U.S. interest rates have soared everywhere but savings accounts • Hacker News Board

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

#131

Post by dragonwriter » Sat, Apr 23, 2022, 6:02 PM UTC

imtringued wrote: post #115

kobalsky wrote: post #91

Earlier quoted context omitted.

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.

> With demurrage currencies, everything works like TIPS. Yields may be negative but they are free from inflation and deflation.

Not at all true of historical demurrage currencies, with are subject to inflation/deflation as normal but also have reduced nominal value over holding time.

ISTR the term has been resurrected for crypto products, but I can't find any details of how any crypto demurrage currencies work that would confirm or deny that they are somehow insulated from inflation/deflation and only change buying power by the demurrage charge, though I can't see it being likely to work in practice.

In theory, you could have what is basically a “stablecoin” managed against a price index like the CPI-U instead of an actual fiat currency and then add a demurrage charge on top of that (which could provide stabilization resources, so it's not completely irrelevant to function).

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

#132

Post by doktorhladnjak » Sat, Apr 23, 2022, 6:02 PM UTC

reducesuffering wrote: post #103

ragingrobot wrote: post #27

Right before the 2008 downturn, I had an ING Direct (now Capital One) savings account, at that time with an APR over 8. At once point in the early 2000s it was doing a hell of a lot better than that. It never recovered. I never saw that rate go above 1% ever since.

I’ve had that same account. You got duped by Capital One, as this account was a “Savings” Account, but then they introduced a new “Performance Savings” account years back. The Performance account has competitive yields (top of market 2.5% few years back) but they got to milk customers who just stayed on existing “Savings” accounts that didn’t realize the yields were way too low. Getting the higher yield was as simple…

That was particularly annoying though because the new product did not support joint accounts whereas the old one did

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

#133

Post by ChrisLomont » Sat, Apr 23, 2022, 6:04 PM UTC

joe_guy wrote: post #82

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?

GDP and USD are not the same thing. GDP measures production over a year (a timespan which is simply an artifact of our planet) in US dollars. It's a rate.

USD is the sum of US dollars in use. It's an amount.

Comparing a rate (defined by an arbitrary local constant) to an amount doesn't make much sense.

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

#134

Post by imtringued » Sat, Apr 23, 2022, 6:05 PM UTC

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%.…

One could argue that inflation increases the value of future income streams, which is not a bad thing if your goal is to maintain civilization.

What irritates me is that a lot of people seem to treat this "humanity project" like a paper towel that is meant to be thrown away the moment they die.

You can't just put labor in the fridge and then take it out when you are 70. Time doesn't stand still. So old people are reliant on young people. Old people must find an arrangement that works for young people too. I don't think that is impossible.

However, a lot of old people don't care, they just want the future generation to be their worker bee with zero say. Let's say you work and save 20 years of labor. For your money to maintain its value, a young person must work 20 years for you.

There are obvious problems here. What if there aren't enough young people? What if they earn money at a slower rate than you did? What if you don't actually give them 20 years of work so they can work themselves out of that debt?

The latter is particularly ironic. A young person has 20 years of debt and his old father has 20 years of savings. When the father dies he thinks he is leaving his son a fortune, yet the only benefit the young person sees is that he is out of debt. He doesn't gain something he didn't already have.

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

#135

Post by doktorhladnjak » Sat, Apr 23, 2022, 6:06 PM UTC

aklein wrote: post #53

ra7 wrote: post #35

Earlier quoted context omitted.

Thanks for the recommendation! I’ve never bought bills, I will check it out. I use Marcus savings which just increased its rate from 50 bps to 60 bps yesterday. (PS: I always search for your comments in any finance-related threads as I learn a lot from them. Just an appreciation!)

You can buy CDs from a Vanguard brokerage account that are yielding about 50% more than the equivalent durations offered at gsbank/Marcus: https://personal.vanguard.com/us/FixedIncomeHome

Brokerage CDs are a pain if you need your money back early. Unlike a normal CD, which you can redeem early for a penalty, you can only sell brokerage CDs on a secondary market. They trade at huge discounts, and you have to pay fees to involve a broker because they are not liquid enough to trade yourself. At least this is how it was when I tried to do this a few years back.

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

#136

Post by JumpCrisscross » Sat, Apr 23, 2022, 6:07 PM UTC

imtringued wrote: post #123

Youden wrote: post #52

Earlier quoted context omitted.

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

If countries adopted negative interest rates we could stop the inflation nonsense and then you could easily compare countries based on their interest rate. In this case the Indian interest rate would be somewhere between -1% and 0% instead of 5% inflation and 4-5% interest.

> countries adopted negative interest rates we could stop the inflation

If you're talking about monetary policy, this is wrong. Low rates spur inflation. Raising rates fights it. Countries that implemented negative rates did so to fight deflation and spur inflation.

If you're talking about how we quote and talk about rates, we quote nominally because that's how most bonds are written. When you buy a 10Y Treasury, it will pay you a specific nominal rate. You know that ex ante. Inflation is whatever it is now, but we have zero guarantee around what it will be between now and ten years hence.

Also, there is no single figure for inflation. It's a measure on a basket of goods. That basket is designed to approximate the average American's, but nobody is an average American. (Or an average Indian.) Your experience of inflation will be different from mine based on our purchasing preferences. (This doesn't make inflation subjective. Just heterogenous.)

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

#137

Post by JumpCrisscross » Sat, Apr 23, 2022, 6:11 PM UTC

imtringued wrote: post #134

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%.…

One could argue that inflation increases the value of future income streams, which is not a bad thing if your goal is to maintain civilization. What irritates me is that a lot of people seem to treat this "humanity project" like a paper towel that is meant to be thrown away the moment they die. You can't just put labor in the fridge and then take it out when you are 70. Time doesn't stand still. So old people are rel…

> could argue that inflation increases the value of future income streams

No?

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

#138

Post by driverdan » Sat, Apr 23, 2022, 6:11 PM UTC

hsnewman wrote: post #6

Just go for I-Bonds instead.

I Bonds might be a good alternative to CDs but are not comparable to a savings account. Your money is essentially locked in.

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

#139

Post by poof131 » Sat, Apr 23, 2022, 6:12 PM UTC

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?

If able, perhaps focus on your earning potential. We’ve had a forty-year run of asset price inflation relative to wage inflation. We may have hit the end of this period and will see a realignment with wages increasing at a faster pace than capital assets, similar to what happened in the 1970s. The Asset Economy is a somewhat dry but interesting book that presents a more academic take on the economic patterns of the last forty years.[1] The increase in unionization efforts, anti-trust, and the inability of the FED to manage inflation seem to point in this direction.

Otherwise, monopolies still seem strong for now with pricing power. Areas the government will print money to fund also seem like a decent bet: defense, climate, …? And you can try to maintain purchasing power with gold or crypto or real estate (in non-bubble areas). But we may be entering some challenging times for those with assets.

1. https://www.wiley.com/en-us/The+Asset+Economy-p-978150954345...

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

#140

Post by imtringued » Sat, Apr 23, 2022, 6:16 PM UTC

smm11 wrote: post #94

Trickle-down only works when it isn't for 'consumers.'

I think it is pretty common knowledge that money has diminishing returns. What I find absurd is that people actually bought the trickle-down nonsense. It's almost on the same level as flat earth. It's sooo obvious that this isn't how the economy works.

If you want to give money away, give it to those who actually need it not those who need it least.