Low Interest Rates: Great for Banks, Bad for Investors… (VIDEO)
…says the WSJ.com in this recent video. Well, we couldn’t have said it better.
What American savers should understand is that by putting your money in the bank, you are essentially lending your money to the banking institution. In turn, that institution pools all of our collective money and lends it out in a variety of financing products: from mortgages at 4.5-8% interest rates, to lines of credits, to credit card at higher rates of up to 30%. The difference between what the bank pays the account holders and how much they receive in interest from their borrowing customers is their gross revenue.
Low interest rates are an “attack to the savers who are providing the capital to the benefit of the people who are borrowing the capital, that includes bankers, mortgage borrowers, companies, and the like…” explains Mark Whitehouse, WSJ News Editor.
No wonder Lending Club has been growing at a 5-15% pace every month for more than a year, recently passing more than a quarter billion dollars in loans.
Enjoy the short but poignant explanation of how the traditional bank lending system has become inefficient, unnecessarily complex, and bad for investors:
Friday, April 8th, 2011 at 11:16 am