Tuesday, January 22, 2008

Fed Move v. Tax Rebate -> Money in Your Pocket?

In the PF blog world, much has been written about the $800 per person tax "rebate" proposed as part of an economic stimulus package. While it may not be the best tax policy, it has one great virtue - simplicity. Get a check = have more money to spend, save, or pay down debt.

Nevertheless, the Fed's loosening policy may put more money in your pocket. In the past 52 weeks, the policy has caused the Libor to drop from 5.82% to 3.90%. Because many variable rate loans (credit cards, student loans, and HELOCs) are tied to the Libor, a person with a combined $50,000 will save in the neighborhood of $1,000 per year.

Bottom Line: The Fed's move favors debtors.

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