The Fed speaks

Posted on 30th January 2012 by Trevor Reynolds in Uncategorized

Low rates continue to 2014. Last year, the Federal Reserve predicted that the US economy would recover into 2012, and expectations were that the central bank would begin tightening interest rates by as early as 2013. This week we learned that the Fed expects to hold rates “exceptionally low” until late 2014. Although the Fed expects inflation to remain low, gold had a big rally believing instead that inflation will increase. Do you remember the rule of 72? When people still put money in the banks – to estimate how long it takes for your money to double, simply divide 72 by the interest rate. So at 6% – 12 years and 5-6% was on the low side for a long time. It was helpful to know in those days that one did not have to learn about risky investments and could still grow their savings. Here is the Fed fund rates since 1952.

These are the rates that the Fed (a private corporation) charges banks and unfortunately they do not pass along these great rates to us and at the same time banks no longer pay us any worthwhile interest to hold our funds. If your bank gives you 2% interest on your savings you can double your money in 36 years and at 1% in 72 years. Though by then that money will not be worth much as long as the Fed exists and prints the value of money away. graphs – RTTNews


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