help me understand interest rates

Interest rates are the thing that make Mooch me broke.

That's all I understand about them buggers.

what is .15 percent? is that the same as 1.5?

No, ridiculous as it may sound you are being offered 0.15 percent i.e. .0015 x your principal. So if that is an annual interest rate (not compounded on some shorter period) you would make 150.00 on your savings of 100,000.00 over a one year period. In the mean time, the bank that is offering you that interest will be loaning out your money at about 5.00 to 7.00 percent and making 5000.00 to 7,000.00 on your money, if they can find anyone who wants to borrow. I have actually gotten a good deal less on a money market fund in the first quarter of the year.

The problem you have as a saver is that you are competing to loan your savings to a bank with the Federal Reserve, which is offering to loan virtually unlimited amounts to the bank at zero percent. The bank can then buy US Treasury notes with the money they are being loaned for nothing at about 2% with no risk, so there is very little incentive for them to do any borrowing from you.

This whole process is designed to flood the economy with money so that people who were not so foolish as to save during the borrowing-fueled economic bubble years, will be able to borrow really cheaply to invest in producing a lot of stuff that no one has enough money to buy. But other people should be able to borrow easily so that they can buy it. But the banks have a risk free money machine so why should they lend money cheaply to anyone else?

One could argue, that if the government and its quasi-governmental agencies wanted to truly stimulate borrowing-induced growth, they should have required banks to demonstrate that for every dollar of free money they get from the Federal Reserve, they should be able to show that they have loaned it to some productive purpose not just government bonds. That would have been the government meddling with the free market however, and is forbidden by god.

What the government is permitted to do is to devalue the currency (see quantitative easing above) and force the saving public into putting their money into speculative investments by forcing a negative return on everything except equities and junk bonds.

me thinks its just a matter of time before all or dollars are worth zero - along with some other economist that think the same thing - 

printing press is out of control 

I try not to worry ...

Just saying 

Hopefully it does matter where you invest your money....and the dollar wont collapse -- 


but heck .....

you know?

Well..... the banks currently are paying abysmally low interest rates. 

Personally right now, I am pessimistic.... I see the glass as damn near empty.   Some time back, earlier this year, some people were saying that gold, at the time near $800 or so would hit $1500 by years end.... everybody slammed them... have you checked the price of gold recently..... it's over $1400 and six weeks to go yet.  The millionaires and billionaires have been reportedly buying gold literally by the ton.  When money becomes inflated or deflated gold becomes the place investors go for stability. The Fed announced a "managed decline" of the value of the US dollar just recently.  Energy costs are predicted to rise 30% in Pennsylvania after Jan...... clothing 30% increase by spring...... that's the result of printing money...AKA inflation.

I might be doing it wrong, but I cashed out of the markets back before the big crash, and I am still not convinced to jump back in again yet. Even though prices are/were climbing, they have been propped up by the govt infusing cash into the markets..... artificial stimulation of the markets..... not a place I want to be invested right now. The fed will reach the point soon when they will not be able to prop it up and when that happens...who knows what will occur...Bernake even commented that "we are entering uncharted waters" due to the sheer size of the numbers..... the US owes more money right now than ALL the nations of the world produce in GDP in a year.  Yeah you read that right ALL the nations of the world's GDP is actually a smaller number than what the USA owes.

Keep some cash handy if you can, invest in some silver and gold. That stuff retains it's value when paper money is being burned in your heater to heat the house.... or at least a room. Pay off your debt, that doesn't go away in a time of financial crisis, but in fact becomes a major problem.  Store up a few months supply of food. You can not eat money, and the stores might not be taking your cash if they even have food.

I'm saying this because we are now entering a period where the financial situation of the country is almost identical to the conditions that existed in the Wiemar  Republic Wikipedia account  and the results were not pretty. Could it happen here? I don't know, and I sure hope not. But..... when panic sets in and people act irrationally, the bottom is a long way down.....

Just be careful where you invest in this volatile financial market.  Right now be thinking protection of your principle..... don't worry right now about big gains with interest. Let the economy stabilize first... or crash.... once it stabilizes and things look better... then invest.

This is just MY  PERSONAL TAKE on the situation and should NOT be construed as financial advice..... even though I did sleep at a Holiday Inn Express recently.

Everybody was a freaking millionaire.... but it took a million to buy a loaf of bread.... so what was the point? Just poverty with a different definition.

bapu


Interest rates are the thing that make Mooch me broke.

That's all I understand about them buggers.

Luckily you have somewhere to go where you can be fleeced like a good 'un that you know you can trust.

(or have you?)

Jonbouy

bapu


Interest rates are the thing that make Mooch me broke.

That's all I understand about them buggers.

Luckily you have somewhere to go where you can be fleeced like a good 'un that you know you can trust.

(or have you?)

Yes I do and yes I have.