Why are interest rates so low?

[tallyho8]

It was back in the early 1980s when prices started skyrocketing just like they are doing right now in 2022. The difference is that the gov't is saying we just have a 7% inflation rate while everything we buy is 2 or 3 times what it was a year ago. In the early 1980s I put $20,000 in a 5 year CD at 18% interest and after 5 years it was over $45,000. It seems that inflation is worse now than it was then but cd rates are still less than 2%.
Putting $20,000 into CDs now means they will be worth less than $10,000 in 5 years after inflation.

 

[2manyrocks]

Would like to know the real answer to your question myself. I figure they studied the same economics as everyone else so what where they really thinking to have continued so much QE for so long?

 

[mikester]

The older I get the more I start to think it's all a load of BS and smoke and mirrors.

Look at the historical price of gas and diesel vs crude oil. We hit $140/barrel back in 2007-2008 and I wasn't paying $2.00/L for gas at the pumps - closer to $1.40/L. Our peak oil price set this year is under $120/barrel.

Funny how the news right now is getting spun up over monkey pox which is pretty much an STD and covid has disappeared.

 

[Moxie 15]

interest is the result of the bank's need for money. The banks pay an interest on your money commensurate to their needs. It is not set in stone by the Federal Reserve.

Inflation numbers reported are not reflective of what it costs you and me to make it day to day.They are a measure of what it costs business to operate day to day. The numbers reporting what it costs the average person to live day to day is The Consumer Price Index.

The economy is a self serving monster that is little controlled by politicians, media, or businessmen. I have to stop here or I will go off on a rant and enough of you think I am crazy and wrong.

 

[duffer]

interest is the result of the bank's need for money. The banks pay an interest on your money commensurate to their needs. It is not set in stone by the Federal Reserve.

Inflation numbers reported are not reflective of what it costs you and me to make it day to day.They are a measure of what it costs business to operate day to day. The numbers reporting what it costs the average person to live day to day is The Consumer Price Index.

The economy is a self serving monster that is little controlled by politicians, media, or businessmen. I have to stop here or I will go off on a rant and enough of you think I am crazy and wrong.

You were doing pretty good until you got to the last sentence. Then your brain went on the fritz. The economy IS affected by gov't, business, media, and us as consumers. Many times working at odds....like now.

And oh, by the way the CPI excludes food & energy. So our actual inflation rate is much higher than reported.

 

[Diggin It]

Banks, businesses and the banking business is one huge organized crime ring. It's all about the almighty profit for the sake of profit. Any other justification for high prices is irrelevant.

Savings, checking and CDs are paying 1% or less while CCs are charging 20% or more. 3-4% interest on a $50K vehicle loan yields them much more than 5% on a 10K used vehicle loan. Banks are literally raking it in hand over fist.

I play the game though and chase promotional bonuses and no interest introductory periods. I've pulled in several hundred dollars in bonuses and rewards in the last couple of years and have not paid a penny in interest. I've been able to buy a few things I needed and spread the payments out over a year or more without paying interest AND get the prices reduced by the bonuses. These are things I needed and could have paid for in other ways.

Tractor is due to be paid off by the end of this year, about two years early which saves me considerable interest even with the low 3% rate.

Banks are out to screw you. It's what they do. You just have to figure out a way to do it to them before they can do it to you.

 

[Hay Dude]

Banks, businesses and the banking business is one huge organized crime ring. It's all about the almighty profit for the sake of profit. Any other justification for high prices is irrelevant.

Savings, checking and CDs are paying 1% or less while CCs are charging 20% or more. 3-4% interest on a $50K vehicle loan yields them much more than 5% on a 10K used vehicle loan. Banks are literally raking it in hand over fist.

I play the game though and chase promotional bonuses and no interest introductory periods. I've pulled in several hundred dollars in bonuses and rewards in the last couple of years and have not paid a penny in interest. I've been able to buy a few things I needed and spread the payments out over a year or more without paying interest AND get the prices reduced by the bonuses. These are things I needed and could have paid for in other ways.

Tractor is due to be paid off by the end of this year, about two years early which saves me considerable interest even with the low 3% rate.

Banks are out to screw you. It's what they do. You just have to figure out a way to do it to them before they can do it to you.

Guess who is a huge supporter of the credit card companies and their sky high interest rates?
We cant say on this forum…..

 

[chevy]

The interest rates are low because of all the tens of trillions of debt the US government holds. If interest rates go up to where they were in the 80s, all of the money collected in taxes would not be enough to pay just the interest on the debt.

 

[2manyrocks]

Banks love it because they are essentially getting free inventory as opposed to actually having to pay depositors.

 

[hosspuller]

The interest rates are low because of all the tens of trillions of debt the US government holds. If interest rates go up to where they were in the 80s, all of the money collected in taxes would not be enough to pay just the interest on the debt.

CD rates are low because the FED is NOT fighting inflation. (caused by too much money in the economy) Paul Volker won the inflation battle in the 80's because the FED raised interest rates HIGHER than the inflation rate. The FED won't do the same because they fear starting a recession (diminishing Democrat election chances) and as Chevy said gov't debt service.

Yet our current administration still yet wants to throw more gasoline errr... money on the fire.