Could that be true or just my imagination? If I remember it correctly, it was the prevailing interest rate that banks used to pay many eons ago. The banks were rich and able to pay savers good returns. And they must have reinvested them wisely to be able to afford that kind of interest rate.
Today the banks are big time in gambling. They called it investments and tradings or fund management. They manage a great lot more money than before and took greater risks for greater returns. They even charge small savers a $2 fee and pay them negligible interests. The banks must be grotesquely profitable and rich.
Why can’t they pay higher interest rate? One major reason is that the whole financial system is flooded with banana currencies, and plenty of them. But that should not be that difficult to pay a bit more as the banks will simply transfer whatever is their cost to the borrowers. And the big gambling, sorry, mis statement, the great investments in all the great funds with all the great fund managers and private client managers, the banks must be making more money than the old conservative banks by unimaginable amount.
Now where did all the big incomes go to? Or the banks are losing money all the way? The American banks are losing big time and needed bailouts. They are now claiming to be making big times and paying themselves crazy like before. Are the gains real or more cook book fairy tales? Asians banks are steadier, and making profits after profits. Making a few hundred million lesser is a crime and the analysts will instantly recommend a sell on their stocks.
Where have all the profits gone? They can’t be paying themselves all the big salaries and unable to pay a little more to the savers?
PS. Britain is going to curb all the excessive compensation for the robbers in top management. The legislation is coming to end the looting.
In the past, there was less global liquidity, and the banks had to look to the individual savings as a source of funds. Hence higher interest rates.
ReplyDeleteThe markets now are awashed with cash due to the US QE. There's no need for the banks to provide high interest rates to "borrow" from individuals, when they can borrow cheaply from other banks the money need to finance their business.
You are talking about the days of the quasi gold standard ala Post WW2 Bretton Woods Agreement.
ReplyDeleteIn 1973 Nixon defaulted on US commitment and removed the gold standard.
Now you can have as much liquidity as you like. Just ask Robert Mugabe :)
Well, during the oil crisis, interest rates were more than 10%. I rather it stays low, still have mortgages to pay.
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