A Rollercoaster Ride on Wall Street
Wow! What a way to finish out the week. Wall Street has been up and down and all around over the past week. Stocks opened the day about 400 points higher. This due to the news that the government plans to rescue big banks from billions of dollars of bad debt. The bailout would be the biggest ever undertaken by the government.
In addition, the SEC has placed a temporary ban on the short selling of 799 financial stocks.
What’s up next? Only time will tell. For now, please fasten your seatbelts and keep your hands inside the car at all times. Please enjoy the ride!
Disdain For The Federal Reserve Interest Rate Cuts
How can so many people be excited about the latest fed cut? You know, the one that lowered the federal funds rate 0.75 percent? Sure, this helps banks borrow money at a cheaper rate. It allows banks, if they choose, to pass on the savings in the form of lower interest loans. But it does nothing for me, the person trying to save money for a home.
While my money sits in a high-yield savings account, the interest I make on it keeps going down. If this trend continues, I’m not sure the account will qualify as so-called “high yield” if there’s another rate cut. Everywhere I turn for news, I read that people are worried about inflation–which, to me, seems to be a legitimate worry. The cost of gas, utilities and food continues to rise — there’s no doubt about that. And in turn people are reeling in their discretionary spending and focusing on putting gas in their cars and food on their tables. Yet the Fed continues to cut rates and increase the money supply.
I understand what the Fed is trying to achieve by lowering the federal funds rate, but I don’t necessarily agree with it. These actions seem to encourage companies to continue the risky behavior that got them in this mess in the first place. I believe it sends an entirely wrong message: “Go ahead and do what you want — we’ll bail you out again.”
I’m most peeved that the government seems to have turned their backs on those that have been responsible with their money. Why should I have to pay for the foolish decisions made by others? I think the economic landscape will get a lot worse before it gets better. My guess is that the credit card industry is next in line for problems, i.e. more people will begin using credit cards to make monthly payments just to keep their heads above water for a little while longer.
Dropping Interest Rates - What Effect Will This Have?
Earlier today, Federal Reserve Board Chairman Ben S. Bernanke announced that he’s prepared to lower the interest rates another half percentage point. That would take the current 4.25% interest rate down to 3.75%. This could be good news for you, or it could be bad news for you - it depends what your situation is. So, if the rate is actually cut on January 28th, what kind of impact will it have?
1. Variable rate loans: the interest rate on variable rate loans will go down. If you have this type of loan, this would be a good opportunity to make some extra payments to pay down the balance.
2. Variable rate credit cards: cards tied to the prime rate will see an interest rate decrease, too. Depending on your situation, it may be a good time to make extra payments on these cards.
3. Savings account interest: these accounts will also see a rate decrease. However, unlike loans and credit cards, this doesn’t work in favor of savers.
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About
Just Squeaking By is a blog about my personal finances and my quest to get them in order. Read more about Just Squeaking By
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