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Thread: interest rates on basic savings accounts are now above the target run-rate of inflation

  1. #11

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    Quote Originally Posted by Ryanferr View Post
    My post was clearly in regard to the situation right now and made no attempt to argue the efficacy of a high yield savings account over any prior time duration. Given where rates are today and where rates are projected to be heading, getting at least a 2% or above return is easily done. It's very simple and no one is cherry picking data. You are rambling again. Bring it back in.
    I would say it's cherry picking when this thread is about silver value -- which is how we came to fiat value -- and then you choose to focus only on the 2% special savings today (which, again, is not what most people get), while ignoring of all the other years many have been posting here trying to justify owning silver. You need to consider what you contributions are in relation to the wider topic, but of course, you have an agenda in which getting outside of today's best interest rate is not as helpful to your digital mission, nor is the reminder of how so many common savers lost value over this time. (To think they would have been better holding gold over the last 10 years; in breathless to self-speech of banksterman : "must not let them discover this, our very faith in the digital gods and the order they create is at stake!" - "data", give me the strength .......)

    I thought you might also help me out, and tell me how I can also get that 2% rate while using cash coming directly in and out -- or is it that you just don't like my offer of silver dollars in payment? Now given you know of some magic ball of "projections" -- can you tell us if we should sell stock, and buy bonds? Or visa versa? Or just hold in money market right now because bond valuations are falling faster then interest can make up? Or can it be -- that these "projections" are merely the wishes of mortal men, and we can't actually know with the same confidence the soft handed masters like to speak in? And finally - how is 2% interest keeping up with inflation? You really believe we only have 2% inflation? Where do you live that you can actually believe this?
    Last edited by motocat; 11-06-2018 at 05:42 PM.
    “Of all the contrivances for cheating the laboring class of mankind, none has been more effective than that which deludes them with paper money.”Daniel Webster (1782-1852)

  2. #12

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    Always remember in order to spend your money at some point you need to pay the IRA some money.
    So if inflation is 2.5% ( who cares what the target rate is) and you are lucky enough to get 2.5% in a savings vehicle
    then you are not keeping up with inflation as you are only going to realize 60 to 90 % of that money ( I do not know what US taxes are but assuming in that area depending on your income)

  3. #13

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    Quote Originally Posted by brutus2 View Post
    Always remember in order to spend your money at some point you need to pay the IRA some money.
    So if inflation is 2.5% ( who cares what the target rate is) and you are lucky enough to get 2.5% in a savings vehicle
    then you are not keeping up with inflation as you are only going to realize 60 to 90 % of that money ( I do not know what US taxes are but assuming in that area depending on your income)
    That is a fair point to add, though in fairness it applies to PMs too. FWIW this whole topic wasn't meant to be a separate thread. I responded to someone elses' post to point out that with yields rising across the board while inflation remains in check that the attractiveness of PMs as an inflation hedge is somewhat diminished. Simply put PMs haven't exactly been good hedges lately and now there are numerous rival products that offer yields that theoretically should outpace the target run-rate of inflation. You are right that inflation could overshoot or undershoot that target (the Fed has been signaling it is willing to let it overshoot for a bit), but in general we're in a much better shape today now that benchmark rates are off their post-recession lows. To that extent cash accounts are increasingly attractive.

    Unfortunately that simple comment was derailed by a lot of nonsense that followed it and now we have this orphaned thread.
    The answers are in the data

  4. #14
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    Quote Originally Posted by Ryanferr View Post
    That is a fair point to add, though in fairness it applies to PMs too. FWIW this whole topic wasn't meant to be a separate thread. I responded to someone elses' post to point out that with yields rising across the board while inflation remains in check that the attractiveness of PMs as an inflation hedge is somewhat diminished. Simply put PMs haven't exactly been good hedges lately and now there are numerous rival products that offer yields that theoretically should outpace the target run-rate of inflation. You are right that inflation could overshoot or undershoot that target (the Fed has been signaling it is willing to let it overshoot for a bit), but in general we're in a much better shape today now that benchmark rates are off their post-recession lows. To that extent cash accounts are increasingly attractive.

    Unfortunately that simple comment was derailed by a lot of nonsense that followed it and now we have this orphaned thread.
    Interesting. But "target rates" can be misjudged - and inflation could exceed the target.

