[saalweachter]

If you are earning less than a percent, you are probably paying for liquidity.

Inflation is currently bouncing between around 1.6% and 2% (but mostly towards the 1.6%). A 3 year CD at a decent bank is currently paying around 1.6%; a 5 year CD is paying around 2%. So if you're willing to commit to a 5 year deposit, you will probably beat inflation and realize a small, real return. Even an interesting-bearing checking account (with a sufficient balance...) pays close to 1.6%.

Granted, it's not the glorious 5%+ returns of yesteryear, but then, we're in a savings glut.

[msandford]

> Granted, it's not the glorious 5%+ returns of yesteryear, but then, we're in a savings glut.

That's a nonsensical statement when the central bank is fully in control of the money supply, and thus, the interest rate.

That's like saying "well my computer has a billion copies of funny cat gifs on it, so there's a funny cat gif glut". It doesn't make any sense. You control how many copies of funny cat gifs are on your computer. If there are too many, it's because you made too many copies. If there are two few, it's because you made too few. Pretending that market action had anything to do with something that you are ultimately in control of makes zero sense.

The interest rate is low (or zero) because the central bank decided it should be, not because all the people in the world collectively don't have any real preference for a dollar today versus a dollar tomorrow.

[saalweachter]

The interest rate / inflation is largely low because the central banks are trying to keep it low / not trying to raise it.

The return from consumer savings accounts being near inflation / a near-zero real rate of return is because of the savings glut.

The two are related but not the same thing.

[msandford]

I don't see how you can just assert that they're similar but not the same, without any supporting argument, and expect me to accept it.

The interest rate is supposed to be the price of money. There's going to be a bid/ask spread on that because of the cost of accepting money and bundling it together, along with the cost of keeping up with the book-keeping and various other things that are costs for loans. So the rate you get paid in interest should always be less than the rate that you pay in interest. This I understand.

But if the interest rate is low, then the interest rate is low. The interest rate is determined by the aggregate supply and demand for money. If there is a lot of supply, relative to demand, then the interest rate is low. If there is a lot of demand relative to supply, then the rate is high. And given that people have a nearly infinite desire for money today versus in the future, the rate is really determined by the supply.

The Fed is in control of the supply by creating or destroying money as needed. That means that they fully and truly do set the rate, because they can do literally whatever is needed to move the needle.

The idea that everyone's individual actions to save is somehow what created the tremendous amount of expansion in the money supply (and thus the very low interest rate) is utter nonsense. The Fed created a lot of extra money which expanded the supply of loans, thus pushing down the rate.