Friday, March 14, 2008

Feds Please Stop Dropping the Interest Rates - You're Hurting Us

Check out Seb’s Open Letter to Ben Bernanke at Pinching Copper.

At first I bookmarked this article to including in my round-up but then I decided it was too good to wait, especially since it seemed to be talking right to me because of my frustration with dropping interest rates both with my car savings at Emigrant Direct and my savings at my brick and mortar bank.

Over the last few days I’ve been exchanging emails with a reader about passive income (note to self – write a post about passive income soon) and I had calculated that last year I earned $2,919 from my house down payment CD’s and Emergency Fund Money Market.

It got me thinking about the amount of interest I’m going to be “loosing” this year because of the interest rate cuts. By the end of the year all of my laddered CD’s will have expired and I will need to renew at a lower interest rate. Last year my CD rates were around 5%, so far I’ve had to renew two of them for around 3% plus my money market has dropped from 4.5% to a measly 2.7%. Doing a few quick calculations I’ve discovered I’m going to make about $1,000 less this year from this passive income.

Ben – listen to Seb he speaks for all of us who were financially responsible. Please don’t punish us for other’s mistakes.


No Debt Plan said...

The only problem with having the fed do nothing is there is a risk of the economy grinding to a halt.

Would you rather earn 2.7% on your savings account money and have a job, or would you rather earn 5% and have no job because the economy has stopped?

I'm not taking up for the fed... our whole monetary system is jacked up. But it isn't the easiest decision. If all of the major banks defaulted (which if the government let them, they might -- see Bear Sterns today) that would be --awful-- for the economy. That's bad for you and me and everyone else.

"Future Millionaire" said...

@ no debt plan - If lowering interest will "save" our economy then I'm all for it, especially since my industry, construction, get hit first. BUT I'm not sure how much lowering interest rates by another .5 point or so is really going to help. Lending institutes have put much more stringent rules in place and its becoming harder to get a loan period.

I'm talking from personal knowledge that its not just Jan and John Doe who want to buy a $150,000 home. Its also large Development and Real Estate Companies who have substantial assets and have long histories of paying back 150+ Million Dollar Loans that can't secure funding. This what's hurting the large Commercial Construction Industry - no new work is coming our way and its not just the white collar workers who are going to be out of jobs its going to be masses of blue collar guys who do the labor to build these building. If interest rates stay higher or stay flat IMHO its not going to effect who gets the loans but if they stay higher or flat the banks might have more incentive to lend out money because there would be higher returns for their risk. But this discussion is for another post.

I'll leave the decision to Ben and his team.

BK Brian said...

haha ben and his team....niiiice

yes, this credit crunch is incredible and bear stearns, as we all saw i'm sure, was bought out yesterday for less than a 1/5 of what it's midtown (manhattan) HQ is worth - CDOs, mortgage securitization in general must be fixed before we see any growth again - also, i think there may have been too much building, people who own a home aren't that keen to see other homes built usually since that potentially brings their worth down, the whole thing is crazy fun to listen to tho....

Seb said...

I'm glad you enjoyed my letter to my Ben. I don't think he's been listening, but that's OK... he's pretty busy destroying the value of the dollar in an effort to prop up Wall Street. :-)

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