I already talked about an alternate way that the Bank Bailout could have been orchestrated, but that got me thinking… here’s another idea:
Why haven’t people been saving much (until just recently)? Interest rates have been crappy! Honestly, they’re not keeping up with inflation, so why would the average American save money in a savings or money market account, or even in a certificate of deposit? BY the time you pull it out the money plus its accrued interest will have less purchasing power than if you’d just spent it all as soon as you got it.
The conspiracy theorist in me wants to think this is exactly what “they” want. The less money you have, the easier it is for you to go into debt and become a “slave” to “them”.
Of course that’s just crazy talk (or is it?!), but the result is the same: people are investing a little (at higher interest rates) but they aren’t really saving money.
How much interest are you paying on your credit cards? On your line of credit? On that payday loan? Chances are you’re into the double-digits! Sometimes as high as 20%+. How insane is that?
So, let’s say you have a Discover Card at 19.99% variable interest. They big banks “needed” a bailout because people weren’t paying their bills, they didn’t have enough liquid funds to be able to extend new credit (or make good on credit that had already been issued).
How could we get the big banks a big, immediate influx of liquid cash? Why not require them to let you deposit money into your account at a few percentage points under your current rate? Even –5% would mean you’d be getting 14.99% on your money. Who WOULDN’T want to do that?!
Obviously, it would be better to pay off your 19.99% interest first, but in both cases the banks would get a huge influx of money by those that were able to actually save money.