Comments on: Signs of ill health/will http://asteroid.divnull.com/2009/12/signs-of-ill-health/ A mind forever meandering. Wed, 11 Jan 2012 00:03:39 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: rob sama http://asteroid.divnull.com/2009/12/signs-of-ill-health/comment-page-1/#comment-12577 rob sama Mon, 14 Dec 2009 14:28:34 +0000 http://asteroid.divnull.com/?p=805#comment-12577 To be clear, I mean that the bank is making money by doing nothing, bu collecting interest on its reserved from the Fed. To be clear, I mean that the bank is making money by doing nothing, bu collecting interest on its reserved from the Fed.

]]> By: rob sama http://asteroid.divnull.com/2009/12/signs-of-ill-health/comment-page-1/#comment-12576 rob sama Mon, 14 Dec 2009 14:27:27 +0000 http://asteroid.divnull.com/?p=805#comment-12576 What you describe is not the case at the Credit Union I bank at: http://iccreditunion.org/rates/ I suspect that this is really the result of the fact that for the first time ever the Federal Reserve is paying interest on bank reserves. This means that they are making money by doing nothing. It's the Federal Reserve's strategy to stem inflation. But the result has been that the bank doesn't much care about making loans. The reason why CDs make sense for a bank in normal times is that it helps them to better match their deposits with the length of the loans they make. And the bank pays extra for that. But if the bank isn't making loans, then they don't care much about you making long term deposits. As for me, I'm not investing in anything unless I can get a better rate of return than I get by paying my mortgage. And for the ordinary investor, I'm just not seeing those opportunities right now. What you describe is not the case at the Credit Union I bank at:

http://iccreditunion.org/rates/

I suspect that this is really the result of the fact that for the first time ever the Federal Reserve is paying interest on bank reserves. This means that they are making money by doing nothing. It’s the Federal Reserve’s strategy to stem inflation. But the result has been that the bank doesn’t much care about making loans. The reason why CDs make sense for a bank in normal times is that it helps them to better match their deposits with the length of the loans they make. And the bank pays extra for that. But if the bank isn’t making loans, then they don’t care much about you making long term deposits.

As for me, I’m not investing in anything unless I can get a better rate of return than I get by paying my mortgage. And for the ordinary investor, I’m just not seeing those opportunities right now.

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