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Comment by ru999gol | Hacker News Reader

It seems if you save money at the bank they will actually loose money for you since their interest rate is lower than inflation. The financial market is such a clusterfuck lmao

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I'm not going to claim that finance isn't a clusterfuck - but paying people to store things securely isn't exactly strange.

If anything the amazing thing was that people would pay us to look after our money in the first place!

But I already pay them extra for that and they do work and profit with my money. You think your bank is just doing nothing with your money? I think its not too much to ask to want to at least get interest matching inflation. But go defend the noble banks why not.

Except they don't store all of it, they loan it out to other people and pocket the interest

You give them $100,000 and they store $5000 of it, at best.

If other people take their money out first you'll end up with zero, if you're lucky though a government bailout will come along and the loss is outsourced onto future taxpayers.

The bank doesn't have your actual money on hold in case you want it.

That’s kind of the point of low interest rates isn’t it? The idea is that this encourages money to move around the economy instead of sitting there accumulating interest.

But with fractional reserve banking, money isn’t just “sitting there” — most of it is being lent out to someone else by the bank.

During QE, the Federal Reserve bought huge amounts of toxic assets from the big banks, and flooded the banks' accounts with new money, but then paid the banks a higher rate of interest NOT to lend that money out (at least this is my understanding). That's a contributor to the slow "recovery" (which is really just slowly reinflating the credit bubble). The reason they would do this is to prevent high inflation from the massive increase in the monetary base. Effectively, QE just made the big banks balance sheets show "Red == Black" by having the Fed take the red onto itself.

So, normally you would be correct about the point of low interest, but in this new world, post-QE, low interest rates are really just there to keep the economy limping along by hiding the massive structural issues, instead of encouraging credit growth.

That's why the whole narrative about the Fed heroically saving the economy after 2008 crisis is pretty much nonsense, IMO. The problem still exists and it's worse than ever. Who knows what the next can-kicking solution will be, if there even is one?

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