"In Era of Cheap Money, Consumers Are Shut Out" By NATHANIEL POPPER and TARA SIEGEL BERNARD

[applegrove]

In Era of Cheap Money, Consumers Are Shut Out

By NATHANIEL POPPER and TARA SIEGEL BERNARD at the NYTimes


http://www.nytimes.com/2012/06/09/business/in-era-of-cheap-money-consumers-are-shut-out.html?_r=1&smid=tw-share

"SNIP......................................

New data this week from the Federal Reserve shows that in the first quarter of this year, American businesses were taking on new debt at the fastest rate since the financial crisis in 2008. American households, though, were heading in the opposite direction, increasingly shedding debt.

And as in the case of Mr. Shreve, the lack of borrowing by American families was not always by choice. Another recent Fed report shows that while more consumers are interested in buying homes or refinancing existing mortgages, banks remain hesitant to extend credit to them.

Consumers are also getting squeezed on the investing front. Wary of the volatile financial markets and worried about the continued weakness in the economy, they have been putting more money into ordinary savings accounts, the new data shows. But those accounts are paying an average of 0.1 percent, according to Bankrate.com.

“There’s definitely winners and losers in this kind of extremely low interest rate environment,” said Ed Yardeni, the president of Yardeni Research. “In this case, any borrower that has access to the capital markets and doesn’t have to fill out a loan application at a bank is definitely going to have a tremendous advantage.”


...........................................SNIP"

[SoutherDem]

1. We need a new stimulus but this time

instead of giving tax cuts to big business this time do a FDR.

Repair or replace those many old bridges.

Repair the interstate system.

Finish started but stopped roads.

Repair the water and sewer systems.

Up grade the electrical grid.

Help shift the country from coal and oil to renewable energy.

Give NASA a real budget, build a heavy lift vehicle and a new passenger vehicle.

Upgrade transit systems.

I could go on and those were suggestions maybe not everything but do something with will help employee Americans rather than give tax breaks to the wealthy.

When we were in the space race everywhere there was a plant which worked on the Moon rocket there was a city which benefited from the salaries of those workers.

Call me stupid, but I think this really would work.

[AdHocSolver]

2. Low interest rates on savings is another way to transfer money from the middle class to the wealthy.

A bank that pays 0.1 percent on depositors' money, and lends that money to borrowers at 7 percent is getting a 70 times return on that money (0.07 / 0.001).

This is a rip off of the depositors set up and maintained by the Federal Reserve to increase bank profits.

At the same time, the real economy is experiencing considerable real inflation. Because of this inflation, depositors should be getting a higher interest rate on their savings, not less.

[jmowreader]

3. There is a reason money is cheap right now--American consumers either can't or won't borrow

Credit follows the same supply-and-demand rules as any other product--and if you're a bank, credit is definitely a product.

At this time, the people who CAN borrow money don't want to, and the people who want, sometimes desperately, to borrow are trapped by low liquidity, bad credit scores, no jobs or one of a hundred other reasons to be denied credit.