    If one purchased gold, say 10 years ago (as an inflationary hedge) at 970. per ounce, and if the price of gold today is say, 1,229.00, (I'm not that good at math) what would the last 10year annual interest percentage be?
    Who are the righteous? ....Markpti

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    by steady training of the individual - in conscience and character...." .......T. Roosevelt

  5. #15

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    Quote Originally Posted by Markpti View Post
    Interesting. But "target rates" can be misjudged - and inflation could exceed the target.

    If one purchased gold, say 10 years ago (as an inflationary hedge) at 970. per ounce, and if the price of gold today is say, 1,229.00, (I'm not that good at math) what would the last 10year annual interest percentage be?
    Sure -- and I specifically mentioned the target is just a target, not a hard cap or universal constant. I'm just saying if we look at the situation at a 30,000 foot level and say over the long run inflation will average ~2% as that is what the Fed targets, throwing cash into an account paying above 2.0% should generally mitigate your inflation concerns. You are right that inflation will run above 2.0% at times and at other times it will run below it, but policy makers target an average of ~2%. If inflation picks up well beyond that target range they will raise rates which will put upward pressure on benchmark rates which will in turn lift the interest rates on these same products. The opposite is true if inflation is severely muted and they cut rates. These are floating rate instruments, not fixed rate instruments like a bond.

    I don't really know what to tell you on gold over time...you can pick whichever period you want and find a range that will confirm the bias. My point wasn't to suggest that one is superior to the other, just that now that rates are higher folks have a lot of options on where to put their cash to partially or fully hedge inflation. Back in 2010 when everyone was paying 0.01% across the board this wasn't the case.
    The answers are in the data

  6. #16
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    Quote Originally Posted by Ryanferr View Post
    Sure -- and I specifically mentioned the target is just a target, not a hard cap or universal constant. I'm just saying if we look at the situation at a 30,000 foot level and say over the long run inflation will average ~2% as that is what the Fed targets, throwing cash into an account paying above 2.0% should generally mitigate your inflation concerns. You are right that inflation will run above 2.0% at times and at other times it will run below it, but policy makers target an average of ~2%. If inflation picks up well beyond that target range they will raise rates which will put upward pressure on benchmark rates which will in turn lift the interest rates on these same products. The opposite is true if inflation is severely muted and they cut rates. These are floating rate instruments, not fixed rate instruments like a bond.

    I don't really know what to tell you on gold over time...you can pick whichever period you want and find a range that will confirm the bias. My point wasn't to suggest that one is superior to the other, just that now that rates are higher folks have a lot of options on where to put their cash to partially or fully hedge inflation. Back in 2010 when everyone was paying 0.01% across the board this wasn't the case.
    I picked this period as it fits the current timeline and investment/growth parameters. Let's see. 1229 - 970 = what, 259 / 10 = 25.90 per year, divided by 970. equals 2.6 percent. Is that a valid computation?

    All the while, the gold holder was thinking he had the insurance policy for gold to hedge a fall in the dollar or higher inflation.

    And, if he got a return of 2.6 percent (if I figured that in a valid way) then he was better off than holding cash in a bank. Not as good as equities over this timeframe for sure, which is why his diversification should have been prudent.

    Am I wrong in my elementary view of all this?
    Who are the righteous? ....Markpti

    What value did Burisma think to gain by hiring Hunter Biden as a Board member vs ALL other choices?

    Those who cannot articulate the other argument do not fully understand their own argument.

    "Much can be done by wise legislation and by resolute enforcement of the law. But still much more must be done
    by steady training of the individual - in conscience and character...." .......T. Roosevelt

  7. #17

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    Quote Originally Posted by Markpti View Post
    I picked this period as it fits the current timeline and investment/growth parameters. Let's see. 1229 - 970 = what, 259 / 10 = 25.90 per year, divided by 970. equals 2.6 percent. Is that a valid computation?

    All the while, the gold holder was thinking he had the insurance policy for gold to hedge a fall in the dollar or higher inflation.

    And, if he got a return of 2.6 percent (if I figured that in a valid way) then he was better off than holding cash in a bank. Not as good as equities over this timeframe for sure, which is why his diversification should have been prudent.

