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Phillip Tilley

Very interesting : interest rates

June 10, 2011 | Comment icon 10 comments
Image Credit: sxc.hu
My good friend Joe is blind and has been for forty years yet he inspires me with his ability to see what many sighted people fail to. He recently pointed out that his savings account only returns to him an interest rate of a quarter of one percent for the Bank to have use of his funds. They loan funds to other people and charge interest on that to pay Joe his quarter percent and cover operating expenses and earn a profit as is the capitalistic way.

Joe pointed out that he knows why the economy has not pulled out of its slump. Although the Bank dropped the amount of interest they pay him from 4% to .25%, an 1800% decrease in what he makes in interest, at the same time they are still charging customers 22.5% interest to use credit card debt. Joe pointed out that the difference between the .25% interest the Bank gives him for the use of his funds and the 22.5% interest it takes in on credit cards gives them a theoretical 9000% profit.

If the Banks dropped the rate they pay why did they not also drop the rate they charge? It seems a rate of 5% in light of the economic slump would be more on par with the interest they pay depositors. This would still give them a 2000% profit which is more than enough. Most of us wish we could make a 2000% or 9000% profit in our businesses.

If the Banks lowered the interest they charge on credit card debt to 5% it would lower peoples payments to a manageable level in this economy. That would leave funds to stimulate the rest of the economy. A look a quarterly profit reports has Banks and Oil companies earning Billions while everyone else struggles. If they were not overcharging for their products it would not be so one sided. Joe stopped using credit cards and will never use them again. If everyone else did the same they would have to change the way they do business.

But the Banks got bailed out by the Government using taxpayer funds. That is your money. Banks could then turn around and foreclose on mortgages and take your homes and drive families into bankruptcy in ever increasing numbers. Not because they care about the people or the economy, they care about their own greedy bonuses they do not deserve.

As the slumping economy drags on I wish everyone could see as clearly as my blind friend Joe. Wake up people, the Money Matrix has you.[!gad]My good friend Joe is blind and has been for forty years yet he inspires me with his ability to see what many sighted people fail to. He recently pointed out that his savings account only returns to him an interest rate of a quarter of one percent for the Bank to have use of his funds. They loan funds to other people and charge interest on that to pay Joe his quarter percent and cover operating expenses and earn a profit as is the capitalistic way.

Joe pointed out that he knows why the economy has not pulled out of its slump. Although the Bank dropped the amount of interest they pay him from 4% to .25%, an 1800% decrease in what he makes in interest, at the same time they are still charging customers 22.5% interest to use credit card debt. Joe pointed out that the difference between the .25% interest the Bank gives him for the use of his funds and the 22.5% interest it takes in on credit cards gives them a theoretical 9000% profit.

If the Banks dropped the rate they pay why did they not also drop the rate they charge? It seems a rate of 5% in light of the economic slump would be more on par with the interest they pay depositors. This would still give them a 2000% profit which is more than enough. Most of us wish we could make a 2000% or 9000% profit in our businesses.

If the Banks lowered the interest they charge on credit card debt to 5% it would lower peoples payments to a manageable level in this economy. That would leave funds to stimulate the rest of the economy. A look a quarterly profit reports has Banks and Oil companies earning Billions while everyone else struggles. If they were not overcharging for their products it would not be so one sided. Joe stopped using credit cards and will never use them again. If everyone else did the same they would have to change the way they do business.

But the Banks got bailed out by the Government using taxpayer funds. That is your money. Banks could then turn around and foreclose on mortgages and take your homes and drive families into bankruptcy in ever increasing numbers. Not because they care about the people or the economy, they care about their own greedy bonuses they do not deserve.

As the slumping economy drags on I wish everyone could see as clearly as my blind friend Joe. Wake up people, the Money Matrix has you. Comments (10)


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Comment icon #1 Posted by williegreen 13 years ago
While I agree that credit cards charge too high an interest, it isn't as simple as you have made it. The big piece you are missing is the number of defaults and late payments that take that 9000% and substantially reduce it. So in fact you should be blaming your fellow citizens who aren't paying, they are the main reason for such high interest rates.
Comment icon #2 Posted by Oen Anderson 13 years ago
While I agree that credit cards charge too high an interest, it isn't as simple as you have made it. The big piece you are missing is the number of defaults and late payments that take that 9000% and substantially reduce it. So in fact you should be blaming your fellow citizens who aren't paying, they are the main reason for such high interest rates. You don't have to be a genius to figure lower interest rates would lead to fewer defaults and late payments. Blame the greedy bankers.
Comment icon #3 Posted by bulveye 13 years ago
While I agree that credit cards charge too high an interest, it isn't as simple as you have made it. The big piece you are missing is the number of defaults and late payments that take that 9000% and substantially reduce it. So in fact you should be blaming your fellow citizens who aren't paying, they are the main reason for such high interest rates. But it's the banks fault for bending over backwards to lend money to anyone regardless of whether they can pay it back or not. About 20 years ago banks would be very wary with who they leant money to, and they made good money and interest rates on... [More]
Comment icon #4 Posted by Torgo 13 years ago
There's a reason I never don't pay off my credit card within a month, and only keep a third of my money in a financial institution.
Comment icon #5 Posted by Habitat 13 years ago
I suspect the average worker would be shocked to discover how much of the working week is occupied in earning to pay interest. Aside from personal debt, such as credit cards and mortgage etc, there is a lot of hidden interest charges built in to the price of goods and services, because those companies providing them typically have loan borrowings themselves. And governments with their bloated debt pay it off through inflated charges and taxes. Maybe some time Wednesday you start earning money for yourself.
Comment icon #6 Posted by sher0828 12 years ago
About the interest rates, I have read from an article that Interest rates are at record lows for most kinds of loans accessible in the United States, making it less expensive than ever to borrow cash. But that is not true for all kinds of loans. A brand new report says that rates are increasing for charge cards once again.
Comment icon #7 Posted by Super-Fly 12 years ago
Hope it changes.
Comment icon #8 Posted by Babe Ruth 12 years ago
As Paul Craig Roberts points out, this is connected to the manipulation of LIBOR, the current and legitimate scandal in the banking industry. It no longer pays to save money, because the interestest paid is so low.
Comment icon #9 Posted by lightly 12 years ago
Banks used to pay a decent interest rate on accounts to encourage people to put money in their bank.. so they could loan it out at a HIGHER interest rate. Direct deposit practices have eliminated the need for banks to offer encouraging interest rates. Social Security Retirement checks now get deposited directly . That is a huge (federally mandated) gain for banks. CD's ( certificates of deposit ) were paying 7-8-9 % in the 70's .... about 4-5 % in the 90's .... Now most earn less than 1%. I remember when savings accounts paid 3 to 5% ... mine now pays about 15 one hundredths of one percent!
Comment icon #10 Posted by Super-Fly 12 years ago
I spend my queen heads when i get it. No time for saving! But like i said, i do hope it all changes. Thanks,


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