Before I get to Quarles and his qualifications, it’s important to understand the Fed and what it does. Its decisions are vital to every person on the planet who borrows or lends money (pretty much everybody) since it has enormous influence over global interest rates. Its board of governors also influences most other aspects of the global financial system, from regulating banks to how money is wired around the world. Continue reading
The Federal Reserve is expected to lift short-term interest rates at the close of its two-day meeting today and signal that more hikes are to come over the course of the year.
Numerous commentators have focused on who is hurt by rising rates, particularly those with lots of floating rate debt, such as a credit card balance, or anyone in need of a loan.
Not everyone, however, is negatively affected by rising rates. There are some individuals and businesses cheering the Fed on as it pushes up rates, including savers, people traveling abroad and foreign exporters and businesses with large cash balances.
Not unexpectedly, U.S. savings rates are also quite low as individuals ask themselves: “Why save a lot of money at a bank if I get no return?”
Individuals who don’t save face spending their golden years of retirement in poverty, instead of plenty. In addition, people with no savings face financial problems and potential ruin when unexpected large expenses occur and cannot help out their children with large bills like college or a down payment on a first home.
In the absence of a rapid increase in interest rates, which appears unlikely, is there anything we can do to change this problem and get people to save more?
As odd as it may sound, gambling could be part of the answer. Continue reading
There is a very high chance the Federal Reserve will raise interest rates next week. It would be the first time the Federal Open Monetary Committee (FOMC) – the Fed’s rate-setting team – has lifted its benchmark rate since 2006, beginning the so-called return to normal. Economists, traders and policymakers have been pontificating, prognosticating and placing bets about this decision for a long time, because the impact is expected to be far-reaching.
So how will higher rates affect you? Continue reading
The Wall Street Journal reported yesterday that “The yield on the U.S. Treasury bill maturing on Oct. 2 traded at negative-0.01%.” The negative rate means that the USA’s government is paid to take out loans and buyers of the treasury bills are charged for saving money. This situation is similar to someone asking you if they could borrow $10 today with the promise that they will pay you back $9 tomorrow. You know ahead of time it is a bad deal that will cost you money. While some professional traders knowingly made money losing trades yesterday, would you ever accept a negative interest rate?