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Hopeless Savers: 0.26% on Money Markets

Written by Gary North on April 5, 2013

The plight of savers in America is hopeless. We know that price inflation is over 2% per year. What do investors get in a money market fund? A pathetic 0.26%.

Then they pay income taxes on this 0.26%.

What if they do not want to tie up their money for a year? Then they get 0.12%. Before taxes.

What about interest-bearing checking accounts in an FDIC-insured bank? These pay 0.05%. Let’s be honest. Let’s round it off (after taxes) to zero.

The saver is falling behind. The rate of price inflation is eating into the saver’s net worth by at least 2.9% per year.

How much money is deposited in money market accounts. About $2.6 trillion. This is up by $2.6 billion this week.

This is a recovery?

Why are rates low? Because businesses are not borrowing, and bankers are not lending. What kind of economic recovery is this? It’s not a recovery on Main Street.

There is a disconnect between the stock market and the economy. Stock market investors are saying this: “It does not matter what happens to savers, small businesses, and all but 10 large banks out of 7,000 banks. The big banks hold 77% of all American bank assets, up from 55% in 2002. That is what counts.”

How does the little guy get ahead? Not by putting his money in a money market fund and holding it.

How long can this go on? At 2.9% price inflation per year, in 25 years, the dollar will lose half of its purchasing power. (The “rule of 72.” Divide 2.9 into 72.) At some point inflation will rise, interest rates will rise, and savers will still be behind the eight ball.

This is crony capitalism. This is what Reagan’s ex-budget director David Stockman calls the Great Deformation. He saw it coming. He resigned.

The financial system is rigged by politics to squeeze out the common man. The common man senses that something is wrong, but he does not know what.

I will tell you what: Keynesianism, which is funded by the Federal Reserve System.

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5 thoughts on “Hopeless Savers: 0.26% on Money Markets

  1. This is and always has been the end result of allowing a private central bank to run a nation's economy. You eventually end up with more debt than wealth with which to pay off the debt, because all the wealth gets concentrated at the top of the pyramid. That's what TARP and QE-to-infinity do.

    The only countries left on earth not yoked to a private central bank are N. Korea, Iran and Cuba. The first two are objects of nonstop propaganda and threats of war from USrael. And Cuba? Well, they've been under US embargo since Castro took over, proving that the US knows how to hold a grudge and make itself look petty and vindictive to the rest of humanity.

  2. Traditional investments are a fools game, and savings are depreciating as Gary says. It won't be much longer until our fiat money system collapses and hyperinflation begins.

    If you have any money (and sense), then use it to buy things which will always have value for use and/or barter. Long term food storage, firearms, ammunition, alcohol, gold and silver. Real estate is only good if it is arable land you are or can live on. Training course on farming, defense tactics, medical are worthwhile 'investments' as well.

  3. This has been a savage attack on older people in this country. They grew up saving for their retirement, setting aside money in CDs and other bank accounts which a a few years back paid 5% or so interest. That interest money helped stretch the money from Social Security and pensions to make their retirement years comfortable. Thanks to our corrupt government, the interest on a CD might buy you a McDonalds burger now instead of paying the power bill. The interest is being kept low so banks can borrow money cheap and make their money on the loan interest charges. To Hell with Grandma and Gramps, the banks want every cent they can get and no one in DC is stopping them. Why? Grandma and Gramps don't contribute heavily to the political campaigns…

  4. You CAN get better interest rates without FDIC insurance. Continental Bancorp (Panama) http://cbcorp.co.nz/ pays 5.5% on 1-year USD term deposits. Up to 7.8% on 3-year term. Commonwealth Bank (Australia) http://www.commbank.com.au/ pays 4.05% on 1-year term of 50,000 AUD or more. Also over 4% on money market no minimum (GoalSaver account) if you make a small deposit (or a transfer from a Smart Access account) every month. Free Lakota Bank, on sovereign Indian territory in South Dakota, http://www.freelakotabank.com/, pays 3.25% on 1-year term up to 5.25% on 3-year term deposits in .999 silver coins. Interest also paid in silver. All these banks welcome US depositors.

  5. Mockingbird says:

    How safe is this kind of investment?