around 8%, give or take.
- FooBarBizBazz 5y ago
  Or it's just a way to screw younger people who didn't lock in fixed rate mortgages when they could.
  - incomingpain 5y ago
    >Or it's just a way to screw younger people who didn't lock in fixed rate mortgages when they could. Lets say we climb to 15% inflation and subsequently interest rates. Who can afford to pay 150,000$/year on a million $ home? Literally nobody. The boomer selling the home suddenly cant sell their home for a million. It will have to drop in order to spend that $. That retirement fund is suddenly looking weaker. Generational wealth is a remarkable field that we don't know anything about. We do know inheritance taxes are absolutely destructive to economies, but 1 generation can't in debt another in order to retire. Soon as you retire, I saw that I will now only work for much much more than you can afford on your fixed income. The system is understanding this. There's a reason why real yields are negative. Hell Switzerland is -0.75% interest rates. Denmark -0.6%. Japan -0.1%. Most of the west is at 0% or recently increased.
hsnewman 5y ago
Just go for I-Bonds instead.
- ra7 5y ago
  The $10k limit makes I-Bonds mostly suitable for parking emergency funds. If you’re saving up more money (for buying a house etc), a savings account is still the best bet. I’m in this position and the interest rates are frustrating, but everything else is very risky IMO.
  - imtringued 5y ago
    It sounds like I-Bonds are not meant to subsidize the poor instead of the rich which is a nice change for once.
  - JumpCrisscross 5y ago
    > If you’re saving up more money (for buying a house etc), a savings account is still the best bet Open a TreasuryDirect account and buy bills, currently yielding about 50 bps for 4 weeks [1]. Or search out a high-yield online (FDIC insured) savings account, presently paying up to 80 bps [2]. [1] https://www.treasurydirect.gov/instit/annceresult/annceresult.htm https://www.treasurydirect.gov/instit/annceresult/annceresul... [2] https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/ https://www.bankrate.com/banking/savings/best-high-yield-int...
    - ra7 5y ago
      Thanks for the recommendation! I’ve never bought bills, I will check it out. I use Marcus savings which just increased its rate from 50 bps to 60 bps yesterday. (PS: I always search for your comments in any finance-related threads as I learn a lot from them. Just an appreciation!)
      - JumpCrisscross 5y ago
        Thanks!
Rastonbury 5y ago
Clickbait title, the fed rate went from 0.25% to 0.5% hardly soaring. Savings accounts previously paid like 0.04% according to article, that's because they need margin and they can keep them low cuz people won't swap banks for half a percent (not that it'll get there anytime soon)
- marcosdumay 5y ago
  > hardly soaring It's double the previous rate. I don't understand why central banks always use fixed increment sizes.
  - PopAlongKid 5y ago
    Maybe for the same reason why gasoline in U.S. is usually priced in increments of $0.10 as the performance rating goes up (although that seems to be less of a rigid rule lately where I live)? Or maybe for ease of predictability? After all it is much easier to make a binary choice between two numbers with a fixed interval between them, than to choose an intermediate value to the Nth degree.
    - marcosdumay 5y ago
      They can use hyperbolic sized increments with the same predictability they get on constant sizes.
  - Rastonbury 5y ago
    Predictability, they don't want to introduce too much volatility.
- gotaquestion 5y ago
  Doubling equals soaring in anything related to economics or finance.
  - Rastonbury 5y ago
    Nah man 0.001% to 0.002% really? Would anyone describe the yield of t-bonds as astronomical at 1.44%? Nobody would even care if banks passed on fed rate to consumers, imagine getting the joy of getting 0.5% up from 0.25%
ragingrobot 5y ago
Right before the 2008 downturn, I had an ING Direct (now Capital One) savings account, at that time with an APR over 8. At once point in the early 2000s it was doing a hell of a lot better than that. It never recovered. I never saw that rate go above 1% ever since.
- mgh2 5y ago
  It is a well known sales tactic to hook customers in then lower interest rates. Whomever does not fall into this trend will gain consumers' trust
- kube-system 5y ago
  A lot of other online banks did the same. They were essentially paying to acquire customers. 8% was not a typical interest rate in savings accounts at that time. Not unlike promotional rates at other types of subscription-like businesses that offer great rates to pull you in, hoping you’ll stay after the promotional period ends because of the inconvenience of switching.
- reducesuffering 5y ago
  I’ve had that same account. You got duped by Capital One, as this account was a “Savings” Account, but then they introduced a new “Performance Savings” account years back. The Performance account has competitive yields (top of market 2.5% few years back) but they got to milk customers who just stayed on existing “Savings” accounts that didn’t realize the yields were way too low. Getting the higher yield was as simple as a few buttons online to open the account and transfer money, same interface and everything.
  - doktorhladnjak 5y ago
    That was particularly annoying though because the new product did not support joint accounts whereas the old one did
azth 5y ago
Serious question: inflation seems to only be getting higher (is it 8%+ now?) the Fed's increasing of the interest rate is causing a stock market crash. So if one puts their money into assets, those are decreasing in price due to the fed, and if someone is holding cash that's also going down in value due to inflation. What's the solution?
- imgabe 5y ago
  Monkey jpegs
- okaram 5y ago
  Yearly inflation seems to be going up mainly due to how it is calculated ... Monthly inflation seems to be going mostly sideways (although it has increased the last 3 months). There's not (yet) been a market crash ... If you look back a month or a year, it's been mostly sideways too. It may be the beginning of a horrible market crash ... But it may not ;). Trying to time the market, you're just as likely to lose as to win. Diversifying is always good; the stock market has usually provided the most growth long term. Unless you need the money soon, close your eyes and keep your money in the market.
- 01100011 5y ago
  The solution is ask a real professional, not HN amateurs like me. If you want my crank opinion though, at this stage in the economic cycle you should be in commodities. Sure, you're late to the party and they're going to make you ill with their volatility, but generally that's where you want to be now. Other options are recession plays like consumer staples. Think about the things people will still have to buy or will downgrade to in a recession. I bought $BUD and $TAP because I think people will drink cheap beer. Cigarette companies are good if you have no conscience and can catch them on a downswing(they're already up). My $KHC bet I made 6 months ago is probably the best thing in my portfolio right now. You have to be prepared for days like last Friday when nearly every stock was down. People are fleeing to dollars, so actually having cash right now isn't a bad thing. Your cash already lost value. We may see a dollar squeeze as people flee to safety and the fed drains liquidity from the financial system before the dollar continues its downward slide(late this year?). Everything depends on the threat of war right now. Not enough people are talking about the supply disruptions happening. 