That's eye-opening.
tl;dr: You will receive $10,000 in 10 years by investing $6,140 today in the world's safest security.
tl;dr: You will receive $10,000 in 10 years by investing $6,140 today in the world's safest security.
In other words, if in 2033 a stick of gum is $10000, which implies there was high inflation between 2023 and 2033, which likely means Fed increased rates even more, wouldn't that cause your rate of return to go above 5% and therefore roughly maintain the value of your assets (assuming Fed keeps interest rates above inflation)?
Invest $6,140 at 3.0% (2% inflation) compounding for 10 years = $8,269.69
Invest $6,140 at 2.5% (2.5% inflation) compounding for 10 years = $7,871.71
Invest $6,140 at 2.0% (3% inflation) compounding for 10 years = $7,491.97
The likely reason you see banks offering high interest CDs, is because it facilitates them slowly rolling over their long term bond portfolios by attracting CD investment. Especially if they are beating the 1 yr treasury rate, they are losing money to lose less than they would rolling over their bonds.
An unfortunate thing for the banks is that CDs aren't as attractive as they were in the past because technology (ETFs, internet brokers) have made treasuries more accessible