WHY LOW INTEREST RATES ARE A BAD THING
If you listen on the radio you may hear ads from mortgage companies advertising low interest rates. “These rates are the lowest they have EVER been” they say. “Get in now before it’s too late!”
When interest rates are this low, you have to know there is a reason and that reason is not a good one. A normal economy that is chugging along nicely with average job creation will never have low rates like this. So, because interest rates are at or near an all time low, it is evident that things are NOT normal.
Aren’t low rates good for people who want to borrow money you ask?
Well yes, if you can get a loan that is. Ask anyone that is trying to or has tried to get a home loan, business loan, car loan, or any other kind of loan recently. Money is tight and banks are NOT giving it out like they used to.
Some of the bad economy can be attribute to the mortgage crises that came about because banks loaned money to anybody and everybody. They didn’t do their homework to see whether every loan applicant had the means to repay the loan. People all over the country were getting loans that were WAY bigger than they should have and one by one, they started defaulting. Suddenly there was a tidal wave of defaults and all hell broke loose and here we are. The government then got involved via the stimulus bill and now banks are under a much higher scrutiny.
This higher scrutiny means that banks are being very cautious who they loan money to and how much they loan out. They don’t want a repeat where they get caught with a new batch of defaults. So, even though interest rates are low, it doesn’t guarantee you can qualify for all the real low rates you hear being advertised. And even if you do, you might not be able to get as much as you want. While it is true that low interest rates are generally good for people who want to borrow money, if it is very difficult to qualify for a loan and take advantage of them, then these low rates are really not that good after all.
It is more obvious why low rates are bad for those people that have investment money.
Anyone who has savings and money they would like to put aside may want to invest it safely and earn interest. Folks that are retired or near retirement age are a good example as that type of person should have proportionally less in stocks and more in savings. They need to preserve their money and make sure it is not at risk of going down because they will need that money to live off of.
People like that need interest income to supplement their social security. When the best money market rates and best CD interest rates are at an all time low, this means these retired folks have had much of their income cut. ANYONE who relies on interest income has had their income drop!
Low interest rates go way beyond just hurting our seniors. ANYONE who wants to invest their money safely (meaning FDIC insured) is now left with no way to make money on their money. The saying “time is money” hardly is true with rates so low!
Low interest rates are also a silent tax on all people who have been responsible, worked hard, and have savings to show it. Low rates take away their ability to make money on the money they have worked so hard for. You used to be able to get 4% to 5% on your money and now you can maybe get 1% at best for anything short term.
LOW INTEREST RATES PUNISH THE RESPONSIBLE PEOPLE IN OUR SOCIETY and they hurt anyone who has worked hard to be successful.
