# Interest rates I think we are being set up



## budgetprepp-n (Apr 7, 2013)

The fed may up the interest rate 1/2 percent the stock market will dip down and when it does
before it has time to adjust there going to scream "The sky is falling" And save us all buy lowering
it buy 1% now that will throw us into a negative rate (just a little) and pepole will accept that
to be saved. 

They have been getting us a custom to the idea of it by showing it in the news from over sears 
over and over. Now our pepole are ready and willing to accept it. -getting us ready to be controlled

Now they got there foot in the door that rate will start rising very slowly so slow most pepole 
won't complain in few years when it's so high that pepole start to complain it will be to late.
It will already in place. We are frogs and the water is starting to heat up..........................
And the only place to go will be to jump out into the fire.


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## Gimble (Aug 14, 2015)

We are already at negative interest rates when you take the "whole picture" into account.

We are already being controlled.

We have been wage slaves since 1933 (at least).

If the economy was truly recovering, interest rates would be rising and people would love it. The news will spin it as a problem since that is all the news knows how to do. The sheep will run until dancing with the stars comes on... repeat.


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## Seneca (Nov 16, 2012)

It's already been done
Swiss bank ABS becomes first to hit savers with negative interest rates | Daily Mail Online


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## Gimble (Aug 14, 2015)

Seneca said:


> It's already been done
> Swiss bank ABS becomes first to hit savers with negative interest rates | Daily Mail Online


Maybe I miss read the OP... Are we talking about negative interest rates on lending (take my money I'll pay you - Mr. Banker) or negative interest rates on "commodity banking" (I'll hold your money safe for a fee)


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## Smitty901 (Nov 16, 2012)

Rates should have gone up a long time ago. I had been planning on dumping Government bonds. Took care of that last week. Rates will go up just a madder of when and how much.

Disclaim I am responsible for no one finances but my own. I give something to think about not advice.


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## 8301 (Nov 29, 2014)

budgetprepp-n said:


> The fed may up the interest rate 1/2 percent the stock market will dip down and when it does
> before it has time to adjust there going to scream "The sky is falling" And save us all buy lowering
> it buy 1% now that will throw us into a negative rate (just a little) and pepole will accept that
> to be saved.
> ...


Be realistic here.

When the fed rate is free it encourages very low loan rates which helps businesses borrow money to grow which is good along with slowing national debt from growing so fast since T-bills don't cost the US much to repay with their super low interest cost (reduced debt load)... but at the expense of the Government having to print more money to allow these interest free loans which will eventually result in higher inflation in the future.

Personally I've been hoping the Fed would raise rates at least 500 basis points (.5%) for the last 2 years. It would help assure inflation stays lower in the long term and provide a semi-secure investment for people who are risk adverse.

In addition it gives the fed some leeway to lower the rate in the future to combat future economic troubles. At 0% the fed has lost it's best way to stabilize the economy if things go south. That's why the government was forced to come up with QE1. QE2, and now QE3 putting us, the tax payers, as guarenteers for less then good mortgages. As it is now with fed prime at 0% we are not only asking for future inflation but it's like living week to week on your paycheck with nothing to do if you can't pay the bills. Having the Fed prime rate up a bit gives them something to work with, kind of like having a little money in the bank. The Fed would have a effective tool to stimulate the economy if needed which it does not have when Fed prime is 0%.

This is a simplistic explanation but I hope it get's the idea across. We are better off when the Fed doesn't just print money to make loans to banks but instead the Fed charges a bit to the banks for those loans.

In a super healthy economy I'd like to see the Fed rate somewhere around 1%.


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## Montana Rancher (Mar 4, 2013)

budgetprepp-n said:


> The fed may up the interest rate 1/2 percent the stock market will dip down and when it does
> before it has time to adjust there going to scream "The sky is falling" And save us all buy lowering
> it buy 1% now that will throw us into a negative rate (just a little) and pepole will accept that
> to be saved.
> ...


