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| "No Country For Old Men?" Bernanke Plan To Exterminate Savers Is Unsustainable |
| 2012-02-07 |
| I call it the China Syndrome. Negative real interest rates and distrust of the government's will/ability to maintain the value of the currency causes investments in tangible and risky assets. Inflation has been kept in check by the efficiency gains from the internet and shifting manufacturing to China but for how long? |
| Posted by:phil_b |
| #19 Up to my eyeballs, Glenmore! That was never the plan at all, but life threw me some curveballs and here I am - and weirdly kind of relieved. I'm glad for the bit of luck. I am not glad for the country. |
| Posted by: RandomJD 2012-02-07 22:05 |
| #18 Unless you have debt too, you lose. |
| Posted by: Glenmore 2012-02-07 19:04 |
| #17 Yes. Effectively, that's what ZIRP + QE is. Nifty. The Fed is paying the US government to borrow money, by accepting repayment in devalued dollars. Yeah, that'll slow em down. One hell of an interesting experiment, that's for sure. Just make sure you have a chair when the music stops. |
| Posted by: RandomJD 2012-02-07 17:58 |
| #16 Not just that. They're talking about negative interest rates... |
| Posted by: Bright Pebbles 2012-02-07 15:54 |
| #15 no mo uro, also: It isn't about the dream of home ownership for all. Mortgage rates (new and re-fi) are at rock bottom, around 3.8%. Yet, home sales remain stagnant. Anyone who was going to buy already has, or, they're waiting for home prices to stabilize, because they're still dropping. And by "anyone," I mean people with a decent credit rating and a good chunk for a down payment, which substantially limits the pool of eligible buyers. So, the fantasy is pretty much dead. The Fed recently announced that ZIRP (0% interest rates) will remain in effect until 2014 or 2015 at least. Has nothing to do with the little guy, but rather the government's ability to pay it bills. They would raise the rates, if it didn't mean instant default, bankruptcy, and who knows, maybe Chinese aggression, depending on how much they don't like getting stiffed for a trillion or two. |
| Posted by: RandomJD 2012-02-07 13:50 |
| #14 #4 and #5, bingo. Imagine having a credit card where you could set your own credit limit and APR. The card is maxed out, expenses keep rising, and you can barely make the minimum payments (which are a function of the interest rate). If you have no control over the expenses or the limit - as the Fed does not - what do you do? Right, keep the interest rate near zero to keep the minimum payments manageable. Maybe do a little quiet counterfeiting too, and call it something complex, like "quantitative easing," so no one asks any questions. The funny money is why real inflation is closer to 8-10%. I.e., the annual rate at which the dollar is being devalued. To counter inflation, interest rates need to be higher than the inflation rate. So really, the prime rate should be more like 10%. Two problems with that. One, the government would no longer be able to pay the bill. Two, people would be saving instead of spending, which would kill the so-called (almost entirely consumption-driven) recovery. Unsustainable? Absolutely. |
| Posted by: RandomJD 2012-02-07 13:24 |
| #13 ...wired under the count |
| Posted by: Anguper Hupomosing9418 2012-02-07 12:45 |
| #12 investments in tangible and risky assets. Make sure you distinguish these two classes. Currency is an intangible and risky asset. A few thousand gallons of gasoline stored in your garage is tangible and risky. Cans of tune are tangible & not risky as long as they don't spoil. Etc. |
| Posted by: Anguper Hupomosing9418 2012-02-07 12:45 |
| #11 Imagine that scene with Meg Ryan or Reese Witherspoon as the protagonist. Or having the scene end, not when the coin toss is called, but when the dude behind the country triggers the Claymore mine he has had wired under the country in his paranoid preparation for an encounter just like this one. |
| Posted by: Anguper Hupomosing9418 2012-02-07 12:42 |
| #10 That was the best scene in the whole movie.... |
| Posted by: CrazyFool 2012-02-07 12:10 |
| #9 For sure. |
| Posted by: newc 2012-02-07 11:20 |
| #8 That was a chilling scene. Played perfectly. |
| Posted by: JohnQC 2012-02-07 10:47 |
| #7 The No Country For Old Men coin toss scene is one of the best examples of pure good acting I have ever scene. Javier Bardem was a slam dunk for an Oscar with that scene. All anyone needs to know is that he's a ruthless killer. He projects such utter menace, with just minimal movement. It is the height of socially uncomfortable, between a normal, average person and death itself. |
| Posted by: Anonymoose 2012-02-07 09:36 |
| #6 Keeping the T rates low does hurt US savers but also hurts the foreigners who seek US T debt. Muni bonds can be tax free at both State and Fed level if you buy the ones issued by govt in your state (or if you live in a state with no income tax). Corporate Bonds can also be a good buy and some corporations are, arguably, less risky than the US govt. |
| Posted by: lord garth 2012-02-07 08:25 |
| #5 Double the rate and over enough time you double the outlay of the Federal government on interest payments. If we go back to historic prime rates of about four percent, we'll have a two trillion dollar deficit. This is why Bernanke is keeping rates down. |
| Posted by: Steve White 2012-02-07 07:52 |
| #4 It's artificially kept low to fund the US government and to do it without actually DOING something that would get the politicians voted out. It is a hidden tax on savings and it will continue until savings are gone (or valueless, same thing). Then the vampire will turn to his next victim, whatever it is. It will consume all the blood, er money, everywhere. Then the sun will come up. |
| Posted by: Glenmore 2012-02-07 07:41 |
| #3 The interest rate should have been raised to reflect the actual cost of borrowing at lest 7 years ago. Most of the estimates I have seen indicate it should be somewhere between 6-8%. It is artificially kept low, to maintain the fantasy that everyone can own a house without regard to their income. Time for the fantasy to die. Raise the damn rates. |
| Posted by: no mo uro 2012-02-07 06:29 |
| #2 You're such an optimist, Besoeker. They won't stop until you're Bangladesh |
| Posted by: g(r)omgoru 2012-02-07 06:06 |
| #1 "Herding" us all into dividend paying stocks then hammering the capital gains tax is a likely outcome. It's asset manipulation and we are the assets. They will not stop until we are Norway. |
| Posted by: Besoeker 2012-02-07 05:24 |