    Am I wrong in my elementary view of all this?
    Seems valid to me as there is no compounding effect associated with a gold investment, so the calculation is much more simple. I got 2.67% per year return doing my lazy back of the envelope calculations too. However, I don't think your conclusion is correct. For much of the prior 10 years interest rates were very low and thus savings accounts paid out very little. I don't know what the average rate on deposits for high yield accounts was over that comparable 10 year time line, but it certainly was lower than 2.6%. For example, back in 2015 GE Capital Savings (the precursor to Marcus) only paid 1.05% and Ally Bank was paying 0.99%. So while rates today are pushing >2.0%, it's a new phenomenon hence my point that now there is increased competition for gold as a hedging tool given that a run of the mill savings account or money market account can provide a return in excess of expected inflation (on average).

    To be clear I never suggested holding cash over the last 10 years was a good idea lol. That was part of the issue for investors over the last decade...holding cash was a major drag on returns! Holding cash in general is usually pretty bad for returns, regardless of the timeline, unless you're in deflation.
    Last edited by Ryanferr; 11-06-2018 at 10:06 PM.
    The answers are in the data

  8. #18
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    Quote Originally Posted by Ryanferr View Post
    Seems valid to me as there is no compounding effect associated with a gold investment, so the calculation is much more simple. I got 2.67% per year return doing my lazy back of the envelope calculations too. However, I don't think your conclusion is correct. For much of the prior 10 years interest rates were very low and thus savings accounts paid out very little. I don't know what the average rate on deposits for high yield accounts was over that comparable 10 year time line, but it certainly was lower than 2.6%. For example, back in 2015 GE Capital Savings (the precursor to Marcus) only paid 1.05% and Ally Bank was paying 0.99%. So while rates today are pushing >2.0%, it's a new phenomenon hence my point that now there is increased competition for gold as a hedging tool given that a run of the mill savings account or money market account can provide a return in excess of expected inflation (on average).

    To be clear I never suggested holding cash over the last 10 years was a good idea lol. That was part of the issue for investors over the last decade...holding cash was a major drag on returns!
    I agree. Holding gold was also better than holding cash, minus any taxes paid if one converted to dollars. I wish I sold at 1900. I didn't so, I held. I lost in the sense that had I put that portion of my portfolio also into equities I'd be better off - provided I convert my stocks to fiat or gold before a disaster.

    Gold seems to rise as the trading dollar weakens so there seems to be (under normal conditions) some protection there.
    Who are the righteous? ....Markpti

    What value did Burisma think to gain by hiring Hunter Biden as a Board member vs ALL other choices?

    Those who cannot articulate the other argument do not fully understand their own argument.

    "Much can be done by wise legislation and by resolute enforcement of the law. But still much more must be done
    by steady training of the individual - in conscience and character...." .......T. Roosevelt

  9. #19
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    I have my ready cash in a credit union money market that yields 0.5%. I have my 6 month fund at CapitalOne360 which yields 1.85%. Money can be extracted from that CapitalOne account by going online and transferring from the MM to the CapitalOne savings account. That savings account can be accessed at any 7-Eleven Allpoint ATM. If I want to wait 3 business days, I can do an external transfer to my credit union.

    So it works. The only thing I'm missing is the account that yields 2% or more. But I'm close. I have more at Vanguard, but its 3 business days in or out through them.

  10. #20

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    Quote Originally Posted by suemarkp View Post
    I have my ready cash in a credit union money market that yields 0.5%. I have my 6 month fund at CapitalOne360 which yields 1.85%. Money can be extracted from that CapitalOne account by going online and transferring from the MM to the CapitalOne savings account. That savings account can be accessed at any 7-Eleven Allpoint ATM. If I want to wait 3 business days, I can do an external transfer to my credit union.

    So it works. The only thing I'm missing is the account that yields 2% or more. But I'm close. I have more at Vanguard, but its 3 business days in or out through them.
    In my experience CapitalOne is usually one of the laggards in terms of interest rates compared to other online platforms (Citizens, Marcus, Ally, Synchrony, etc). That said, CapitalOne does have a nice platform, so like everything in life it's about trade offs.
    The answers are in the data

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