The point of negative interest rates isn't to make tons of profit on the 1/4% they take, it is to encourage you to take the money out of savings and put it into the economy. Be that consumer spending, stocks, bonds, it really doesn't matter as long as the velocity of money is increased.

This also explains why they continue to suppress the price of gold and silver, that is the ONE PLACE they don't want you to flee to.


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## Kauboy (May 12, 2014)

They won't raise rates. Not under this economy. Full implosion would commence.


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## 8301 (Nov 29, 2014)

Kauboy said:


> They won't raise rates. Not under this economy. Full implosion would commence.


I disagree. The market has been devalued for some time now in anticipation of a rate rise. 
It's kind of like a company that has been facing a major law suit for years. After a settlement is announced the company's stock price almost always jumps a bit.

Large players in the market and manufacturers have already taken a fed rate increase into account.


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## Mosinator762x54r (Nov 4, 2015)

They won't raise rates. The too big to fails are bigger than ever.


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## A Watchman (Sep 14, 2015)

How then do you explain what look like playing with the precious metal swings and the timing thereof?


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## Mosinator762x54r (Nov 4, 2015)

Don't you think the same could be said for a correction?


FoolAmI said:


> I disagree. The market has been devalued for some time now in anticipation of a rate rise.
> It's kind of like a company that has been facing a major law suit for years. After a settlement is announced the company's stock price almost always jumps a bit.
> 
> Large players in the market and manufacturers have already taken a fed rate increase into account.


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## Mosinator762x54r (Nov 4, 2015)

Supply side must be stronger than the demand side.


A Watchman said:


> How then do you explain what look like playing with the precious metal swings and the timing thereof?


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## 8301 (Nov 29, 2014)

US manufacturing has been showing roughly a 2% increase year to year since 2010, still softer than the 3% we'd like to see but in a soft global economy we're doing much better than most.

US housing starts have doubled since 2010 and housing supply is at 4.3 months which is low meaning there are more buyers than sellers/builders out there now. ^ Six months supply is considered a balanced supply/demand amount.

Unemployment claims have steadily dropped since 2010 to the current 5.3% we have today. 4-6% is generally considered a healthy churn as most people change jobs every few years. Below 4% is when businesses are forced to hire unqualified employees in an effort to fill the job slots.

Yes, the spread between the wealthy and the lower income average continues to increase, something that has been happening for over the last 100 years so nothing new there. Average Americans aren't seeing their standard of living rise but this is in large part because we keep increasing programs like welfare and allowing people to stay at home eating Cheetos while collecting unemployment for a full year in most states.

But when unemployment is below 6% it doesn't make sense to loan free money to the banks in an effort to spur the economy. In the long run it will bite us in the tail.


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## Kauboy (May 12, 2014)

FoolAmI said:


> I disagree. The market has been devalued for some time now in anticipation of a rate rise.
> It's kind of like a company that has been facing a major law suit for years. After a settlement is announced the company's stock price almost always jumps a bit.
> 
> Large players in the market and manufacturers have already taken a fed rate increase into account.


I stand by it.
We won't see rates raised for at least 6 months, if not longer.
They wouldn't dare do anything this close to the holiday shopping season to spook any market.
They also can't risk making a democrat look bad in an election year. Despite the fact that Obama isn't running, the democrats would suffer hugely if the economy slumped as a result of rates being raised. Republicans often cite Fed policy as foolish and dangerous. Even if rates *SHOULD* rise(which they should), doing so would cause money to be pulled out of the stock market, and back into savings accounts and other interest bearing vehicles. This would look very bad to Joe Schmo.
We *KNOW* it's necessary, but you have to keep a smile on the clown or everyone runs in fear.
Despite the Fed needing to raise rates, they won't do it in order to maintain as positive an image as they can for the sitting president's party in order to not give ammunition to their opponents. The Fed won't be blamed for their actions, the president will, and they know it.

