Tuesday, December 16, 2008

Fed Moves against Savers

By pushing interest rates to historic lows in hopes of stopping the economic meltdown, the Fed has made in virtually idiotic to throw money in a savings account. Even online banks will have a hard time paying more than 2%.

What to do?

  1. Spend money on depreciated assets: in particular land and beaten down stocks will seem more attractive.
  2. Pay down any loan balance you have that is not at rock bottom rates. Having high interest loans in the coming year is going to be brutal.

What banks will do?

With free money from the fed to loan, they are going to throw money into loans like there is not tomorrow.

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