20% of the world's container ships are currently in traffic jams thanks to Chinese COVID paranoia. Russia, a major commodity supplier, is cut out of the Western financial system. Fertilizer and energy are spiking. Recession may have peaked but it will settle into a steady 5+% rate unless the fed grinds the economy to a halt. War may already be happening behind the scenes. The FBI is now warning(https://www.ic3.gov/Media/News/2022/220420-2.pdf https://www.ic3.gov/Media/News/2022/220420-2.pdf) of attacks on our food infrastructure, possibly connected to the rash of fires occurring at food processing plants(stuxnet being fed back to us?). Indonesia just suspended palm oil exports. They make something like 60% of the global supply. Countries are becoming protectionist. We are reverting in some ways to a pre-globalist world. Sweden and Finland are likely joining NATO. The tensions with Russia aren't going away anytime soon. Even though Putin looks to be in poor health, the Russian aggression is not purely a product of Putin but baked into the national identity of Russia's elites. Maybe a good play, despite already taking off, is defense industry stocks(Lockheed, Raytheon, etc). The world is entering a very unstable period. One thing you should consider doing as well: buy things you'll need over the next year. They're only going to get harder to buy and they're going up in price. Like a certain brand of shampoo? Why not buy a year's worth. Stockpiling is horrible on a national level, but as an individual it will help you cope with some of the price increases while your dollars would otherwise be stagnating or decaying. Lets hope the bond market is currently wrong, because they seem to be pricing in many more hikes than the fed thinks will need to happen. There is a risk that inflation becomes unhinged and spirals for a while. The West isn't prepared for that sort of financial doom scenario.
frontman1988 5y ago
Is this a US problem? In India you can easily get 5% interest in savings account. Maybe an opportunity to move money to Indian banks through crypto and then get it back after getting that sweet interest.
- polskibus 5y ago
  Savings accounts rates are also lagging behind central bank rates and inflation in EU, for example Poland.
- deleted 5y ago
  [deleted]
- Youden 5y ago
  Over the past 10 years, inflation in India has typically been ~5% [0] and the currency has also fallen against the USD at ~4% per year [1], so I don't think this is a good idea. [0]: https://tradingeconomics.com/india/inflation-cpi https://tradingeconomics.com/india/inflation-cpi [1]: https://www.xe.com/currencycharts/?from=INR&to=USD&view=10Y https://www.xe.com/currencycharts/?from=INR&to=USD&view=10Y
  - imtringued 5y ago
    If countries adopted negative interest rates we could stop the inflation nonsense and then you could easily compare countries based on their interest rate. In this case the Indian interest rate would be somewhere between -1% and 0% instead of 5% inflation and 4-5% interest.
    - JumpCrisscross 5y ago
      > countries adopted negative interest rates we could stop the inflation If you're talking about monetary policy, this is wrong. Low rates spur inflation. Raising rates fights it. Countries that implemented negative rates did so to fight deflation and spur inflation. If you're talking about how we quote and talk about rates, we quote nominally because that's how most bonds are written. When you buy a 10Y Treasury, it will pay you a specific nominal rate. You know that ex ante. Inflation is whatever it is now, but we have zero guarantee around what it will be between now and ten years hence. Also, there is no single figure for inflation. It's a measure on a basket of goods. That basket is designed to approximate the average American's, but nobody is an average American. (Or an average Indian.) Your experience of inflation will be different from mine based on our purchasing preferences. (This doesn't make inflation subjective. Just heterogenous.)
myroon5 5y ago
https://archive.ph/VvfgN https://archive.ph/VvfgN
CottonMcKnight 5y ago
The best way I've heard it put to describe savings rates and banks is: they take the elevator down, and the stairs up.
snshn 5y ago
Print 50% of all existing USD in less than two years, then see rates go up up up. Color me surprised.
- joe_guy 5y ago
  Americas anual GDP was $21t in 2020. Federal COVID relief funds were 4.6t over the span of 2 years according to https://www.usaspending.gov/disaster/covid-19?publicLaw=all https://www.usaspending.gov/disaster/covid-19?publicLaw=all That's just over 10% of the GDP. Not a small amount by any measure but our numbers are rather different. What am I missing?
  - rufus_foreman 5y ago
    https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL
    - throwaway48375 5y ago
      That's not what the Fed says. >In late February and early March of 2020, the Fed cut its policy interest rate dramatically to help ease credit conditions during the COVID-19 crisis. The resulting acceleration in the supply of M1 can be understood largely as banks accommodating an increase in people’s demand for money. https://fredblog.stlouisfed.org/2021/01/whats-behind-the-recent-surge-in-the-m1-money-supply/ https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...
      - rufus_foreman 5y ago
        It's literally what the Fed says, it's nothing but a link to a Fed chart.
        throwaway48375 5y ago
        Yes they changed how it was measured around that time, but that didn't cause the substantial change in money supply. They didn't really change how it was measured that much. They say themselves it was due to increased demand for money.
gdurham 5y ago
The issue is that there is no incentive for banks to increase interest rates on accounts as they are already sitting on too much cash. Banks make money by lending money out, in times where banks are strapped for cash on hand, you will see interest rates increase. I don’t see this changing in the near future.
- Consultant32452 5y ago
  Yep, the reserve rate has been at 0% for years. Bump that back up and watch savings interest skyrocket.
- clairity 5y ago
  > "...there is no incentive for banks to increase interest rates on accounts as they are already sitting on too much cash." and folks wonder why banks are so strictly regulated... no, banks are never sitting on too much cash unless they've made a marketing and/or an operational error. most banks are highly levered, meaning they're lending out, say, 10× the cash they hold, so they never "have too much cash on hand". quite the opposite. banks continually lobby regulatory agencies to raise their leverage thresholds so they can lever up even more and rake in more of that sweet, nearly risk-free[0] cash flow. that they don't raise savings rates is purely out of greed, not necessity. they're also under no competitive pressure to do so, which indicates a malfunctioning market (functioning markets are by definition competitive). and more galling, they charge you hidden fees out the wazoo for the "privilege" of banking in a mine field. banks are core infrastructure, much like roads and housing. i'd rather go back to a simpler form where banks were only allowed to make money on the spread between lending and savings rates, making them boring and having to compete (with higher savings rates, for example) for your business. all the risk-taking extensions to banking can still exist, just in a separate, firewalled entity with no access to that (nearly) risk-free cash flow. [0]: risk-free in the finance sense of being free of idiosyncratic risk, not systemic risk.
  - WalterBright 5y ago
