What interest rates at zero would mean for your wallet

[Yo_Mama_Been_Loggin]

If it were up to President Donald Trump, there would not be much for the Federal Reserve to discuss.

On Wednesday, Trump tweeted that the central bank should cut interest rates to zero or even set negative interest rates. The president also called Fed officials "boneheads" in the tweet.

The president has been vocal in his resistance to higher rates, raising concerns that increased borrowing costs will put the brakes on economic growth.

However, "zero percent interest rates are not a panacea," said Greg McBride, the chief financial analyst at Bankrate. "We know this firsthand because we lived it."

Since the recession, rising rates have paved the way for pay raises and a better return on savings, despite the impact on borrowing costs.

And still, interest rates are historically low, which leaves the central bank with little wiggle room in the event of a recession or if the economy stumbles. The current target range for its overnight lending rate is 2% to 2.25%.

"Cutting interest rates to zero would throw savers under the bus," McBride said.

https://www.msn.com/en-us/money/personalfinance/what-interest-rates-at-zero-would-mean-for-your-wallet/ar-AAH8YIa?li=BBnbfcN

[Thomas Hurt]

1. same logic at play here as with taxes...

lower taxes to create more jobs, doesn't work, lower them some more

ditto with interest rates, keep doing it till you get the results you want.

[lastlib]

2. I'm sitting with cash & money-market accounts....

...of around $145,000. With a zero Fed-funds interest rate, I would have to take inordinate risk with money set aside for retirement, in order to have any kind of positive return to build enough retirement assets to keep me out of the poorhouse. I'm two or three years away from retirement--CANNOT afford to take that kind of risk. AnusMouth would be fucking me over once again, just like every G-- D----- Repuglikan since Reagan has done. I will not stand for it!
--- ---

[moondust]

3. Is Dumfuck trying to force

you and all the other "savers" to redirect all your money into the stock market so he can boast about it during the coming campaign?

[lastlib]

4. Probably so. I ain't gonna play his game willingly. eom

[Calculating]

6. Absolutely, 100%

Doesn't matter that stocks are already overvalued by maybe 20-30% across the board, Trump wants it higher so he has something positive to brag about for his reelection campaign.

[Yavin4]

8. Yes. Which should make you question the actual value of equities.

We had 0% rates for almost ten years. Huge tax cuts in 2018. Stock buy backs, and now Trump wants to go back to 0%.

So, with all these stimuli what's the true value of the market. It's like Barry Bonds taking steroids. Makes you question the validity of the numbers.

[former9thward]

21. It must be a world wide conspiracy.

Interest rates have gone negative in Europe. The U.S. has nothing to do with that. It is the economy which is pushing rates down.

"Savers" have no "right" to high interest rates. No one is forced to go into the stock market. If someone doesn't want their money in a market which is at record highs so be it. Keep it in cash. Invest in land. Give loans to trustworthy borrowers. There are many, many options if someone wants to grow money instead of complaining.

[moondust]

25. Does Donny know any of that?

Or does pResident Simpleton think he can strongarm a lot of people's savings into the stock market trying to get a decent return so they don't end up retiring in poverty--and he can brag about the stock market/"great economy" in his campaign?

[ooky]

32. You might want to check out a stable asset fund for that money if you haven't already.

I retired a few years ago and left most of my money parked there rather than putting it into riskier investments or cashing out and having to pay tax on it. It only returns about 2%, but I feel a lot safer with it there, and in my case it earns enough in dividends to supplement my social security enough to cover my expenses without reducing the principle.

The fund I have it in didn't lose any value during the last crash in 2008. It just went on making it's ~ 2% returns.

[CountAllVotes]

5. Luckily, I am long on insured investments

and gold has been looking mighty fine lately.

[Liberal In Texas]

7. It'll be a real good way to goose the stock market ... just before it causes the bottom to fall out.

[former9thward]

22. People predict "the bottom falling out" on a weekly basis for years now.

What does "the bottom falling out" mean specifically and when is it going to happen?

[Blue_true]

9. Germany has negative interest rates. The effect has been to slow it's economy because savers are

sending money to places that still have positive interest rates.

[roamer65]

12. Correct...or they withdraw it and it becomes "mattress money".

In a negative interest rate environment, cash actually becomes an investment. You gain on it because you don’t lose money.

[Blue_true]

13. Yes it becomes an investment because it is worth more buried in a backyard that in a bank. nt

[roamer65]

14. The USA has never had negative interest rates.

I honestly think if the banks start to charge them against deposits, a run on the banks will occur.

The FDIC and Federal Reserve had better have a shit ton of cash on hand.

[Blue_true]

17. All experts who aren't Trump asslickers think that negative interest rates will be enormously

disastrous longterm. They will boost growth for a few months, but then the bills will start coming in.

[former9thward]

23. Why is that not happening in Europe?

I am not in favor of rates going up or down. They will go where the market sends them.

[Blue_true]

24. Germany's economy has slowed dramatically since that country introduced negative interest rates.

So it is happening to the once strongest economy in Europe. Actually, all of Europe is stalled, the UCB also introduced negative interest rates relatively recently (about 1.5 years ago), initially they boosted growth, but now economies across the EU are stalling and headed toward a recession like in Germany. Merkel's party recently lost support to an ultra-rightist party in a recent election in a part of Germany, the reason was uncomfort about the economy (I am sure racism was in the mix, but why should racists use racism when the other side inflicts a wound on itself).

[Vinca]

10. What the heck are negative interest rates?

The bank pays you to take out a no interest mortgage????

[egduj]

11. You pay the bank for them holding your money.

[Vinca]

30. Thanks for the reply. I had no idea.

It sounds like another nail in the coffin of the economy.

[Blue_true]

15. No. You pay the bank to hold your money in a savings account.

You actually pay the bank interest to have your money there.

I am sure that the bank will be happy to charge you interest on a home Mortage or business loan.

[roamer65]

16. That's when I withdraw the cash.

[Blue_true]

19. Most people would to and in Germany, they are. nt

[roamer65]

18. In Denmark, some have actually gotten negative interest rate mortgages.

The bank is literally paying them to buy the house.

[Blue_true]

26. I did not hear about that. Do banks have excess repossessed housing stock?

Negative mortgages make no sense otherwise, unless their discount is smaller than what savers are paying banks.

[roamer65]

29. Danish Krone is in ERM2.

https://www.theguardian.com/money/2019/aug/13/danish-bank-launches-worlds-first-negative-interest-rate-mortgage

The Danes pretty much have to follow ECB policy, since the Krone is locked into a certain trading range via ERM2.

[leftyladyfrommo]

20. I remember when interest on savings was an

important part of retiree's income.

[Blue_true]

27. Same here, the widows and orphan's funds. Low, but adequate return, super safe. nt

[demosincebirth]

28. Not good for seniors.

[roamer65]

31. The best move is to eliminate interest on Federal Reserve deposits.

Last time I looked member banks got 2 pct on deposits at the Fed.

Switch to negative rates on just those deposits. It forces banks to make loans to make money.