View Full Version : “low interest rates harm savers, it’s absolutely true.”
http://www.bloomberg.com/image/iURc6pOWUlPU.jpg
Yellen Says, Yes, the Fed Makes the Rich Richer
When confronted with concerns about people struggling to live off fixed incomes, Yellen agreed that “low interest rates harm savers, it’s absolutely true.” Harming at least some savers, however, may be part of the plan, at least if Yellen agrees with Charles Evans, the president of the Federal Reserve Bank of Chicago. He has argued that the threat of wealth confiscation by negative interest rates is necessary to restore spending and “risk-taking” back to “normal levels.”
http://www.bloomberg.com/news/2013-11-14/yellen-says-yes-the-fed-makes-the-rich-richer-.html
Low interest rates are necessary for people to start investing their spare cash instead of leaving it in the bank earning low interest rates. With more spending and investing, the economy will then grow and recover faster, more jobs can also be created with more spending and investing.
This is what she means by increasing risk-taking behaviour...spenders help the economy more than savers do...
nobrainer32007
17-11-13, 09:52
What a smart mummy you are! :)
Low interest rates are necessary for people to start investing their spare cash instead of leaving it in the bank earning low interest rates. With more spending and investing, the economy will then grow and recover faster, more jobs can also be created with more spending and investing.
This is what she means by increasing risk-taking behaviour...spenders help the economy more than savers do...
That the main reason property price move so fast so the pass few years...:tongue3:
What a smart mummy you are! :)
Thank you, thank you...:ashamed1:
Question : Fed's purchase Treasury securities and mortgage debt and when Fed's stop the purchase or reduce, the interest rate go up. Do Fed's pay higher interest rate or lower interest rate?????????? how is Fed's going to pay back what she purchase.?????????????????:beats-me-man:
http://useconomy.about.com/od/econom...gage_Rates.htm
Question: What Is the Relationship Between Treasury Notes and Mortgage Rates?
Answer: Treasury notes directly affect the interest rates on fixed-rate mortgages. How? When Treasury yields are higher, so are interest rates. That's because investors who want a fixed return on their money will either shop for Treasury notes, CDs, money market funds, mortgages or corporate bonds. Treasury notes are considered ultra-safe since they are guaranteed by the U.S. government. CDs and money market funds are slightly less safe, since they aren't guaranteed. However, that safety comes with a price - a lower return.
Investors who want a slightly higher return, and are willing to accept more risk, will buy mortgages. Instead of buying the mortgages directly, they usually purchase products backed by mortgages, called (you guessed it) mortgage-backed securities. When Treasury yields rise, mortgages also have to provide higher returns to attract investors. The result to the borrower? Higher interest rates.
Those who are willing to do a little research into specific companies will purchase corporate bonds, which are rated as to their level of risk. Bond yields are also somewhat affected by Treasury yields, as well.
How Do Treasury Notes Work?
Treasury notes and bonds are sold by the U.S. Treasury Department to pay for the U.S. debt. Treasury notes are issued in terms of 2, 3, 5, and 10 years, while Treasury bonds are issued in terms of 30 years. Treasury bills are issued in terms of one year or less. However, many people just refer to all of them as Treasury bonds, Treasury products or even just Treasuries. The most popular Treasury product is the 10-year note.
Treasury notes and bonds are sold at auction by the Treasury Department, which sets a fixed face value and interest rate. If there is a lot of demand for the note or bond, it will go to the highest bidder at a price above the face value. This decreases the yield, which is a common term used to describe the total amount of money you make on a U.S. Treasury note or bond. It lessens the yield because, regardless of how much you bid for the note, the government will only pay back the face value plus the stated interest rate. If, on the other hand, there is not a lot of demand, then the bidders will pay less than the face value, which increases the yield. That is why yields always move in the opposite direction of Treasury note prices.
Treasury note and bond yields change every day, because hardly anyone keeps them for the full term. Instead, they are resold on the open market. Therefore, if you hear that bond prices dropped, then you know there is not a lot of demand for Treasury notes and bonds, and that the yields increased. This makes it more expensive to buy a home, because mortgage interest rates rise. That lessens demand for homes, which puts downward pressure on home prices. This slows economic growth.
