another indication that this economic recovery
if they kept the money in cash, seeking to
DVD ripperavoid all risk, this is their reward: 0.05 percent.
Now does that sound fair? Of course not.
That said, the current spread between Treasury rates does offer encouragement that things will get better for the economy, and for savers. The last two times the spread between the one-year and 10-year Treasuries approached this level were in 1992 and 2003. In each case, that happened as slow recoveries after recessions were finally about to accelerate.
That such a large spread has come this soon after the 2007-9 recession is another indication that this economic recovery is likely to be much stronger than many anticipate.
After America’s previous banking crisis, in the early 1990s, a steep yield curve helped banks to earn good profits at low risk. They could borrow from the public at very low rates, and charge much better rates on loans. If they saw few attractive loans, they could still earn good profits just by buying Treasury securities. That yield curve literally saved some banks, among them Citibank.
It did that at the cost of discouraging lending, since there were risk-free profits to be made while the banks cleaned up from the mess their all-too-risky previous lending had produced.
That could be happening again.
Much of the talk about whether the Fed should keep rates low focuses on the risk of higher inflation if it does so, or the risk of a new recession if the Fed allows rate to rise
DVD ripperto anything close to normal levels. Perhaps the toll on savers should also get some attention.
