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

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

#81

Post by bezospen15 »

incomingpain wrote: post #5

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 say failure but this is yet another successful grift. Most of them bought homes decades ago and are cashing out at 3-5x without putting any money into it. They're retiring very well off, hence the cost of retirement communities. We will get through housing painfully only to have to deal with retirement costs after that.

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

#82

Post by joe_guy »

snshn wrote: post #73

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

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

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?

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

#84

Post by JumpCrisscross »

toomuchtodo wrote: post #58
JumpCrisscross wrote: post #39

Earlier quoted context omitted.

> Clickbait title It's a (granted, well deserved) PR piece for Goldman Sachs. Their "popular consumer bank Marcus" is called out early for "offering individuals a yield in excess of 2%" in 2019. Its 50 bps is then compared to "Bank of America Corp.’s 0.04% or JPMorgan Chase & Co.’s 0.02%."

Would you say this speaks to the stickiness of savings accounts, in that there is no deposit account ACATS equivalent and folks won’t go through the effort of moving institutions to maximize savings returns?

> there is no deposit account ACATS equivalent

There sort of is: wires and EFTs.

The simple answer may be, for many savers, the spread is irrelevant. If you're saving for a home over a year [1], the difference between earning zero and 80 bps on e.g. $100,000 (quarter of the median home sales price [2]) is no more than $800. If these are your only savings, having them at an institution you know and trust may be worth sacrificing $800 over. (I'd argue it isn't. But I can imagine someone getting stressed over it.)

If you're saving for the longer term, e.g. in a rainy-day fund or for retirement or broadly for asset accumulation, you're thinking like an investor and out of the domain of basis-point yields.

[1] More realistically, if you're a median household earning $67,500 [a] saving 10% a year for a home, deposited monthly, one would have $100,027 after 168 months (~14 years) at 0.8% and $100,125 after 178 months (~15 years) at 0%. That's a difference. But not a practically meaningful one.

[a] https://fred.stlouisfed.org/series/MEHOINUSA646N

[2] https://fred.stlouisfed.org/series/MSPUS

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

#86

Post by H8crilA »

victor106 wrote: post #79

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...

You can, and you should buy short dated govt bonds (up to, say, 2 years). This is what I do for savings. And you can "draw down" quickly by selling them, perhaps at a modest loss of rates go up in the meantime. If not they will deliver exactly as advertised.

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

#88

Post by ceejayoz »

flatiron wrote: post #43
azth wrote: post #40

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?

Based on the market a lot of people believe “buy some real estate” is the solution. But that bubble IMHO is about to pop. Maybe look into interest protected bonds? https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl... Personally I have been just spending what I make assuming saving is moot right now (besides 401k and espp)

> Based on the market a lot of people believe “buy some real estate” is the solution. But that bubble IMHO is about to pop.

I fear we're gonna move to an Australian-style real estate market. Never-ending boom, impossibly high prices for first-time buyers. People have predicted its collapse for 40 years or so, to no avail.

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

#89

Post by hakfoo »

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.

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

#90

Post by ericd »

JumpCrisscross wrote: post #74
kobalsky wrote: post #62

Earlier quoted context omitted.

Bumping because I'm really interested in this answer. For me the obvious answer is, if the fed actions means it's more expensive to borrow now, then lend your money. The question is how and where. Bonds? Which bonds? TIPS don't seem to have a rate that would protect me from inflation. Gold? There's enough volatility there to lose more than 2 years worth of inflation with a badly timed entry, and I if I have to time m…

> TIPS don't seem to have a rate that would protect me from inflation The TIP yield is a real yield. It's indexed to CPI-U, same as Series I bonds. (TIPs adjust monthly; Series I bonds semiannually.) > would convert a some portion of my savings into stablecoins This is probably the worst choice one can make. It's accepting a 0% nominal yield against an unregulated counterparty. A Bank of America savings account is li…

This. Also, max put your Series I allocation ($10k/yr/SSN iirc, must be purchased from TreasuryDirect) before bothering with TIPs. If you have kids, the inflation adjustments can be used tax free for educational expenses, which would already make them the best inflation adjusted bond, but on top of that, you can cash it in whenever you want for nominal value rather than selling them on the secondary market, which makes them so much better than TIPs in the scenario where interest rates soar and inflation actually gets beat back (fwiw I don’t think this is as likely as currency devaluation).
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