121–130 of 356 posts
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...
> 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.)
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> 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.)
Exactly, and this is why the Fed is doing QE.
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.
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 [1]: https://www.xe.com/currencycharts/?from=INR&to=USD&view=10Y
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Note that the tax-free educational expenses apply only to higher education and have an AGI cut-off, though. Read the fine print!
Ah thanks for the clarification! Have a link to a good explanation of the limitations?
Just go for I-Bonds instead.
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.
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?
“Assets” is much broader than, and other categories don't consistently follow, the stock market.
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> go for I-Bonds instead Series I bonds promise a 0% real yield. TIPs [1] are currently offering between 0.5% and 1.6% of real yield [2]. Plus, no cap. [1] https://www.treasurydirect.gov/indiv/products/prod_tipsvsibo... [2] https://www.treasurydirect.gov/instit/annceresult/annceresul...
Actually Series I bonds are negative real yield because the interest is taxed federally.
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I was clearly misunderstanding how TIP yields worked, I'll read more about it. Thanks!
The money illusion got you. With demurrage currencies, everything works like TIPS. Yields may be negative but they are free from inflation and deflation. It's kind of weird that people are choosing the money illusion over a negative yield/interest rate. I would rather have no inflation and see that the yield is negative than unpredictable inflation where the yield could be absolutely anything and I simply won't know.
No systemic measure is free from inflation or deflation in a dynamic market.
Prices move, sometimes in a correlated fashion, and credit waxes and wanes organically. Long-run inflation may be theoretically zero in some systems (constant money supply and magically constant velocity), but in reality, we have never observed this. (Even under commodity money systems with relatively constant money supply.)
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.
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.
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I had this debate last night. Where i'm undecided is if this works when a housing market is propped up by cash. Eg both houses and land purchases (something i'm trying to do) are quite a difficult market due to cash offers being consistently present. Ie a new family won't have 500k in cash and their loan offer isn't as good as a cash offer. It happened to me several times when i was buying my home ~6 years ago, 250k…
Well, what happened in 2008? Stocks down 50%, housing down 30%. Buying housing was a better investment than stocks. But as both were down, simply holding cash was better. But that's only because the wealthy were hedging against a hyper-inflation scenario, and that scenario didn't occur. In fact you can see this hedging as a reason for the inflation in the first place. Even things like target date funds that need to h…