It's become more political than economical. The economy would necessarily suffer, but the politicians would suffer more.


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## A Watchman (Sep 14, 2015)

Not until after the Holiday season. I agree it is a put your game face on tactic for a while.


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## 8301 (Nov 29, 2014)

A Watchman said:


> How then do you explain what look like playing with the precious metal swings and the timing thereof?


Bullion prices like most things is controlled by supply and demand. Currently there is a lot less demand for silver and gold, Platinum and Palladium prices have held fairly steady the last 10 years.

The largest driving force behind Gold prices is India How This Indian Wedding Tradition Drives Global Gold Demand
and they have been slowly getting away from giving gold to the ladies.

While I haven't researched this I suspect silver is primarily driven by people looking to hedge their investments and looking for a bit of security.
While most people want the economy to do better on the average people, at least in the US, have more confidence in the economy than they did in 2010 and have reduced their silver purchases and in some cases are even selling it off to reap the tax deduction or buy a new car.

Both metals have industrial applications but mostly its silver used by industry.


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## 8301 (Nov 29, 2014)

Kauboy said:


> I stand by it.
> We won't see rates raised for at least 6 months, if not longer.
> They wouldn't dare do anything this close to the holiday shopping season to spook any market.
> They also can't risk making a democrat look bad in an election year. Despite the fact that Obama isn't running, the democrats would suffer hugely if the economy slumped as a result of rates being raised. Republicans often cite Fed policy as foolish and dangerous. Even if rates *SHOULD* rise(which they should), doing so would cause money to be pulled out of the stock market, and back into savings accounts and other interest bearing vehicles. This would look very bad to Joe Schmo.
> ...


You have a point but I hope you're wrong.


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## Mosinator762x54r (Nov 4, 2015)

U3 Unemployment is healthy, but U6 is a push to recession start levels(meaning no progress has been made). Not only that but quality of jobs is less adequate as we all know jobs aren't paying what they were before and value of benefits have diminished (mostly thanks to unaffordable Healthcare Act). Add in that rates have effectively been at zirp the entire time pre-recession going forward there is no indication that rate hike will do anything but damage.

I guess it's just a matter of perspective. Some people are bullish and some are bearish. And only time will tell. I personally believe Yellin doesn't have the cojenes to raise rates. I don't think we've had a Fed Chairmen with the gumption to do it since Greenspan and he's the one that effectively put us on the skids to zirp to infinity.

Warm up the printing presses...I think what we've got coming up is QE 4 Operation Twist.2 or whatever the Fed wants to label it.











FoolAmI said:


> US manufacturing has been showing roughly a 2% increase year to year since 2010, still softer than the 3% we'd like to see but in a soft global economy we're doing much better than most.
> 
> US housing starts have doubled since 2010 and housing supply is at 4.3 months which is low meaning there are more buyers than sellers/builders out there now. ^ Six months supply is considered a balanced supply/demand amount.
> 
> ...


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## 8301 (Nov 29, 2014)

Actually most of the mortgage crisis came from looser lending regulations enacted during the Clinton administration which was pre Greenspan.

Loose cash makes for a faster growing economy but is monetary policy gets too loose after a few years the economy overheats (speculative stock pricing and overleveraged mortgages) and goes bust. The trick is to find the middle ground and keep adjusting it. Hard to do when people keep wanting to grow the economy faster and faster. About 2.9% - 3.2% growth is a nice stable rate for a mature economy like the US. The last 5 years the US has averaged about 2.2% which is low but so much of the world isn't able to buy as much from us anymore because their own economies have slowed.

It's a fine line to balance but I'd like to see the Prime rate raised before we get so swamped with cash that inflation grows out of control. If the fed prints money to loan to banks faster than the US economy grows then inflation will eventually develop.


