Reminding everyone reliant on those two backstops for the integrity of their deposits that no higher global or galactic power stands behind the NCUA or the FDIC. Only America herself assumes that duty.
Interest rates generally have been low for many years, a situation which is reminiscent of the post war years and well into the 1950s. But the low interest rates of that era eventually shot higher, a LOT higher.
Today, because of the low interest rates, America can afford the debt service on our massive (and growing) $30T national debt. But should interest rates rise even modestly, say only to 4%-5%, that same debt service will balloon to over $1T/year. And looking back, 4%-5% interest rates are not in the least unprecedented.
Panic? no
Concern? maybe
Most of all keep your eyes open and be careful what you wish for.
Great post. The next three years of this Administration will be very interesting. If we continue to go in the same direction we are now headed, it could be very traumatic for the country and possibly the world.
Thank you, goldendog, for your post. We have no disagreement. But one focus of this thread is wealth preservation. More precisely stated, purchasing power preservation.
I wish I had the magic formula to ensure that goal, something which is on my mind a lot these days. I do not have the formula, magic or otherwise. But I agree with you that the next three years will be pivotal.
Wealth preservation is going to be harder for retired folks who have to rely upon their savings to pay for their expenses. In an inflationary world, interest rates will never keep up with price increases, causing much economic hardship for people on fixed incomes. The Fed could get out in front of this cycle of increasingly worse inflation numbers, but I donât think they have the fortitude or nerve to do it. Instead, we could see a decade of high inflation (1970âs), slow growth (stagflation) and greater wealth inequality in our country. Itâs not going to be pretty.
Both Bauer and Ken have updated their credit union and bank health ratings. Those services are now offering health ratings based on end of 2021 data, the most recent available.
Weiss? Donât ask.
Weiss is tardy as usual. I have given up estimating exactly when his updated ratings might become available. It will probably happen some time in the next few weeks.
There are times I wonder why I bother posting deals here. I guess some people benefit. I hope so, anyway. But others do not. Case in point:
The Smart Move CD I posted has no cap.
The Smart Move CD pays 1.15% APY.
The Smart Move CD is open to anyone.
The Smart Move CD offers a three year rate lock and even a one time rate bump.
The Smart Move CD allows you to add $100 or more at any time, once.
But wait. How about liquidity??
The Smart Move CD allows you to withdraw all your money, except for $1000, at any time without penalty. Thereafter, if you donât need all that money, you would simply open a new Smart Move CD!
Concession:
I concede Smart Move might not be a perfect solution for those needing to access small amounts of money every week or two. For that a more conventional money market account would be better. But if you have substantial funds which must nevertheless remain liquid for whatever reason, Smart Move is the way to go.
ETA
Heck, there are conventional CDs around which do not offer anything like the benefits of Smart Move and still do not pay 1.15% APY, not to mention a possible rate bump.
Of course that might begin to change after the Fed rate increase widely anticipated later today.
That Smart Move CD is one special puppy. Iâd be in, if not for the fact my liquidity is currently covered by a multitude of Rewards checking accounts paying 1.5%+. But Iâm hoping itâs still competitive (and still being offered) later this summer, when I have some large CDs maturing.
That was 23 days ago. This second reminder is being prompted by todayâs news:
Biden warns of âevolving intelligenceâ suggesting possible Russian cyberattacks against the US
Biden says intelligence suggests Russia âexploring options for potential cyberattacksâ
Guys, the Russkies are really pissed off at us . . . and the free world.
President Biden on Monday warned that there is âevolving intelligenceâ to suggest that the Russian government is exploring options for potential cyberattacks against the United States, amid its multi-front war against Ukraine, and urged the private sector to âimmediatelyâ harden âcyber defenses.â
In a statement Monday, the president said this is âa critical moment to accelerate our work to improve domestic cybersecurity and bolster our national resilience.â
I agree with President Biden regarding this matter, and I donât want any participants here to encounter any sort of personal black swan event with their CDs or with their banking business in general. I strongly suggest, if you have not already done so, to be certain you have available offline personal financial records. It is not a good time to be âloosey gooseyâ as regards reliance on the internet.
Consider Russiaâs banking and financial systems have been viciously attacked, justifiably of course, by our side. Nothing would make Putin happier than bringing the free worldâs financial systems down hard in the spirit of tit for tat.
President Bidenâs warning needs to be respected and taken seriously.
CD veterans would do well at this point at least to consider alternatives such as (safe) bonds. This because banks and credit unions are not keeping up with rising interest rates . . . at least not yet.
The above goes double for persons living in deep blue states, e.g.:
New Jersey
New York
Massachusetts
Illinois
California
and others
Just be certain the safe alternatives you choose are also free of state tax. Many are, several are not. You have to do your homework.
Will CD interest rates recover? I expect they will, however I donât know when it will happen. But from a safety standpoint, a US treasury security or even high quality US government agency paper is equivalent in safety to FDIC and NCUA guaranteed investment options. And in many instances today the interest rate is higher on the former.
ETA
The above notwithstanding, Iâm unaware of any safe investment alternatives for our money today which are able to keep up with current inflation and taxes. The best you can do, with safety, is to lose money more slowly than otherwise might be the case.
This inflation most assuredly is a form of taxation. And nothing is more certain, sadly, than death and taxes.
Iâd consider that to be very intriguing. Itâll be a while until any shorter term rates catch up to 2.75%, and I think itâs pretty likely that the extra it earns you now will more than make up for potentially being âunderwaterâ (2.75% being below the current market rates) towards the end of the 3-year term. Iâd prefer 2 years, but 3 years doesnt kill it.
Yes glitch99, Iâm thinking 2.75% rate is almost to good to believe. So I just talked to the agent a few minutes ago. The Credit Union I have worked with many years is not involved with this rate.
Now I find out itâs an annuity. This agent is not with the CU. She talked about singing all these papers when I asked âwait a minuteâ. Is this a regular CD?
So duped again. Itâs usually to good to be true!!
So back to the blackboard again.
As of now, treasuries will give you a better deal than a 2.75% CD rate.
The 3-yr treasury rate is currently 2.63% and is state-tax exempted. If you are in CA and assuming a 9% marginal state tax rate, you would need a CD rate of 2.63/0.91 = 2.89% to match the treasury yield.
Thanks for the data point. 
