Posted on 12/26/2009 12:23:40 PM PST by FromLori
As PIMCO's Bill Gross notes in this NYT article on zero-percent interest rates, the Fed's ongoing Wall Street bailout is coming at a cost: Anyone who has any cash savings is getting screwed.
This includes retirees who did exactly what they were supposed to do--save. Their incomes are now getting clobbered.
Meanwhile, for those who prefer to borrow money, the ongoing bailout has created the world's easiest way to make $1 billion. Borrow short-term from the taxpayers and lend the same money back to the taxpayers--and get a guaranteed risk-free spread.
Here's Bill Gross:
“What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” said William H. Gross, co-chief investment officer of the Pacific Investment Management Company, or Pimco. “It’s capitalism, I guess, but it’s not to be applauded.”
Mr. Gross said he read his monthly portfolio statement twice because he could not believe that the line “Yield on cash” was 0.01 percent. At that rate, he said, it would take him 6,932 years to double his money.
(Excerpt) Read more at businessinsider.com ...
He didn't count taxes. After a 28% tax bracket it would take 9,627 years to double.
I remember Jesse Jackson one time saying that people’s retirement pensions should be available for other uses.
You always hear complaints that Americans don't save enough, but if you wanted people to save, wouldn't you favor HIGHER interest rates and real low inflation? Wouldn't you want to let the market determine the interest rate?
True, and the people attending Tea Parties and those mad at the federal government in general should actually be even madder. Some (new) candidates for president and Congress need to make this point in 2010 and 2012.
This has been going on since Greenspan reduced rates again and again to help prop up the economy years ago.
No surprise, that’s what the government is best at doing, screwing the taxpayer. Not only have you been a good little saver, mister taxpayer, we won’t pay you interest while we let the banks make all the money on loans so they pay back the government first, the money you paid into the Treasury in the first place by being a good little citizen and paying your taxes, while government fiscal policies and inability to understand basic economics forced this catastrophe on us in the first place.
Then, for those stupid citizens who aren’t thrifty and borrowed money left and right and are technically bankrupt, the government will bail them out (along with the stupid financial institutions that lent the stupid citizens pretty much free money in the first place) and you, the thrifty taxpayer, will pay for that too. And so will your children and grandchildren, who will hopefully be as productive and thrifty as you are so the government and the lazy, incompetent, stupid citizens can be unproductive, wasteful and parasitic and continue to sponge off you and your legacy forever.....get used to it, chump because not only are they taxing us to death, they’re taking away our freedoms at the same time.
The banksters are getting money for zero interest from the gubmint, and turning around and charging us increased rates on our credit cards. Good deal.
Low interest rates mean it's a great time to borrow money even while it's a terrible time to lend it. Get yourself a long-term loan at very low rates and do something useful -- or even just enjoyable -- with the money.
I borrowed some money from my 401(k) account to finance some expenses related to a new business I've started. I'm paying the money back -- to myself -- at a rate of 4.25% over five years. And since the interest is tax deductible, I've got a really good chance of coming out ahead in the long run.
Secret slush funds going.
Yes you know it seems to me that is a lot of truth in this article
http://www.thedailybell.com/681/Nelson-Hultberg-The-Fed-is-a-Fascist-Cartel.html
Yup. Government does not want us to save. We have to be good little soldiers, er....consumers, and keep the economy humming. In their eyes, the ideal citizen has no savings (other than a 401K), lotsa debt, and lotsa foreign made stuff. And when it comes time to retire, they will have no choice but to take SS or keep on working till they drop. Good little worker ant!
People didn’t used to use banks to save money. Their nest eggs were in jars and hidden in their house or on their property. There was a reason for that. 2 generations later, people are learning that all over again.
If you think the rate is too low lend your money elsewhere at a higher rate. You don't have to have a government guarantee on the return of your capital, do you?
Nope, it's not capitalism. It's politics and campaign contributions and lobbyists. And at times it might be the many being forced to bail out the financial system because of the incompetent and reckless few.
I'm one of those government retirees that a lot of Freepers think should have their pensions eliminated. Our retirement fund is completely self-funded from investments. About twenty years ago the city attempted to force us to use a significant part of the pension to make "low interest home loans to individuals who could not access normal mortgage instruments." When the pension board refused, they tried to order us to do it. We refused. Our pension is still sound, and requires no contributions from the city, except for those contributions made as part of our compensation package before retirement.
28% of my compensation package was retirement. During the early 1980s, there was a move (by Democrats) to take all of the money in our retirement fund and use it to prop up Social Security. In exchange for taking all our retirement, they would put us in Social Security.
The lesson here is that whenever someone accumulates any amount of money, the government believes they should get it. They have magnificent plans to make everything better, and all it requires is everything anyone has worked for, plus some more.
Confiscation of firearms would be the other.
IMHO
Nooses over telephone pole crossbars comes to mind...
Please be careful with 401(k) loans. You’re borrowing your own money and paying yourself “interest” as you repay the loan. It’s not the same thing as earning money on your investments. The hidden cost of 401(k) loans comes from the earnings you’re not receiving on your savings while they’re borrowed from your account. The interest you pay yourself is not a true interest expense since you’re paying it to yourself and its definitely not tax deductible.
And one of the things that motivated me to borrow the money in the first place was that I specifically drew down part of my U.S. bond fund to provide cash for the loan. That fund was earning such miniscule interest anyway, so I don't see the withdrawal of the money as much of a "lost" opportunity at all.
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