Conversely, low yields on U.S. Treasury notes mean lower rates on mortgages. This allows homeowners to afford a larger home, and renters to afford their first home. This increased demand stimulates the real estate market, which stimulates the economy. Lower mortgage rates also allow homeowners to afford a second mortgage, which allows them to purchase more consumer products. This also stimulates the economy.
Treasury Yields Only Affect Fixed-Rate Mortgages
It is important to know that Treasury yields only affect fixed-rated mortgages. The 10-year note affects 15-year conventional loans, while the 30-year bond affects 30-year conventional loans.
Adjustable rate mortgages are affected more by the Fed funds rate. This is set by the Federal Reserve. It is the rate banks charge each other for overnight loans needed to maintain their reserve requirement with the Fed. The Fed funds rate affects LIBOR, which is the rate banks charge each other for one, three and six month loans. It also affects the prime rate, which is the rate banks charge their best customers. Since the Fed funds rate affects LIBOR and other short-term interest rates, it also affects adjustable-rate mortgages, since these typically adjust on a semi-annual or annual basis.
Recent Rate Trends and Outlook
Between May and September 2013, the 10-year Treasury yield rose more than 75%, to 2.98%. The yield started rising after Federal Reserve Chairman Ben Bernanke announced the Fed may start tapering off its purchases of Treasuries and other securities. The Fed has been buying $85 billion a month since September 2011. See more about Quantitative Easing. Rates continue to rise as the economy improves and investors switch to stocks and real estate investments. Citi forecasts that the 10-year Treasury yield will break 3% next year, while Wells Capital Management says it will happen this year. (Source: CNBC, Market Consensus: Get Ready for 3% Treasury Yields, June 19, 2013)
Why Rates Fell to a 200-Year Low
On June 1, 2012, the yield on the 10-year Treasury note dropped briefly during intra-day trading to 1.442%, the lowest in 200 years. By the end of the day, the rate closed just a bit higher, at 1.47%. Nevertheless, this forced mortgage interest rates down to record lows.
Why was the Treasury yield so low? Investors were panicked by a lower-than-expected U.S. employment report, and by ongoing worries about the eurozone debt crisis. They sold stocks, driving the Dow down 275 points. They put their cash into the only safe haven, U.S. Treasury notes. (Gold, the safe haven in 2011, was down thanks to lower economic growth in China and the other emerging market countries.)
Investors still hadn't recovered their confidence from the stock market crash of 2008. In addition, they were uneasy that the Federal government would allow the economy to fall off the fiscal cliff. Add in the uncertainty around a Presidential election year, and you had a situation that might not occur for another 200 years. Article updated September 5, 2013
Recently, Standard Chartered Bank has a promotion, is linked with prudential.
If you buy an insurance policy with Prudential, you are eligible to open a Bonus Savers Acouunt with SCB. SCB interest rate is 1.88% but cap at $25k, any amount >$25k will be at normal interest rate.
As for the insurance, you need to contribute 5 years ($600 every month or more), but will only mature in 10 years time and upon maturity, you will get back your principal amount + interest. This interest is different from SCB interest. In other words, you will get the interest from SCB + Prudential but of course, u also save separately, different fund.
To know more details, it is better to check with SCB, the officer can explain better.
Yellen Says, Yes, the Fed Makes the Rich Richer
the rich take $1M-$10M loan to invest > money makes money
the poor keep their $1K-$10K in the bank for 0.1% interest > the poor has 'limited access' to loans
so the point is??
Recently, Standard Chartered Bank has a promotion, is linked with prudential.
If you buy an insurance policy with Prudential, you are eligible to open a Bonus Savers Acouunt with SCB. SCB interest rate is 1.88% but cap at $25k, any amount >$25k will be at normal interest rate.
As for the insurance, you need to contribute 5 years ($600 every month or more), but will only mature in 10 years time and upon maturity, you will get back your principal amount + interest. This interest is different from SCB interest. In other words, you will get the interest from SCB + Prudential but of course, u also save separately, different fund.
