Low interest rates: I’m done with them

I sat down to do my taxes over the weekend and I realized I was missing a 1099 from a bank where I have an interest savings account. I called up the bank and after some rooting around, the phone rep realized I didn’t get a form because the bank doesn’t mail one out if interest earned over the course of the year is less than $10. Turns out, I’ve been earning a whopping 0.02% on my money. That came to $1.41 for all of 2009.

I have been very patient living in a world with preposterously low interest rates. But now I am done.

As a person looking to save, and not to borrow, the past year has been brutal. I don’t need a 5% mortgage. I don’t want to finance a new car purchase. What I want is to be paid decently when I lend financial institutions my money.

I do, of course, understand that low interest rates have indirectly benefited me by keeping the country out of a deeper recession. I also understand that complaining about low interest rates on savings products makes me sound like a senior citizen.

But maybe that’s the point. Now that the Fed and other central banks around the world are getting ready to start raising rates, we’re beginning to hear about all the people who are going to suffer as a result. The poor home buyers. The poor stock-market investors.

Let’s just keep in mind that some people will also benefit. I think of my grandmother and how little money she’s been receiving from her portfolio of CDs. Interest rates can only go up from here. And I know I’m not the only one looking forward to it.

deconstructiva

Barbara, I share your pain. Except for temp work and stock trading I’m riding out unemployment on savings – was once saving for a house but now on plan B. I wonder how widespread the pitiful savings rates agony is out there (studies?).
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I haven’t calculated but my dividend-paying stocks (most in an all-stocks / no-funds rollover IRA) appear to pay better than broker acct. sweep funds (IRA and regular acct., most savings in reg. for now), both of which ‘crush’ my bank savings acct. I’m seeking a higher paying bank or credit union but it’s table scraps out there at best. I hope you find a better-paying option.
http://www.simonvinkenoog.nl/beeld/Yogi%20-%20Annelies%20Rigter.jpg yogi

Haha, I remember I once e-mailed the Fed back in the summer of ’08 before banks started failing to stop lowering the interest rate because it was ruining my high intrest yield savings account…needless to say, they basically told me to go f myself.
Barbara Kiviat

@yogi: They wrote back? That’s actually kind of cool.
ps56penn62pr64

Savings accounts sound like a good idea, until you really think about them.

Money in a savings accounts is a very low interest loan to the bank, the bank using the money as reserve deposits, the bank multiplying the money by the fractional reserve ratio of 9:1, the buying power of the deposit diminished as new money is created as loans, the purchasing power once residing in a single dollar now distributed in more than ten, a single transaction like a single snow flake landing on a roof going unnoticed, a roof collapsing from the cumulative weigh of innumerable snow flakes, the economy collapsing from the interest burden on innumerable loans.

Saving money in a bank is the key to destroying the economy.
http://www.simonvinkenoog.nl/beeld/Yogi%20-%20Annelies%20Rigter.jpg yogi

Yeah and it didn’t really seem like an auto-response so that was pretty cool, however, not being able to get a loan now, not so much.
ohiopapa

Saving money in the bank doesn’t have to destroy the economy. Esp. in a community bank.
However, I’m wondering:
1) if the ratio was increased after the Banking Modernization Act of 1999 allowed banks to engage in gambling activities (i.e. derivatives, dark pool trades, etc).
2) Why the government doesn’t set certain loan requirements (sufficient income, collateral, % downpayment) to ensure stability of the system.
bryanfromhouston

You’re not the only one wondering why they won’t enforce sensible provisions. Especially, because I read somewhere that the theory on moral hazard is complete bunk. Why?
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Glad you asked. The problem is that when you start off with a caveat emptor and everybody protect themself in a free market atmosphere you get Mrs. O’leary’s cow….and the financial wildfire once started is uncontainable!!! The fire of foreclosures that started on the north-side is raging towards the south-side. The folks that you seek to educate on the front end just watch their house go up in smoke with little emotional cost or financial attachment. And those who are responsible are sitting there thinking of the conundrum between two bad choices: 1) I pay for the fire-truck to stop the other folks house before it catches mine on fire too or 2) in the name of principle, I applaud the burning down of my neighbor’s house only to watch in horror as it also catches my house on fire as well.
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You see, the problem with moral hazard is that by the time you recognize it and have allowed it to blaze up…it’s likely too late. That is why they put Glass-Steagall in place, why we have smoke (and NOT FIRE) detectors in our homes, and even sometimes engage in preventative, controlled backburns of dead wood in forests in California. I think you folks can see the parallels.
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In any event, it’s really too late. We have already let this thing get raging and NOW, the only question is when will it just run out of fuel and die down?