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## Mosinator762x54r (Nov 4, 2015)

If you are looking for a lending bubble this time around it's easy to pick from one a few...emerging markets, student loans (non-dischargable may be worse than the mortgage crisis), auto loans (although people can sleep in a car, but can't drive a house)....Yes Clinton had something to do with it with the repeal of Glass Steagal and the modernization of asset backed securities. The truth is that cheap money has been flooding the markets for years.

The truth is interest has been spiraling downward on savings and lending for decades. This has been punishing savers and rewarding bankers all in one swoop. When I started in banking a 3 year CD had a yield of 9% and a new car loan for 48 months was 7%. Now a 5 year CD is lucky to pay 1% and a new car loan is 1.39%. Raising the prime rate effectively does nothing...all it does it raise the cost of funds to the banks who in turn pass the cost on to the borrowers. If the borrowers can't afford it they default. If we can't afford 25 bps we can't afford 100 bps because quite honestly its not that much difference. The net result on the economy and revenue back to the banks is nearly nothing. All it does it squeeze the margins, reduce the profitability (delinquency increases with higher rates causing a reduction in ROI, ROE, and ROA.) That's where the too big to fails start to get hurt. The margins are too thin...the profitability goes out the window...the layoffs commence...the unemployment shoots back up...and the vicious cycle continues.

Trust me...I watch it all happen.



FoolAmI said:


> Actually most of the mortgage crisis came from looser lending regulations enacted during the Clinton administration which was pre Greenspan.
> 
> Loose cash makes for a faster growing economy but is monetary policy gets too loose after a few years the economy overheats (speculative stock pricing and overleveraged mortgages) and goes bust. The trick is to find the middle ground and keep adjusting it. Hard to do when people keep wanting to grow the economy faster and faster. About 2.9% - 3.2% growth is a nice stable rate for a mature economy like the US. The last 5 years the US has averaged about 2.2% which is low but so much of the world isn't able to buy as much from us anymore because their own economies have slowed.
> 
> It's a fine line to balance but I'd like to see the Prime rate raised before we get so swamped with cash that inflation grows out of control. If the fed prints money to loan to banks faster than the US economy grows then inflation will eventually develop.


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## Mosinator762x54r (Nov 4, 2015)

Yes I am a banker. The line to punch me in the face starts down the block on the left. Take a number.



Mosinator762x54r said:


> If you are looking for a lending bubble this time around it's easy to pick from one a few...emerging markets, student loans (non-dischargable may be worse than the mortgage crisis), auto loans (although people can sleep in a car, but can't drive a house)....Yes Clinton had something to do with it with the repeal of Glass Steagal and the modernization of asset backed securities. The truth is that cheap money has been flooding the markets for years.
> 
> The truth is interest has been spiraling downward on savings and lending for decades. This has been punishing savers and rewarding bankers all in one swoop. When I started in banking a 3 year CD had a yield of 9% and a new car loan for 48 months was 7%. Now a 5 year CD is lucky to pay 1% and a new car loan is 1.39%. Raising the prime rate effectively does nothing...all it does it raise the cost of funds to the banks who in turn pass the cost on to the borrowers. If the borrowers can't afford it they default. If we can't afford 25 bps we can't afford 100 bps because quite honestly its not that much difference. The net result on the economy and revenue back to the banks is nearly nothing. All it does it squeeze the margins, reduce the profitability (delinquency increases with higher rates causing a reduction in ROI, ROE, and ROA.) That's where the too big to fails start to get hurt. The margins are too thin...the profitability goes out the window...the layoffs commence...the unemployment shoots back up...and the vicious cycle continues.
> 
> Trust me...I watch it all happen.


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## 8301 (Nov 29, 2014)

Even in bad times there will always be some bubbles to point at but as far as US markets are concerned.... In 2008 the P&E for the S&P500 was 68. It is currently 22 which is a tad high for such large developed companies in a soft world economy but not outrageous. Nasdaq 100 is currently about 23-1 P&E.