To know more details, it is better to check with SCB, the officer can explain better.
we signed up for this several months ago, then backed out cos dun think it makes much difference (only 1.88% for 25k and ? interest rate for insurance = lower effective rate for ? amount of significant protection). in addition loses flexibility and insurance protection for first few years will necessarily be low due to agent's commissions.
The poor got not enough cash money to pay ABSD + downpayment, so no choice have to keep in the bank for 0.1% interest?... :beats-me-man:
Yellen Says, Yes, the Fed Makes the Rich Richer
the rich take $1M-$10M loan to invest > money makes money
the poor keep their $1K-$10K in the bank for 0.1% interest > the poor has 'limited access' to loans
Don't understand,"The poor got not enough cash money to pay ABSD + downpayment, so no choice have to keep in the bank for 0.1% interest?"
In 2006, with SGD 100,000 can buy 2 Bedroom @ Southbank fast forward to 2013 why is the same SGD 100,000 cannot buy a 2 Bedroom in D7. The poor or the rich having the same SGD 100,000 will still not be able to buy.:beats-me-man:
The poor got not enough cash money to pay ABSD + downpayment, so no choice have to keep in the bank for 0.1% interest?... :beats-me-man:
Poor buy send house thus pay ABSD? LOL.. ur definition of poor is so broken.
Recently, Standard Chartered Bank has a promotion, is linked with prudential.
If you buy an insurance policy with Prudential, you are eligible to open a Bonus Savers Acouunt with SCB. SCB interest rate is 1.88% but cap at $25k, any amount >$25k will be at normal interest rate.
As for the insurance, you need to contribute 5 years ($600 every month or more), but will only mature in 10 years time and upon maturity, you will get back your principal amount + interest. This interest is different from SCB interest. In other words, you will get the interest from SCB + Prudential but of course, u also save separately, different fund.
To know more details, it is better to check with SCB, the officer can explain better.
don't feel its worth it. u get 1.88%plus a draw down on the endowment on the 1st year ard $450.
but u are lock in for 10 yrs. and u are looking at return of projected 5%. but in reality could be 3% or 4% which barely beat inflation rate.
I would rater look doing a term insurance and a RSP on equity. the return with 10-15 yr cycle would be much higher. and higher coverage. plus its flexible without locking
we signed up for this several months ago, then backed out cos dun think it makes much difference (only 1.88% for 25k and ? interest rate for insurance = lower effective rate for ? amount of significant protection). in addition loses flexibility and insurance protection for first few years will necessarily be low due to agent's commissions.
I don't think there is any agent's commission. It is a saver's plan. For insurance, you save about $600 per month, so 1 yr will be $7,200 x 5 yrs = $36,000 but mature only in 10 yrs time. I can't remember the interest rate.
For Maybank, I think you are allowed to withdraw because it is your saving account.
Now buy 2nd property LTV only 60%, so need to come out with 40% cash. Even if 2 Bedroom@Southbank still at same price, suddenly the poor with S$100k cash is unable to buy anymore!
The rich will have much more cash, so they can pay $200k cash to buy if they want to..................... :p
Don't understand,"The poor got not enough cash money to pay ABSD + downpayment, so no choice have to keep in the bank for 0.1% interest?"
In 2006, with SGD 100,000 can buy 2 Bedroom @ Southbank fast forward to 2013 why is the same SGD 100,000 cannot buy a 2 Bedroom in D7. The poor or the rich having the same SGD 100,000 will still not be able to buy.:beats-me-man:
I don't think there is any agent's commission. It is a saver's plan. For insurance, you save about $600 per month, so 1 yr will be $7,200 x 5 yrs = $36,000 but mature only in 10 yrs time. I can't remember the interest rate.
For Maybank, I think you are allowed to withdraw because it is your saving account.
standchart person try to upwell the bonus saver is 1.88% interest catch is u need to spend $500 to the credit card everymth. So the sales person try to bundle with a insurance endowment that charge $500 a mth.. thus wah lah. 10yrs endowment with bonus saver plan .. look at the fine print and ask some question and the truth is out there.
