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The sad thing is that our government is encouraging idiocy.
Posted on: September 8, 2016 at 10:57:07 CT
JeffB MU
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Near zero interest rates? even negative interest rates?
That's craziness. It penalizes savers... interest rates are so low that relatively safe investments often pay less interest than to keep up with the inflation rate... people are losing a bit of purchasing power rather than gaining it over time on the money they've set aside. They'll often get more bang for their buck by spending it now rather than saving it for the future... and to make matters worse, the government will tax you for the "profit" even if inflation is greater than the interest earned.
On the other side of the coin the government is making it easy for salesmen to dangle near zero or truly zero interest rates in front of consumers to try and induce them to buy things that they really don't need. It makes it easy for people to assume that they'll be making more down the road anyway and it won't cost them anything in interest, or if it does cost a tiny bit they can deduct if off their taxes anyway, so what the heck, take the loan and buy more than you need.
and it boosts the economy for a bit... but it causes a bubble in the economy that can't be sustained.
and when the inevitable happens and they can't continue to push purchases forward enough and those loans are maxed out and people start cutting back the economy starts to contract... and all those estimates of better jobs and raises are dashed, and people cut back even more and the bubble pops in a catastrophic bang for many people.
Yes, people make poor choices, but the Federal Reserve is causing it in a misguided attempt to goose the economy.
That's craziness. It penalizes savers... interest rates are so low that relatively safe investments often pay less interest than to keep up with the inflation rate... people are losing a bit of purchasing power rather than gaining it over time on the money they've set aside. They'll often get more bang for their buck by spending it now rather than saving it for the future... and to make matters worse, the government will tax you for the "profit" even if inflation is greater than the interest earned.
On the other side of the coin the government is making it easy for salesmen to dangle near zero or truly zero interest rates in front of consumers to try and induce them to buy things that they really don't need. It makes it easy for people to assume that they'll be making more down the road anyway and it won't cost them anything in interest, or if it does cost a tiny bit they can deduct if off their taxes anyway, so what the heck, take the loan and buy more than you need.
and it boosts the economy for a bit... but it causes a bubble in the economy that can't be sustained.
and when the inevitable happens and they can't continue to push purchases forward enough and those loans are maxed out and people start cutting back the economy starts to contract... and all those estimates of better jobs and raises are dashed, and people cut back even more and the bubble pops in a catastrophic bang for many people.
Yes, people make poor choices, but the Federal Reserve is causing it in a misguided attempt to goose the economy.
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The sad thing is that our government is encouraging idiocy. - JeffB MU - 9/8 10:57:07