    > purely out of greed People want to collect interest on their bank deposits purely out of greed, too.
victor106 5y ago
So treasures yield 3%. Why can’t I just buy these bonds and get a 3% rate? What am I missing? https://www.cnbc.com/amp/2022/04/19/us-bonds-treasury-yields-dip-with-focus-on-economic-data.html https://www.cnbc.com/amp/2022/04/19/us-bonds-treasury-yields...
- twblalock 5y ago
  You'd be better off buying I-bonds if you want to prevent the money from shrinking. They are liquid after one year. Your treasury bonds can lose value if newer bonds pay a higher interest rate. Your free 3% is only guaranteed if you hold the bonds to maturity. If you have to sell them before maturity for some reason, you could lose money overall.
- JumpCrisscross 5y ago
  > Why can’t I just buy these bonds and get a 3% rate? What am I missing? Savings accounts can be drawn with zero notice. They're essentially rolling overnight. A 10-year Treasury cannot be redeemed before 10 years. (It can be sold, though at the market's whim with respect to price.)
  - throwaway_1928 5y ago
    And those market prices will drop as rates go higher.
  - imtringued 5y ago
    Exactly, and this is why the Fed is doing QE.
    - dragonwriter 5y ago
      The Fed isn't doing QE.
      - puppymaster 5y ago
        If anything QT starts in 10 days.
throwawaymanbot 5y ago
deleted 5y ago
[deleted]
Simon_O_Rourke 5y ago
Exactly, why bother, as a bank, providing much in the way of incentives for savers to stay as customers and make money from their savings. Especially when you can legally gouge mortgage holders on the flip side.
hakfoo 5y ago
I always wondered why there was seemingly no (marketed) business in foreign savings accounts. If I'm willing to ride the exchange rate risks, surely there's some bank in Honduras paying a higher rate on Lempira-denominated accounts. Compared to half the derivative products on the market, it's a straightforward offering, and it also feels an ideal product for flim-flam direct-to-consumer marketing-- backed by "government bank insurance" while dodging that it's hardly the FDIC. Is there some regulatory angle that prevents it? I had always heard some foreign banks are uneasy about taking on American customers due to having to deal with the American tax infrastructure, but that wouldn't squash the entire product category.
- refurb 5y ago
  https://en.m.wikipedia.org/wiki/Interest_rate_parity https://en.m.wikipedia.org/wiki/Interest_rate_parity Over time any interest rate arbitrage is priced into exchange rates. So yes, you can get 7% on Vietnamese Dong deposits, but the currency will likely lose 6% of value against the USD over the same time period.
- JumpCrisscross 5y ago
  > why there was seemingly no (marketed) business in foreign savings accounts Opening accounts for Americans is expensive [1]. Offshore banks thus tend to focus on ultra high net worth Americans. [1] https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance...
- ilammy 5y ago
  You don't think savings accounts yield interest out of charity, do you? In most cases they are a way to purchase bonds and alike for people who don't want (or don't know how) to deal with that, and the bank pocketing the difference for their services. If you're sophisticated enough to invest in a foreign country with a goal to actually get real returns and enough capital to make the hassle worthwhile, you'll find a way to do that better than a savings account. But of course there is "market" for exchanging your USD into funny money at predatory rates, letting you experience these juicy 20+% APY, only to realize later that the country makes it illegal to transfer the money out – or you're due some extra fees, and taxes, and surcharges, and more predatory exchange rates – and in the end if you succeed to get your money out and factor in funny money devaluation and USD inflation, you end up barely making more profit than you'd get in a more stable economy. That's assuming said foreign institutions are willing to deal with a US citizen in the first place.
smm11 5y ago
Trickle-down only works when it isn't for 'consumers.'
- imtringued 5y ago
  I think it is pretty common knowledge that money has diminishing returns. What I find absurd is that people actually bought the trickle-down nonsense. It's almost on the same level as flat earth. It's sooo obvious that this isn't how the economy works. If you want to give money away, give it to those who actually need it not those who need it least.
  - spaetzleesser 5y ago
    Trickle down worked extremely well for those who controlled the rate of trickle.
    - micromacrofoot 5y ago
      “trickle” doesn’t even sound good, I don’t think anyone could possibly be fooled by this, it was always a sham
      - dragonwriter 5y ago
        “trickle down” wasn't what proponents called it, it's something a comedian called it derogatorily that stuck. Ditto “voodoo economics”, except the critic wasn't a comedian, but a politician (of the party that rejected the criticism and went whole hog on the policy, but still later nominated him as, and got him elected, President.)
        micromacrofoot 5y ago
        ah ha, that makes a lot for sense, thanks
    - dragonwriter 5y ago
      There never was any rate of trickle (down, at least).
dghughes 5y ago
Here in Canada at TD Bank their "High Interest Savings Account" for $0 to $4,999.99 the interest rate is 0.000%. Highly deceptive for them to call it that with literally 0% interest.
quickthrowman 5y ago
Savings accounts will pretty much never pay more than the Federal Funds (prime) rate. Back in 2019 when the prime rate was 2.25-2.50, the high yield online savings accts were paying 25 bps under the prime rate. As the Fed starts hiking the prime rate over the summer, high yield savings (Marcus, discover, etc) will start yielding more.
mise_en_place 5y ago
Real interest rates are still negative, with inflation being at 9%. So even if the yield is 3%, on the 5 year treasury, the real yield is -6%. What fool would lend someone 100 dollars to get back 94 dollars in 5 years? The biggest sucker is the person who owns a 30 year treasury, and if the Fed starts selling its treasuries, good luck getting a reasonable price for it.
- BayAreaEscapee 5y ago
  The obvious problem is that there is nowhere to hide. All markets are overvalued by virtually any historical metric. At least if you take the -6% real hit, at least you can know and predict what the hit is.
  - mise_en_place 5y ago
    My portfolio with foreign value stocks and gold and silver mining stocks, plus oil companies is doing great. I am up by more than 10%. This is just the beginning for them. My financial advisor who manages the vast majority of my wealth is down 2% in comparison. I'm close to pulling my money because he's extremely anti commodities and I had to yell at him to invest my money into mining companies because he thinks it's better to just hold cash. Meanwhile my networth disappears. Don't use a financial advisor would be my advice to you and do your own research.
    - WalterBright 5y ago
      If you're telling your financial advisor what to invest in, what's the point in having one?
      - ThalesX 5y ago
        Probably to advise you and take care of the nitty gritty details of your decisions.
    - rrrrrrrrrrrryan 5y ago
      I think oil is a moderately risky bet on future geopolitical-economic turmoil, which is far from guaranteed, but your other bets are much more conservative. How are you invested in "foreign value stocks"? (e.g. are there certain funds / ETFs? Individual stocks?)
RicoElectrico 5y ago
Same in Poland, except a handful of smaller banks which need to attract capital.

