Tough topics: money, interest, banking and saving

From illustration for notice of XVIII International Tor Vergata Conference on Money, Banking, and Finance held in Rome in 2009.

Sorry about the long dry spell. We’d  feared we had said all that could be said on investing as a single, thoughtful, rational person who was willing to do the necessary mental work to succeed.

But no. A friend, we’ll call her Hydrangea, (remember her from early posts on this blog?) stimulated our thinking on a new topic.

“Several of my friends have had a lot of discussion on this subject. How does one get the powers that be at least to think about it? If I can navigate the internet right, I’m going to forward it to the AARP magazine,” she wrote.

Our first thought was, “AARP??? They are half the problem!” We will post her essay here and IFO’s comments tomorrow. This woman is nearly 80 years old and has not become familiar with this topic, but she has made a valiant and admirable effort to put her thoughts in print. Writing can help clarify thinking.

Problems with our Government’’s Monetary Program

Our government’’s program of low interest rates to stimulate the economy doesn’’t mention that it is stealing from the nation’’s elderly to implement this theory. The 100th of a percent interest on a Certificate of Deposit pencils out to only one Dollar return for the use of $10,000 for a year. [slight exaggeration, but you get the idea. -Ed.]

Except for the safety factor, a person might just as well hide their money in a mattress. This is less income than the price of the stamp on the bank’ statement. It certainly doesn’’t keep up with inflation! 

People strive to save with the hope that the return on their capital will support them when they can no longer work. [Here is an example of difficulty with financial and economic terminology. Her capital is her farm. The money in the bank is just static savings, no matter what the interest rate is. -Ed.]

The low interest policy cancels this opportunity.  Their capital is sucked away each month leaving them to worry about becoming wards of the state. If the prime rate was raised to a reasonable level, banks could operate without adding extra charges to transactions.

The government would collect some revenue from the interest income. Non-profits could have some revenue coming in which would keep their endowments healthy and give them money for scholarships and other goodwill projects. 

Earning a fair return on their savings would certainly help a lot of seniors sleep easier.

Tune in tomorrow for response. Our readers should feel free to post their own thoughts on this difficult topic.


About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
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