Why Saving Is For Sucker. Your bank, with help from Uncle Sam, is making obscene profits at your expense. Instead of funding the fat cats, here's how to join them in the economic recovery.
If there's one thing that seems like it has to be a good idea, it is saving money. I mean, it's like walking grandmas across the street, eating hot dogs on the Fourth of July and rooting against the Yankees, right? A concept that seems above reproach.
How do banks really make money?
Yet the reality is that in times of low interest rates, a credit bull market and a steadily advancing stock market, socking income away in a savings account may be the dumbest idea in the world.
In fact, I'll go one step further and say it flat out: Saving is for suckers.
The reason this is true explains a lot about where we are in the business cycle right now and how the banking establishment and government conspire to rip off the public at every turn.
The truth about saving
Here's the deal: When you put a portion of your income into a savings account, a money market fund or a certificate of deposit at a bank or brokerage, it appears from your perspective that you are placing it in a vault for safekeeping. But the truth is that you are lending your money to the bank at a rate of about 1%. The bank then laughs behind your back as it turns around and lends it to the government for 4%, to big companies at 6% or to smaller companies for 8% or more.
The difference between what the bank gives you for your cash and what it earns from lending it out at higher rates is called its "spread," and it amounts to the bank's profit margin. That spread right now is so large -- as wide as 8 percentage points -- that even many stupid bank executives could not avoid earning huge profits this year.
Mind you, there are some bankers who are so lame that they won't make money. But for the most part, the profitability of banks right now is so obscene that any tricks they pull in their earnings reports this month will be intended not to hide losses (as bears would have you think) but to hide their gains. A steep yield curve -- which occurs when short-term interest rates are very low relative to long-term interest rates -- is a direct pipeline from your savings account to bankers' bonuses.
There is a way for you to halt this robbery and redirect the process in your favor. But before I get there, let me note that the cover story for this mass misappropriation of the public's money is quite simple and may actually have a positive purpose. msn.com
If there's one thing that seems like it has to be a good idea, it is saving money. I mean, it's like walking grandmas across the street, eating hot dogs on the Fourth of July and rooting against the Yankees, right? A concept that seems above reproach.
How do banks really make money?
Yet the reality is that in times of low interest rates, a credit bull market and a steadily advancing stock market, socking income away in a savings account may be the dumbest idea in the world.
In fact, I'll go one step further and say it flat out: Saving is for suckers.
The reason this is true explains a lot about where we are in the business cycle right now and how the banking establishment and government conspire to rip off the public at every turn.
The truth about saving
Here's the deal: When you put a portion of your income into a savings account, a money market fund or a certificate of deposit at a bank or brokerage, it appears from your perspective that you are placing it in a vault for safekeeping. But the truth is that you are lending your money to the bank at a rate of about 1%. The bank then laughs behind your back as it turns around and lends it to the government for 4%, to big companies at 6% or to smaller companies for 8% or more.
The difference between what the bank gives you for your cash and what it earns from lending it out at higher rates is called its "spread," and it amounts to the bank's profit margin. That spread right now is so large -- as wide as 8 percentage points -- that even many stupid bank executives could not avoid earning huge profits this year.
Mind you, there are some bankers who are so lame that they won't make money. But for the most part, the profitability of banks right now is so obscene that any tricks they pull in their earnings reports this month will be intended not to hide losses (as bears would have you think) but to hide their gains. A steep yield curve -- which occurs when short-term interest rates are very low relative to long-term interest rates -- is a direct pipeline from your savings account to bankers' bonuses.
There is a way for you to halt this robbery and redirect the process in your favor. But before I get there, let me note that the cover story for this mass misappropriation of the public's money is quite simple and may actually have a positive purpose. msn.com
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