This year has been tough for savers. Record-low interest rates have made it difficult to grow money stashed in savings accounts or CDs, and many retirees have had to dip into their principal savings because their interest earned hasn’t been enough to pay their bills.
The plight of savers have led many to start advocating that the government needs to raise interest rates sooner rather than later. Both Barron's and The Washington Post recently published widely-read articles that advocate raising rates, arguing that current policies are basically rewarding the highly indebted at the expense of people who have been responsible with their money.
The government doesn’t necessarily want to punish savers and reward borrowers, but the fed is in a tough position. Although it’s true that savers are suffering now, raising rates prematurely could indirectly punish the whole economy – including savers – even more. In the short term, rate hikes typically reduce housing prices, lower stock market values, and prevent companies from creating new jobs – situations that could ultimately trouble savers just as much as the current low interest rates.
The situation is somewhat akin to the old story about two neighbors - one who is reckless and the other who is responsible. One day the reckless neighbor leaves his burning stove unattended and accidentally starts a fire in his house. The fire department comes to put out the fire which will cost the city (and indirectly the responsible neighbor) a significant amount of money.
The responsible neighbor is furious that she will ultimately have to pay for her neighbor's recklessness – "let his house burn down!" she thinks as the firefighters get to work. However, as the fire begins to worsen, the responsible neighbor realizes that it may start to spread to her own house! At that point, as much as it bothers her, she wants the firefighters to do everything they can to stop the blaze.
There is healthy debate now as to whether the "fire" started by risky financial behavior is still threatening the overall economy. The government should keep rates at record lows only for so long as everyone is at risk. Of course, with banks getting less healthy and with unemployment near double digits, economist like Paul Krugman still argue it’s going to be a while before the fed can raise rates.
Regardless of what’s done in the short term, most everyone agrees that there has to be ways in the future to prevent individual recklessness from hurting people who were responsible. One example of such a measure – proposed by both FDIC Chairperson Sheila Bair and former fed chairperson Alan Greenspan - is to break up large banks so that they’re not "too big to fail" – or in other words, making them smaller so their risk taking can’t singlehandedly take down the entire economy.
In the meantime, we’ll still have to worry about our neighbors leaving their burning stoves unattended.
If and when the FED decides to raise interest rates it'll be in tiny increments. It is not in the interest of banks to relinguish their access to what is practically free money and not in the interest of our politicians who want to keep "stimulating" the economy.I have long stopped worrying about it and have bought foreign currencies and a few ounces of gold instead.In my opinion the dollar is doomed, my trust in the likes of Geithner, Bernanke & Co.to come to grips with the problem non-existant.What exactly Paul Volcker's role is in the White House is another mystery. So far he's only served as ornamentation, they'll trudge him out when finally the fat hits the shin.
Posted by gberys -- Oct 28, 2009 5:49 PM
You work hard for your money, so why not make it work harder for you? In the past, you had two primary low-risk ways to earn interests on your savings: the traditional savings accounts with low interest rates and fixed-term deposits where you can earn higher interest rates but you will not be able to touch your money for several months or years.
However, those scenarios are about to change. With Higher interest online saving bank accounts; you will be able to earn more money without giving up the freedom on when you are going to use your own money. High interest online savings bank account is the suitable solution if you want to save your hard earned money and expect it to yield high interest while avoiding paying high account fees.
What Are High Interest Online Savings Bank Account?
High interest online savings bank account operates similarly to a normal savings account through your local bank branch. The biggest difference is that the account is managed entirely online. This account is run by banks or other types of companies and institutions and generally pays higher interest rates than traditional savings accounts.
Benefits of High Interest Online Saving Bank Account
You might be wondering on the issue of risk in trusting your money in an online account and ask yourself "Why should I do it?" For a start, online savings bank account offers several benefits, including:
· Higher interest rates than traditional savings accounts
· More freedom in which you can withdraw your money anytime compared to fixed-term deposits
· Fewer or even no account fees like many other savings bank accounts
· Ability to tie the accounts to other bank accounts for easy fund transfers
· Availability at all savings levels (some accounts have no minimum deposits)
It is time to decide if you are ready to take back control over your savings and your ability to earn more interest through an online savings bank account.
Posted by jothicse24 -- Nov 5, 2009 2:56 AM
Rates and accounts may differ by geography so enter your zip code for better information.