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Thread: Interest Rates Fall , the fifth consecutive fall in 18 months. westwind.

  1. #1 Interest Rates Fall , the fifth consecutive fall in 18 months. westwind. 
    The Enchanter westwind's Avatar
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    What is the Philosophy of falling Interest Rates? ( As an economic tool to stimulate spending on goods and Services).

    Why do we want spending on Goods and Services?

    As Goods and Services are consumed there may be a demand for further supply.

    Where there is demand more resources are employed( including labour), and cheap Capital is asked for to faciliate this.

    So far so good.
    ( above is elementry economics, entrance level ).

    Now here is, for case study situation only, an imaginary William and Mary. Both been retired with Superannuation Benefits 12 years ago. Good return on Bank Investments, Term Deposits etc for 10 years. Now Interest Rates are falling.

    They have been living off their Investment Income.

    Their Investment Income is now only returning half of their original returns.

    They are older of course, not so active, but still need to find sufficient funds to pay their way.

    The obvious answer is to dip into their Capital.

    The more they use their Capital, the less Capital they have to generate Income.

    So Interest rates fall to zero Return. And stay that way.

    What is the answer to William and Mary's Predictament? westwind.


    Words words words, were it better I caught your tears, and washed my face in them, and felt their sting. - westwind
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    Westwind, lower interest rates tend to push people away from savings and into investments. Perhaps your couple there invested in the wrong things and they lost half of their capital doing so but, the only thing someone could recommend they do is invest in better things.

    The problem with lower (nearly nothing) interest rates is that the newly created currency/currencies are being pumped (for the most part) right into paper markets (stocks, bonds, commodities, securities, etc.) and not finding its way to small businesses, the working class or the retired working class.

    There are massive bubbles growing in paper markets due to the low interest rates and the new currency/currencies those low interest rates create but, those are the cash cows for the wealthy and huge funds now, and not, as it used to be, the production of products, goods and services. Fat cats who go out in the world today and invest in production are fools but, fat cats who invest in paper markets, invest in where all the money is being pumped into, are not so foolish at this point in time. There is no reason to earn and work hard for fish when one can go to an overstocked pond and have the fish jump in their coolers.

    It would be best for your retired (not working) couple to follow the government and invest in what they are dumping, directly and indirectly, billions and trillions of dollars into. They do not need to get to greedy, and they need to get out (cash out) after a decent return and before those paper investments go down.


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    The Enchanter westwind's Avatar
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    gonzales56. we are entering deep water here.

    When in deep water, one must be a great weather captain.

    How strong must his ship be? and his navagational skills.?

    The moment comes, I have a saying, the 7th Wave, which cannot be predicted, when Investors ( read Opportunists who are not investing in the Economy, but in Speculative Ventures as in selling shares in an non-existing Gold Mine), when Investors smell a slight shift in humidity and cash up and bail out of the Markets. Quickly.

    This leaves the Williams and Marys trying to extract their hard earned before the Pile disappears before their eyes.

    The 12% who have cashed out are counting their folding money and William and Mary are appplying for the Pension. westwind.
    Words words words, were it better I caught your tears, and washed my face in them, and felt their sting. - westwind
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    Quote Originally Posted by westwind View Post
    gonzales56. we are entering deep water here.

    When in deep water, one must be a great weather captain.

    How strong must his ship be? and his navagational skills.?

    The moment comes, I have a saying, the 7th Wave, which cannot be predicted, when Investors ( read Opportunists who are not investing in the Economy, but in Speculative Ventures as in selling shares in an non-existing Gold Mine), when Investors smell a slight shift in humidity and cash up and bail out of the Markets. Quickly.

    This leaves the Williams and Marys trying to extract their hard earned before the Pile disappears before their eyes.

    The 12% who have cashed out are counting their folding money and William and Mary are appplying for the Pension. westwind.
    It is unfortunate westwind.. A lot of people do not realize that millions and millions of retired people who worked hard for 40-50 years live off of the interest their savings provides for them. If interest rates go from 4% to 3%, these retired people lose 25% of their income. If it goes from 4% to 1%, they lose 75% of their income. Now they are flying through their savings and they will not sustain their lives and livelihoods unless they pull that money out and get to hustling with it.

    I would recommend these people find a smart fella to help them. Ultimately, the path they chose was the wrong one and they need to be more aware of the economic conditions and system they are in and make better decisions with their money.
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    The Enchanter westwind's Avatar
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    Who will the workers trust with their retirement funds? When the Stock Market also feels the cold wins of a downturn, then dividends shrink.

    Something happens with The Housing Market. Who stand to gain if the price of houses start to fall? Then go into freefall?

    Who, or what, decides the time is right for the price of Houses to fall? For two or three years. Or more. Why?

    We have more demand for Housing at the Present time than we have had for years, yet the price of existing dwellings is still not low enough to create a sellers market. (Melbourne).

    Where has the buying money gone? Escpecially now that housing interest rates are well down.?

    And Banks are falling over themselves trying to loan you money. At reduced interest rates.

    No takers.

    Houses are not selling. Are we expected to give them away?

    Gonzales, is it anything to do with driving what money there is out of the Housing Market and into areas where the unscrupless can get their hands on it? westwind.
    Words words words, were it better I caught your tears, and washed my face in them, and felt their sting. - westwind
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