Now buy 2nd property LTV only 60%, so need to come out with 40% cash. Even if 2 Bedroom@Southbank still at same price, suddenly the poor with S$100k cash is unable to buy anymore!
The rich will have much more cash, so they can pay $200k cash to buy if they want to..................... :p
2 Bedroom @ Southbank in June 2006 cost SGD 535,000.
Bank Valuation in 2011 @ SGD 1,550,000. 40% = SGD 620,000.
2006 need only SGD 100,000 now need SGD 620,000. I think the rich need to add more than SGD 200k.
Still don't understand why 6 yrs later need to pay so much different.:beats-me-man:
Gold price in 1 jun 2006 is 625.00
http://www.usagold.com/reference/prices/2006.html
Gold price in 1 jun 2013 is 1402.50
http://www.usagold.com/reference/prices/2013.html
If I buy gold in 2006 and sell in 2013 I make a profit of 1.244
If I sell at SGD 1550000-428,000(loan)= SGD 1,122,000 = 9.48
Why is there so many people buying gold?:beats-me-man:
http://www.businessinsider.com/larry-summers-imf-speech-on-the-zero-lower-bound-2013-11
"Imagine a situation where natural and equilibrium interest rates have fallen significantly below zero," Summers said. "Then conventional macroeconomic thinking leaves us in a very serious problem because we all seem to agree that whereas you can keep the federal funds rate at a low level forever, it's much harder to do extraordinary measures beyond that forever, but the underlying problem may be there forever."
There are a couple of other ways we could attack this.
-- The Fed could allow for greater inflation, and thus incentivizing people to spend now if they're hoarding money.
-- We could also move to a cashless society where all money is electronic. This would make it impossible to hoard cash outside the bank, allowing the Fed to cut interest rates to below zero, spurring people to spend more.
Both ideas would theoretically overcome the problem of the zero lower bound.
Read more: http://www.businessinsider.com/larry-summers-imf-speech-on-the-zero-lower-bound-2013-11#ixzz2l1QgbQHm
Gold price in 1 jun 2006 is 625.00
http://www.usagold.com/reference/prices/2006.html
Gold price in 1 jun 2013 is 1402.50
http://www.usagold.com/reference/prices/2013.html
If I buy gold in 2006 and sell in 2013 I make a profit of 1.244
If I sell at SGD 1550000-428,000(loan)= SGD 1,122,000 = 9.48
Why is there so many people buying gold?:beats-me-man:
How abt comparing 97-2003 period
2 JUNE 1997 GOLD PRICE 343.90
http://www.usagold.com/reference/prices/1997.html
2 JUNE 2003 GOLD PRICE 364.75
http://www.usagold.com/reference/prices/2003.html
Don't have PC to compare, anyone got a PC to compare 1997 to 2003.
Gold price in 1 jun 2006 is 625.00
http://www.usagold.com/reference/prices/2006.html
Gold price in 1 jun 2013 is 1402.50
http://www.usagold.com/reference/prices/2013.html
If I buy gold in 2006 and sell in 2013 I make a profit of 1.244
If I sell at SGD 1550000-428,000(loan)= SGD 1,122,000 = 9.48
Why is there so many people buying gold?:beats-me-man:
If they sold the gold at peak 1800-1900 then the comparison will be higher.
want to play superwoman?
have the cake (QE) and eat it (no rate increase)
Fed Ponders How to Temper Tapering Without Rate Increase
http://www.bloomberg.com/news/2013-11-19/fed-ponders-how-to-temper-tapering-without-rate-increase.html
Bernanke says interest rate to near zero for a long time
The Fed Chairman Ben Bernanke said that since the implementation of bond buying scheme, a significant improvement was seen in the labor market. After the scheme, the benchmark interest rate is likely to remain low for a long time.
princess_morbucks
20-11-13, 09:15
http://www.businesstimes.com.sg/breaking-news/stock-markets/australia-shares-fall-further-bernanke-comment-worleyparsons-tumbles-201
The Australian share market, on the other hand, is jittery over Bernarke's remarks.
When the fed is saying "place your bet now" u should be careful, because they are about to shake your money tree.
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