405 points by mgh2 5y ago

T-Mobile Money offers a 1% checking account and saving account. Both FDIC insured. I'm not exactly sure how they can afford this, or how long it will last, but it's the highest rate account I've found so far, and you don't need to be a T-Mobile customer.

shepherdjerred 5y ago
One Finance gives 3%, but it only applies to direct deposit

throwthere 5y ago

Most people miss the fact that the fdic caps savings rates. Currently 0.81%.

ceejayoz 5y ago
That's not an obstacle; a lot of banks are getting around it by offering high-yield hybrid accounts that are checking behind the scenes, but have a savings-style interest rate. For example, Sofi offers 1.25% right now; https://www.sofi.com/banking/ https://www.sofi.com/banking/

pishpash 5y ago

Why is this surprising? Overnight rates are still 0.25%, and 1-month bills are 0.46%. Online savings accounts are at 0.6-0.65% now and have not fallen below 0.5% the whole pandemic. The oddity is why they've not fallen to 0% before, but that is because there is an effective duration of savings which may have been shortening recently as rates rise. As for brick-and-mortar banks still at 0%, going by their low-balance fees, 0.5% probably only covers their overhead, if that.

john_moscow 5y ago

Why would they? If there were many small banks competing with each other for the consumer's money, the free market mechanics would have quickly brought the interest rates up. But hey, who needs competition. Let the banking sector be run by a bunch of buddies that go to the same golf club, and if they cock up, they can always schmooze the regulator to give out a hefty bailout package. Who would have thought the consumer will get screwed?

olliej 5y ago

When I first moved to the US I was setting up my first US bank accounts. The credit union bragged about how high there savings account interest rates were. My honest reply was to say I was surprised they gave monthly rather than annual interest rates. When they corrected me to say that it was the annual interest rate I laughed, this was a savings account with fees even. Unsurprisingly the interest rates on everything other than mortgages was in line with those in NZ. Mortgage rates were vastly lower, but 4 or so years later the economy collapsed due to terrible mortgage practices.

timcavel 5y ago

Bitcoin fixes this.

micromacrofoot 5y ago
but the solution is chaos

apayan 5y ago

http://archive.today/VvfgN http://archive.today/VvfgN

Rapzid 5y ago

I hope everyone is maxing yearly I bond purchases ATM.

cheriot 5y ago

SoFi is offering 1.25% but Vanguard's short term treasury fund (VGSH) is at 2.35% if you're ok with mild capital risk.

mgh2 5y ago
Be careful of Sofi, like so many IPOed to raise money from covid, their stock tumbled ~-60% YTD: https://www.google.com/search?q=sofi+stock&oq=sofi+stock&aqs=edge.0.69i59j0i20i263i433i512j0i512l6j69i64.9644j1j4&sourceid=chrome&ie=UTF-8 https://www.google.com/search?q=sofi+stock&oq=sofi+stock&aqs... Founder's sexual misconduct: https://en.wikipedia.org/wiki/Mike_Cagney https://en.wikipedia.org/wiki/Mike_Cagney It is a known sales tactic to hook in customers betting that the hassle to switch later will keep them loyal. The 1.25% rate is if you set up direct deposit, with a $300 bonus. https://www.sofi.com/banking/ https://www.sofi.com/banking/ Don't be surprised if they lower the rate after the promotion time. Happened with HSBC w/ 5% APY before 2009 crisis, Robinhood and Marcus before covid.
- smilebot 5y ago
  I guess the thing to learn from this is always keep shopping for a better deal?
- cheriot 5y ago
  The founder was pushed out years ago so is that still relevant? High yield savings has always been about attracting customers. SoFi just got their banking charter so they want to build up deposits. The rest of the HYS crowd is around 0.5% and pocketing the difference.
samspenc 5y ago
Isn't the risk with any bond funds -- like Vanguard's short term treasury fund (VGSH) -- that their price goes down as yield goes up? I just checked on Google Finance and it looks like it has gone down 4.18% over the past 1 year and negative 3.72% over the past 6 months, so you would be upside down overall if you had invested in it recently?
- 5y ago

