Friday, May 2, 2008

OVERRATED FRIDAYS: Low Interest Rates


Unlike many college students today, when I graduated in the late 1980s, I did so debt free. That was due in part to the fact that I didn't go away to school, but opted, instead, to attend my local state university, live at home for half of my college tenure, and also work various housecleaning/waitressing/graphic design jobs while attending classes. I also got a degree in, ah-hem, Art History, not medicine or law. So there you have it. We liberal arts majors come cheap.

Anyway, not only did I graduate debt free, I also graduated with a nice little nest egg of savings. Because that's what I and my peers had been taught to do. You earned money, you paid your bills, and you put the leftovers in a savings account. If I remember correctly, interest rates were at about 11 percent in those days, a real incentive to savings. So much so that even dumb-ass liberal arts majors knew that to save was to earn. And you could earn even more by investing those savings in things like short term Certificates of Deposit and the stock market. It wasn't just Moi doing this. A friend of mine was already a landlord by the age of 22. Another had saved enough to start a small business. I wasn't as ambitious, but still, I could easily afford things like lunch out every day and yearly vacations, despite the fact that I was making squat as secretary to one of Albuquerque's most gung-ho ambulance chasing lawyers.

You know what that same job pays today? About $1.00 per hour over squat. You know what my former nest egg earns today? If you're lucky, about 2.5 percent.

Which boggles my mind. Wages are stagnant. Inflation is rampant. But the Fed just keeps encouraging us to spend, spend, spend. From now until the end of time. On somebody's else's dime. Those freaks among us who do save? Who refuse to grab the gusto and go ahead and purchase things we can't afford? The gub'ment just sighs and shakes its fingers at us. And lowers the interest rate yet another half percent to "stimulate" the economy.

What should be a totally free market is, instead, nothing more than a precariously built gub'ment directed house of cards, whose rickety foundation, a joint venture between the Federal Reserve and the credit card companies, can only support so much. It's not a matter of if it will all come tumbling down. It's just a matter of when.

12 comments:

Gypsy said...

Interest rates are pathetic here too. Very low on savings though I couldn't tell you exactly what since there is never anything left over to save. On the other side of the coin interest rates on housing loans just keep rising, petrol prices have gone up by 40% and most average people manage to stay just one tiny step away from becoming another statistic.


Good for you for getting through college with a degree and without a massive millstone round your neck. Education is very much becoming a fools dream which is the saddest thing of all.

The Troll said...

Wow. Brilliantly said and needed to be said. The market and not politics should set rates. And peeps need to WTFU!

Happy Over-Under Friday!

Anonymous Boxer said...

I'm printing this out - and keeping it.

For a woman with an Art History degree, you sure are smart with the numbers.

:-)

having my cake said...

No different over here either. Poor kids come out with huge debts. And they're even making it harder for parents to buy houses for their kids at Uni to help with funding. It seems to be the same everywhere. The rich get richer and the poor... well those that can work out the forms might be entitled to some help from the State.

Happy Over-Under Friday!

But the guys in the middle? Well they just get squeezed from both ends.

Meghan said...

Shit... you really SHOULD run for office.

iamnot said...

I'm with you in spirit...but I can't buy in to a totally free market.
You enjoyed high returns on your money way back then because we were just coming down from Jimmy Carter hell and 20%+ interest rates.
The downside of your high returns were mortgage interest rates that made it all but impossible for the middle class to buy homes...their single biggest financial investment.

moi said...

All: It's what happens when gub'ment meddles at all.

Iamnot: Which brings me to your point. Certainly, what you say is true. And the Feds shouldn't have been involved then, either. The fact that their involvement was fortuitous for savings is just a lesser of an evil outcome. But these low interest rates cause more havoc. Banks and other lending institutions should be free to charge whatever rates they want. No one's buying houses because your rates are too high? You lower them yourselves as an incentive. Which businesses are free to do if no outside "regulatory" force is out there all up in their business. It is not the government's job to guarantee you the right to buy a home. You only have a right to purchase what you can afford, which either means paying cash, or crafting a private contract with someone who has the money and wants to loan it to you. How on earth is government involvement necessary in a private exchange of goods and services?

To the contrary, I firmly believe that government involvement in the market for any reason, in any direction, and in any form is like saying, "Okay, we're only going to subject you all to a little bit of fascism. Over here. For your own good, you know." Or, "I'm only going to hit you on the right side of your head, but I'll leave the left side alone. THAT side at least won't hurt."

As soon as the government starts yammering on and on about doing something that's for your own good, duck. 99.999 percent of the time you know who it's good for? Them and their minions, all of whom get rich not from an honest day's work but from dancing on the backs of the bruised.

upset waitress said...

Oh hell I was earning 7% on my savings not even a couple of years ago. Even last year 6.5% on Paypal money market. Now it's like 2%. Everything is more expensive and my wages are less. They have cut funding for planned parenthood and are axing 70 teaching positions in my small county alone. The firefighters aren't getting donations/funding and my old man has tattered bunker gear. However, my mortgage is still 3000$ a month. WTF? And GW wants to give me 300$ to help the economy? My ass. It will go straight to the gas pump and my mortgage. I'll take it though.

I better stop. I'm almost into a full rant on your lovely blog Moi :)

moi said...

Upset: Go ahead. Rant. If we all do, the fuckers might stop their nefarious ways. BTW, nice to see ya again!

iamnot said...

The problem is with the expectations. Greenspan was so good at keeping things on an even tilt that people seem to think markets should be all UP.
I'm no big government guy...I rant on that all the time...on the other hand, I don't want anarchy in the markets either.

Wicked Thistle said...

I thank my parents that debt as a way of life was never condoned in my house. Paying as we went meant forgoing coolio fashions and the latest electronics in favor of food and education. Now I hear even the poorest kids at school talking about their plasma TVs and gameboys. I don't get it.

p.s. Do I sound as old as I think I sound??? "Those darn kids today..." Man, I'm getting crotchety.

The Poet Laura-eate said...

Tis much the same over in UK with our 'grubment'. And although I do my best to keep out of debt, that is not quite the same thing as saving!

To quote the film 'Network' let's all mass together and scream 'We're MAD as hell and we're not going to take this any more!'