And yes, compared to the potential benefits I suspect we may be spending too much on education in fields that may have troubles hiring all of the new graduates. We need more mechanics and fewer English Lit Masters degrees.

US personal savings rates while still low (around 4.8%) are still more than double what they were in 2007-2008 and personal revolving debt is also much lower.

Being a banker I would imagine that raising prime would hurt your business somewhat but at the same time wouldn't it also help keep people from becoming overly speculative about their loans and stock purchases. A broker friend suggested that instead of paying cash for my home I would be better off leaving the assets in my portfolio and taking a low interest loan out because rates were so insanely low compared to market performance. Obviously I thought that was way to speculative. 

You mention the abysmally low rates CDs and other fixed rate instruments are paying. As I mentioned in an earlier post if the Fed raises Prime then CDs and savings accounts will pay at a slightly higher rate. This would hopefully encourage personal saving at your bank but why bother holding funds at a bank when the savings account pays less than 1% and a CD not much better. With those rates people are better off purchasing stock in a fairly secure bond fund than leaving the cash in their local bank and the bond fund is more liquid than a CD as are most mutual funds. Super low interest rates are one of the things driving money into the stock market which only increases the stock value artificially resulting in inflated P&E ratios.


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## 8301 (Nov 29, 2014)

To each their own opinion. I've been wrong in the past occasionally but I've got to go where the numbers lead me and I hope they raise the Prime Rate sooner rather than later.


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## 8301 (Nov 29, 2014)

Mosinator762x54r said:


> If we can't afford 25 bps we can't afford 100 bps because quite honestly its not that much difference.
> The margins are too thin.


U.S. Banking Industry Profits Racing to Near-Record Levels - WSJ

I have a relative who started a bank 10 years ago with one small branch. He now has 6 locations and profits are strong.

I don't begrudge banks making a decient profit, it helps my portfolio since I have some banking stock. Stock I bought by hard work and lots of eating cheap meals.


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## Mosinator762x54r (Nov 4, 2015)

Is it interest income or is it fee income?



FoolAmI said:


> U.S. Banking Industry Profits Racing to Near-Record Levels - WSJ
> 
> I have a relative who started a bank 10 years ago with one small branch. He now has 6 locations and profits are strong.
> 
> I don't begrudge banks making a decient profit, it helps my portfolio since I have some banking stock. Stock I bought by hard work and lots of eating cheap meals.


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## 8301 (Nov 29, 2014)

Mosinator762x54r said:


> Is it interest income or is it fee income?


I would expect it's more fees than interest. Still, banks make some income from interest and the greater their deposits the more money they have to make interest income from.

Bottom line is loaning money has become a much more completive area, especially since a person can use the internet to compare loan rates and get pre approved so much easier.


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## 8301 (Nov 29, 2014)

More information that the Fed may raise the prime rate.
US adds 211K jobs in November, jobless rate steady at 5 pct. - AOL

I suspect yesterday's stock market dip shows that the market also expects the Fed to raise the rate. We'll see a little jittery market for the next few days but if the Fed raises the rate .25% and not .5% I'd half way expect the market to slowly rise for a bit as the uncertainty has passed. Even with a .5% rate rise the market will probably rise but it may take a month or three before it does.

As I've said before we need to raise prime rate a bit to help increase long term stability.


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## Kauboy (May 12, 2014)

I still laugh at that fallacious unemployment rate.
94+ MILLION PEOPLE ARE NOT WORKING!!!!
Are we using Terryology to calculate these figures now?

While I do agree we *need* to raise the prime rate, I am not confident that our economy can sustain an increase at present.


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## Redpavalupu (Jan 28, 2016)

Since the fed rate increase in december, I am skeptical of whether to invest in stocks or not. I am thinking starting to invest from penny stocks, also have researched online on penny stocks to get more idea on the same. What should I do?. Plz advice.


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