twblalock 5y ago

After one year, I-bonds are pretty similar to savings accounts and they are indexed to inflation. Your money won't grow, but it won't shrink either -- and as Treasury bonds they are the lowest-risk investment that exists. If you buy some today, they will pay 7.12% for the next 6 months. After that they will probably be adjusted to pay even more, based on the current inflation rate. There are two major catches: you have to wait at least 1 year before you cash them out, and a person can only buy 10k in I-bonds per year. After the first year is over, selling I-bonds and getting access to the cash takes a few business days. I've been tiering my emergency savings based on how many redeemable I-bonds I have. I have enough money in the bank to cover emergencies I might need to pay for very quickly -- things like plumbing problems, car repair, etc. The rest of my emergency fund is going into I-bonds. If I have a longer-term need for savings, like losing my job, I don't need all of my savings right away and I can wait for the amount of time it takes to cash out I-bonds.

DenisM 5y ago
Where do you buy them?
- blevin 5y ago
  https://treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm#irate https://treasurydirect.gov/indiv/research/indepth/ibonds/res...
everybodyknows 5y ago
For anyone who filed a 4868, and expects a refund, note that up to $5000 of it can be claimed in the form of paper I-bonds. This limit is independent of the $10000 online bond limit. There is a nuisance factor in that some portion will be delivered in small denominations -- down to $50. If you're using TurboTax, the necessary checkbox is well hidden. Look for a "more options" tab or some such, IIRC.
- cbhl 5y ago
  This seems like oddly-timed tax advice -- the filing deadline (without extensions) was Apr 18 and today is Apr 23.

I am in Europe. Is there any way to purchase I-bonds or an ETF that is based on that?

lxgr 5y ago
They’re available to U.S. citizens and residents only.

downrightmike 5y ago

Consumers have been beaten down an now don't expect interest on savings account to amount to much. There are a small group that chase the limited time 5% offers, but like all corps, banks are taking that margin for profits.

mooreds 5y ago
For now. Hopefully competition will come to savings accounts eventually. Wouldn't expect the rate to ever beat inflation, though, since it is risk free (thanks FDIC!).
- gruez 5y ago
  >For now. Hopefully competition will come to savings accounts eventually. Looks like it's already here? According to one site[1], there are several banks offering above 0.6% interest. [1] https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/ https://www.bankrate.com/banking/savings/best-high-yield-int...
  - aaomidi 5y ago
    Sofi is 1.25 if you do DD with them. If this comment helped you here's my referral link: https://www.sofi.com/invite/money?gcp=0eff9a6a-1cc3-4073-b8fc-d81a3810f107&isAliasGcp=false https://www.sofi.com/invite/money?gcp=0eff9a6a-1cc3-4073-b8f...
bitxbitxbitcoin 5y ago
There’s the /r/churning crowd then there’s the DeFi crowd. Yield chasing is becoming more popular.

incomingpain 5y ago

Real yields matter. It's an inflation tax. If inflation is high and the interest rates are low. This tax is on you for holding currency or currency likes. Bonds for example are literally dumb to buy. Why are people buying them? They are legally required to buy them in some cases. What happens is that those 'savings accounts' are paying the inflation tax. Whereas someone with a mortgage at say 2% and inflation is 8%. You are earning 6%. This generally speaking can be defined as wealth transfers from retirees to a lower generation. Primarily Boomer -> Millennial. This will and is causing lots of animosity between the generations. The boomers quite obviously didnt save enough for retirement and thought they could indebt a lower generation? Hilarious failure.

PopAlongKid 5y ago
>Whereas someone with a mortgage at say 2% and inflation is 8%. You are earning 6%. Only if your income goes up 8% a year due to inflation.
- incomingpain 5y ago
  >Only if your income goes up 8% a year due to inflation. Those inflation numbers are still rising. However, who will ultimately be able to find a new job and increase their $? Not retirees obviously.
- ilammy 5y ago
  Nominal value of the mortgaged property is likely going up at at least around 8%, give or take.
FooBarBizBazz 5y ago
Or it's just a way to screw younger people who didn't lock in fixed rate mortgages when they could.
- incomingpain 5y ago
  >Or it's just a way to screw younger people who didn't lock in fixed rate mortgages when they could. Lets say we climb to 15% inflation and subsequently interest rates. Who can afford to pay 150,000$/year on a million $ home? Literally nobody. The boomer selling the home suddenly cant sell their home for a million. It will have to drop in order to spend that $. That retirement fund is suddenly looking weaker. Generational wealth is a remarkable field that we don't know anything about. We do know inheritance taxes are absolutely destructive to economies, but 1 generation can't in debt another in order to retire. Soon as you retire, I saw that I will now only work for much much more than you can afford on your fixed income. The system is understanding this. There's a reason why real yields are negative. Hell Switzerland is -0.75% interest rates. Denmark -0.6%. Japan -0.1%. Most of the west is at 0% or recently increased.

hsnewman 5y ago

Just go for I-Bonds instead.

ra7 5y ago
The $10k limit makes I-Bonds mostly suitable for parking emergency funds. If you’re saving up more money (for buying a house etc), a savings account is still the best bet. I’m in this position and the interest rates are frustrating, but everything else is very risky IMO.
- imtringued 5y ago
  It sounds like I-Bonds are not meant to subsidize the poor instead of the rich which is a nice change for once.
- JumpCrisscross 5y ago
  > If you’re saving up more money (for buying a house etc), a savings account is still the best bet Open a TreasuryDirect account and buy bills, currently yielding about 50 bps for 4 weeks [1]. Or search out a high-yield online (FDIC insured) savings account, presently paying up to 80 bps [2]. [1] https://www.treasurydirect.gov/instit/annceresult/annceresult.htm https://www.treasurydirect.gov/instit/annceresult/annceresul... [2] https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/ https://www.bankrate.com/banking/savings/best-high-yield-int...
  - ra7 5y ago
    Thanks for the recommendation! I’ve never bought bills, I will check it out. I use Marcus savings which just increased its rate from 50 bps to 60 bps yesterday. (PS: I always search for your comments in any finance-related threads as I learn a lot from them. Just an appreciation!)
    - JumpCrisscross 5y ago
      Thanks!

