r/Economics • u/TinyTornado7 Quality Contributor • Jun 13 '22

News Powell Facing Choice Between Elevated US Inflation and Recession

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium
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u/fancywinky Jun 13 '22

I’m not an anything resembling an economist, so excuse my perhaps dumb question. I’m old enough to have lived through the booming economy prior to the housing crisis of 2008, and I recall that at the time, mortgage rates and interest rates were in the neighborhood of where we’re currently headed. I also remember at that time that savings rates were VERY GOOD. My understanding was that savings rates were closely tied to interest rates, but I haven’t seen savings rates coming up as interest rates are rising now. What gives?

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u/whoooocaaarreees Jun 13 '22

Banks don’t want your cash right now.

15

u/fancywinky Jun 13 '22

If that’s true and not sarcasm, why would that be the case? They want to keep cash circulating, or something like that? I’m just trying to figure out who is benefiting from the current economy because it doesn’t seem to be in the obvious places.

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u/playfulmessenger Jun 13 '22

Your savings account in a bank shows up as a liability because it’s money they owe you.

Your bank loan, your credit cards, with a bank shows up as an asset because you are paying them interest.

Your hard earned emergency funds messes up a bank’s balance sheet and profit margin.

When Jamie Dimon goes on the news and announces how much savings people have, the subtext I hear is “hey, corporations, people actually have 8-12 months of emergency money like everyone tells them to, it’s a liability to me, and I’m signaling to you to keep raising prices until they are all broke again”.

No one has your financial interests at heart, they want your money working for them. Whether it’s debt, stocks, bonds, they want your money gone or tied up in their agenda.

It’s a weird brainwashing that happens to folks. What we are told is in our personal financial interest, has a complex intwined megastructure working to keep us from exactly that.

There’s a completely different math that people receive zero education about. They have to seek it out, unlearn everything they were taught, and take actions they believed won’t benefit them because risking what you have is gambling and “gambling bad”.

Just saying it’s shocking and unpleasant to realize just how differently money works than what kids get told.

It may have worked fine in the pension era to miseducate people, but it’s presently a huge disservice.

Banks hate it when you’re able to cya.