Update July 20,2009 — High Online CD Rates
It has been another depressing week for bonds. As the stock market continues to rally (although, I’m not really sure why?), Bond prices have fallen and yields risen (bond prices and yields have an inverse relationship). This happend in June as well. In June, some certificate of deposit rates moved higher, but that hasn’t really taken place here in July.
The best online 1-year certificate of deposit rates are in the 2.50% range. Competitive rates are in the 2.00% to 2.25% range. The curve is fairly flat on terms of 1-year to 3-year. There is usually a little bonus for purchasing a 2-years CD. Most 2-year CD rates are about 0.25% higher than the 1-year, and the 3-year is usually another 0.25% above that, around 2.75%. Good 5-year rates are around 3.40 to 3.60% APY.
Typing the year and rate will produce some interesting rate data. This usually brings up a list of websites with current online interest rates. And if, for instance, you are attempting to find the hard to find 3%, you’ll probably find it within the highest twenty or so web pages. You can also search by state. For example, you could type New Jersey cd rates for rates in New Jersey
For the time being, we will probably continue to see this back and forth between the stock market and bond market. Since the banks also understand it is a back and forth, give and take, they probably won’t respond with increased online CD Rates. I think it will take the Fed to increase Fed Funds to drastically change CD rates. That may not happen for another 9-months. Keep in mind that short-term bank rates will probably increase faster than longer-term rates, eventually leaving us with a flat or mostly flat yield curve. If at some point the curve inverts again (as it did in 2006/2007), I would lengthen your terms on your certificates. Lower rates are usually just around the corner from an inverted curve. However, I think we are in for a enduring time of lower rates. The economy isn’t improving. Everytime people mention a greenshoot, indicators comes out that it really was a brownout.
Remember to visit best bank CD Rates
The article: Ben “Systemic Risk” Bernanke proves that Bernanke knowingly maintained a strict monetary policy long after he knew of the sub prime problem as he knew it would cause of the “Depression”.
It shows that he probably engineered it on purpose!
If you want to sleep tonight, Don’t Read It!
“In contradiction to the prevalent view of the time, that money and monetary policy played at most a purely passive role in the Depression, Friedman and Schwartz argued that “the [economic] contraction is in fact a tragic testimonial to the importance of monetary forces” (Friedman and Schwartz, 1963, p. 300).
…..
The slowdown in economic activity, together with high interest rates, was in all likelihood the most important source of the stock market crash that followed in October.
In other words, the market crash, rather than being the cause of the Depression, as popular legend has it, was in fact largely the result of an economic slowdown and the inappropriate monetary policies that preceded it.
Of course, the stock market crash only worsened the economic situation, hurting consumer and business confidence and contributing to a still deeper downturn in 1930.”
Governor Ben S. Bernanke
Money, Gold, and the Great Depression.
At the H. Parker Willis Lecture in Economic Policy, Washington and Lee University,
Lexington, Virginia.
March 2nd, 2004
You can read also: Preparing for the Crash, The Age of Turbulence Update: 27/07/09., which tries to accomplish Greenspan Mission Impossible:
“That is mission impossible. Indeed, the international financial community has made numerous efforts in recent years to establish such oversight, but none prevented or ameliorated the crisis that began last summer.
Much as we might wish otherwise, policy makers cannot reliably anticipate financial or economic shocks or the consequences of economic imbalances.
Financial crises are characterised by discontinuous breaks in market pricing the timing of which by definition must be unanticipated - if people see them coming, then the markets arbitrage them away.
…
The clear evidence of underpricing of risk did not prod private sector risk management to tighten the reins.
In retrospect, it appears that the most market-savvy managers, although conscious that they were taking extraordinary risks, succumbed to the concern that unless they continued to “get up and dance”, as ex-Citigroup CEO Chuck Prince memorably put it, they would irretrievably lose market share.
Instead, they gambled that they could keep adding to their risky positions and still sell them out before the deluge. Most were wrong.“
Alan Greenspan
The Age of Turbulence: Adventures in a New World [Economic Order?].
The Age of Turbulence: Plea for a New World Economic Order. explains the nature and causes of economic depressions and proposes a plausible alternative solution.