Rastonbury 5y ago

Clickbait title, the fed rate went from 0.25% to 0.5% hardly soaring. Savings accounts previously paid like 0.04% according to article, that's because they need margin and they can keep them low cuz people won't swap banks for half a percent (not that it'll get there anytime soon)

marcosdumay 5y ago
> hardly soaring It's double the previous rate. I don't understand why central banks always use fixed increment sizes.
- PopAlongKid 5y ago
  Maybe for the same reason why gasoline in U.S. is usually priced in increments of $0.10 as the performance rating goes up (although that seems to be less of a rigid rule lately where I live)? Or maybe for ease of predictability? After all it is much easier to make a binary choice between two numbers with a fixed interval between them, than to choose an intermediate value to the Nth degree.
  - marcosdumay 5y ago
    They can use hyperbolic sized increments with the same predictability they get on constant sizes.
- Rastonbury 5y ago
  Predictability, they don't want to introduce too much volatility.
gotaquestion 5y ago
Doubling equals soaring in anything related to economics or finance.
- Rastonbury 5y ago
  Nah man 0.001% to 0.002% really? Would anyone describe the yield of t-bonds as astronomical at 1.44%? Nobody would even care if banks passed on fed rate to consumers, imagine getting the joy of getting 0.5% up from 0.25%

ragingrobot 5y ago

Right before the 2008 downturn, I had an ING Direct (now Capital One) savings account, at that time with an APR over 8. At once point in the early 2000s it was doing a hell of a lot better than that. It never recovered. I never saw that rate go above 1% ever since.

mgh2 5y ago
It is a well known sales tactic to hook customers in then lower interest rates. Whomever does not fall into this trend will gain consumers' trust
kube-system 5y ago
A lot of other online banks did the same. They were essentially paying to acquire customers. 8% was not a typical interest rate in savings accounts at that time. Not unlike promotional rates at other types of subscription-like businesses that offer great rates to pull you in, hoping you’ll stay after the promotional period ends because of the inconvenience of switching.
reducesuffering 5y ago
I’ve had that same account. You got duped by Capital One, as this account was a “Savings” Account, but then they introduced a new “Performance Savings” account years back. The Performance account has competitive yields (top of market 2.5% few years back) but they got to milk customers who just stayed on existing “Savings” accounts that didn’t realize the yields were way too low. Getting the higher yield was as simple as a few buttons online to open the account and transfer money, same interface and everything.
- doktorhladnjak 5y ago
  That was particularly annoying though because the new product did not support joint accounts whereas the old one did

azth 5y ago

Serious question: inflation seems to only be getting higher (is it 8%+ now?) the Fed's increasing of the interest rate is causing a stock market crash. So if one puts their money into assets, those are decreasing in price due to the fed, and if someone is holding cash that's also going down in value due to inflation. What's the solution?

imgabe 5y ago
Monkey jpegs
okaram 5y ago
Yearly inflation seems to be going up mainly due to how it is calculated ... Monthly inflation seems to be going mostly sideways (although it has increased the last 3 months). There's not (yet) been a market crash ... If you look back a month or a year, it's been mostly sideways too. It may be the beginning of a horrible market crash ... But it may not ;). Trying to time the market, you're just as likely to lose as to win. Diversifying is always good; the stock market has usually provided the most growth long term. Unless you need the money soon, close your eyes and keep your money in the market.
01100011 5y ago
The solution is ask a real professional, not HN amateurs like me. If you want my crank opinion though, at this stage in the economic cycle you should be in commodities. Sure, you're late to the party and they're going to make you ill with their volatility, but generally that's where you want to be now. Other options are recession plays like consumer staples. Think about the things people will still have to buy or will downgrade to in a recession. I bought $BUD and $TAP because I think people will drink cheap beer. Cigarette companies are good if you have no conscience and can catch them on a downswing(they're already up). My $KHC bet I made 6 months ago is probably the best thing in my portfolio right now. You have to be prepared for days like last Friday when nearly every stock was down. People are fleeing to dollars, so actually having cash right now isn't a bad thing. Your cash already lost value. We may see a dollar squeeze as people flee to safety and the fed drains liquidity from the financial system before the dollar continues its downward slide(late this year?). Everything depends on the threat of war right now. Not enough people are talking about the supply disruptions happening. 20% of the world's container ships are currently in traffic jams thanks to Chinese COVID paranoia. Russia, a major commodity supplier, is cut out of the Western financial system. Fertilizer and energy are spiking. Recession may have peaked but it will settle into a steady 5+% rate unless the fed grinds the economy to a halt. War may already be happening behind the scenes. The FBI is now warning(https://www.ic3.gov/Media/News/2022/220420-2.pdf https://www.ic3.gov/Media/News/2022/220420-2.pdf) of attacks on our food infrastructure, possibly connected to the rash of fires occurring at food processing plants(stuxnet being fed back to us?). Indonesia just suspended palm oil exports. They make something like 60% of the global supply. Countries are becoming protectionist. We are reverting in some ways to a pre-globalist world. Sweden and Finland are likely joining NATO. The tensions with Russia aren't going away anytime soon. Even though Putin looks to be in poor health, the Russian aggression is not purely a product of Putin but baked into the national identity of Russia's elites. Maybe a good play, despite already taking off, is defense industry stocks(Lockheed, Raytheon, etc). The world is entering a very unstable period. One thing you should consider doing as well: buy things you'll need over the next year. They're only going to get harder to buy and they're going up in price. Like a certain brand of shampoo? Why not buy a year's worth. Stockpiling is horrible on a national level, but as an individual it will help you cope with some of the price increases while your dollars would otherwise be stagnating or decaying. Lets hope the bond market is currently wrong, because they seem to be pricing in many more hikes than the fed thinks will need to happen. There is a risk that inflation becomes unhinged and spirals for a while. The West isn't prepared for that sort of financial doom scenario.

frontman1988 5y ago

Is this a US problem? In India you can easily get 5% interest in savings account. Maybe an opportunity to move money to Indian banks through crypto and then get it back after getting that sweet interest.

polskibus 5y ago
Savings accounts rates are also lagging behind central bank rates and inflation in EU, for example Poland.
deleted 5y ago
[deleted]
Youden 5y ago
Over the past 10 years, inflation in India has typically been ~5% [0] and the currency has also fallen against the USD at ~4% per year [1], so I don't think this is a good idea. [0]: https://tradingeconomics.com/india/inflation-cpi https://tradingeconomics.com/india/inflation-cpi [1]: https://www.xe.com/currencycharts/?from=INR&to=USD&view=10Y https://www.xe.com/currencycharts/?from=INR&to=USD&view=10Y
- imtringued 5y ago
  If countries adopted negative interest rates we could stop the inflation nonsense and then you could easily compare countries based on their interest rate. In this case the Indian interest rate would be somewhere between -1% and 0% instead of 5% inflation and 4-5% interest.
  - JumpCrisscross 5y ago
    > countries adopted negative interest rates we could stop the inflation If you're talking about monetary policy, this is wrong. Low rates spur inflation. Raising rates fights it. Countries that implemented negative rates did so to fight deflation and spur inflation. If you're talking about how we quote and talk about rates, we quote nominally because that's how most bonds are written. When you buy a 10Y Treasury, it will pay you a specific nominal rate. You know that ex ante. Inflation is whatever it is now, but we have zero guarantee around what it will be between now and ten years hence. Also, there is no single figure for inflation. It's a measure on a basket of goods. That basket is designed to approximate the average American's, but nobody is an average American. (Or an average Indian.) Your experience of inflation will be different from mine based on our purchasing preferences. (This doesn't make inflation subjective. Just heterogenous.)

myroon5 5y ago

https://archive.ph/VvfgN https://archive.ph/VvfgN

CottonMcKnight 5y ago

The best way I've heard it put to describe savings rates and banks is: they take the elevator down, and the stairs up.

snshn 5y ago

Print 50% of all existing USD in less than two years, then see rates go up up up. Color me surprised.

joe_guy 5y ago
Americas anual GDP was $21t in 2020. Federal COVID relief funds were 4.6t over the span of 2 years according to https://www.usaspending.gov/disaster/covid-19?publicLaw=all https://www.usaspending.gov/disaster/covid-19?publicLaw=all That's just over 10% of the GDP. Not a small amount by any measure but our numbers are rather different. What am I missing?
- rufus_foreman 5y ago
  https://fred.stlouisfed.org/series/M1SL https://fred.stlouisfed.org/series/M1SL
  - throwaway48375 5y ago
    That's not what the Fed says. >In late February and early March of 2020, the Fed cut its policy interest rate dramatically to help ease credit conditions during the COVID-19 crisis. The resulting acceleration in the supply of M1 can be understood largely as banks accommodating an increase in people’s demand for money. https://fredblog.stlouisfed.org/2021/01/whats-behind-the-recent-surge-in-the-m1-money-supply/ https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec...
    - rufus_foreman 5y ago
      It's literally what the Fed says, it's nothing but a link to a Fed chart.
      - throwaway48375 5y ago
        Yes they changed how it was measured around that time, but that didn't cause the substantial change in money supply. They didn't really change how it was measured that much. They say themselves it was due to increased demand for money.

gdurham 5y ago

The issue is that there is no incentive for banks to increase interest rates on accounts as they are already sitting on too much cash. Banks make money by lending money out, in times where banks are strapped for cash on hand, you will see interest rates increase. I don’t see this changing in the near future.

Consultant32452 5y ago
Yep, the reserve rate has been at 0% for years. Bump that back up and watch savings interest skyrocket.
clairity 5y ago
> "...there is no incentive for banks to increase interest rates on accounts as they are already sitting on too much cash." and folks wonder why banks are so strictly regulated... no, banks are never sitting on too much cash unless they've made a marketing and/or an operational error. most banks are highly levered, meaning they're lending out, say, 10× the cash they hold, so they never "have too much cash on hand". quite the opposite. banks continually lobby regulatory agencies to raise their leverage thresholds so they can lever up even more and rake in more of that sweet, nearly risk-free[0] cash flow. that they don't raise savings rates is purely out of greed, not necessity. they're also under no competitive pressure to do so, which indicates a malfunctioning market (functioning markets are by definition competitive). and more galling, they charge you hidden fees out the wazoo for the "privilege" of banking in a mine field. banks are core infrastructure, much like roads and housing. i'd rather go back to a simpler form where banks were only allowed to make money on the spread between lending and savings rates, making them boring and having to compete (with higher savings rates, for example) for your business. all the risk-taking extensions to banking can still exist, just in a separate, firewalled entity with no access to that (nearly) risk-free cash flow. [0]: risk-free in the finance sense of being free of idiosyncratic risk, not systemic risk.
- WalterBright 5y ago
  > purely out of greed People want to collect interest on their bank deposits purely out of greed, too.

victor106 5y ago

So treasures yield 3%. Why can’t I just buy these bonds and get a 3% rate? What am I missing? https://www.cnbc.com/amp/2022/04/19/us-bonds-treasury-yields-dip-with-focus-on-economic-data.html https://www.cnbc.com/amp/2022/04/19/us-bonds-treasury-yields...

twblalock 5y ago
You'd be better off buying I-bonds if you want to prevent the money from shrinking. They are liquid after one year. Your treasury bonds can lose value if newer bonds pay a higher interest rate. Your free 3% is only guaranteed if you hold the bonds to maturity. If you have to sell them before maturity for some reason, you could lose money overall.
JumpCrisscross 5y ago
> Why can’t I just buy these bonds and get a 3% rate? What am I missing? Savings accounts can be drawn with zero notice. They're essentially rolling overnight. A 10-year Treasury cannot be redeemed before 10 years. (It can be sold, though at the market's whim with respect to price.)
- throwaway_1928 5y ago
  And those market prices will drop as rates go higher.
- imtringued 5y ago
  Exactly, and this is why the Fed is doing QE.
  - dragonwriter 5y ago
    The Fed isn't doing QE.
    - puppymaster 5y ago
      If anything QT starts in 10 days.

throwawaymanbot 5y ago

deleted 5y ago

[deleted]

Simon_O_Rourke 5y ago

Exactly, why bother, as a bank, providing much in the way of incentives for savers to stay as customers and make money from their savings. Especially when you can legally gouge mortgage holders on the flip side.

hakfoo 5y ago

I always wondered why there was seemingly no (marketed) business in foreign savings accounts. If I'm willing to ride the exchange rate risks, surely there's some bank in Honduras paying a higher rate on Lempira-denominated accounts. Compared to half the derivative products on the market, it's a straightforward offering, and it also feels an ideal product for flim-flam direct-to-consumer marketing-- backed by "government bank insurance" while dodging that it's hardly the FDIC. Is there some regulatory angle that prevents it? I had always heard some foreign banks are uneasy about taking on American customers due to having to deal with the American tax infrastructure, but that wouldn't squash the entire product category.

refurb 5y ago
https://en.m.wikipedia.org/wiki/Interest_rate_parity https://en.m.wikipedia.org/wiki/Interest_rate_parity Over time any interest rate arbitrage is priced into exchange rates. So yes, you can get 7% on Vietnamese Dong deposits, but the currency will likely lose 6% of value against the USD over the same time period.
JumpCrisscross 5y ago
> why there was seemingly no (marketed) business in foreign savings accounts Opening accounts for Americans is expensive [1]. Offshore banks thus tend to focus on ultra high net worth Americans. [1] https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance_Act https://en.wikipedia.org/wiki/Foreign_Account_Tax_Compliance...
ilammy 5y ago
You don't think savings accounts yield interest out of charity, do you? In most cases they are a way to purchase bonds and alike for people who don't want (or don't know how) to deal with that, and the bank pocketing the difference for their services. If you're sophisticated enough to invest in a foreign country with a goal to actually get real returns and enough capital to make the hassle worthwhile, you'll find a way to do that better than a savings account. But of course there is "market" for exchanging your USD into funny money at predatory rates, letting you experience these juicy 20+% APY, only to realize later that the country makes it illegal to transfer the money out – or you're due some extra fees, and taxes, and surcharges, and more predatory exchange rates – and in the end if you succeed to get your money out and factor in funny money devaluation and USD inflation, you end up barely making more profit than you'd get in a more stable economy. That's assuming said foreign institutions are willing to deal with a US citizen in the first place.

smm11 5y ago

Trickle-down only works when it isn't for 'consumers.'

imtringued 5y ago
I think it is pretty common knowledge that money has diminishing returns. What I find absurd is that people actually bought the trickle-down nonsense. It's almost on the same level as flat earth. It's sooo obvious that this isn't how the economy works. If you want to give money away, give it to those who actually need it not those who need it least.
- spaetzleesser 5y ago
  Trickle down worked extremely well for those who controlled the rate of trickle.
  - micromacrofoot 5y ago
    “trickle” doesn’t even sound good, I don’t think anyone could possibly be fooled by this, it was always a sham
    - dragonwriter 5y ago
      “trickle down” wasn't what proponents called it, it's something a comedian called it derogatorily that stuck. Ditto “voodoo economics”, except the critic wasn't a comedian, but a politician (of the party that rejected the criticism and went whole hog on the policy, but still later nominated him as, and got him elected, President.)
      - micromacrofoot 5y ago
        ah ha, that makes a lot for sense, thanks
  - dragonwriter 5y ago
    There never was any rate of trickle (down, at least).

dghughes 5y ago

Here in Canada at TD Bank their "High Interest Savings Account" for $0 to $4,999.99 the interest rate is 0.000%. Highly deceptive for them to call it that with literally 0% interest.

quickthrowman 5y ago

Savings accounts will pretty much never pay more than the Federal Funds (prime) rate. Back in 2019 when the prime rate was 2.25-2.50, the high yield online savings accts were paying 25 bps under the prime rate. As the Fed starts hiking the prime rate over the summer, high yield savings (Marcus, discover, etc) will start yielding more.

mise_en_place 5y ago

Real interest rates are still negative, with inflation being at 9%. So even if the yield is 3%, on the 5 year treasury, the real yield is -6%. What fool would lend someone 100 dollars to get back 94 dollars in 5 years? The biggest sucker is the person who owns a 30 year treasury, and if the Fed starts selling its treasuries, good luck getting a reasonable price for it.

BayAreaEscapee 5y ago
The obvious problem is that there is nowhere to hide. All markets are overvalued by virtually any historical metric. At least if you take the -6% real hit, at least you can know and predict what the hit is.
- mise_en_place 5y ago
  My portfolio with foreign value stocks and gold and silver mining stocks, plus oil companies is doing great. I am up by more than 10%. This is just the beginning for them. My financial advisor who manages the vast majority of my wealth is down 2% in comparison. I'm close to pulling my money because he's extremely anti commodities and I had to yell at him to invest my money into mining companies because he thinks it's better to just hold cash. Meanwhile my networth disappears. Don't use a financial advisor would be my advice to you and do your own research.
  - WalterBright 5y ago
    If you're telling your financial advisor what to invest in, what's the point in having one?
    - ThalesX 5y ago
      Probably to advise you and take care of the nitty gritty details of your decisions.
  - rrrrrrrrrrrryan 5y ago
    I think oil is a moderately risky bet on future geopolitical-economic turmoil, which is far from guaranteed, but your other bets are much more conservative. How are you invested in "foreign value stocks"? (e.g. are there certain funds / ETFs? Individual stocks?)

RicoElectrico 5y ago

Same in Poland, except a handful of smaller banks which need to attract capital.