Savers are Losers
The primary reason why investors do better when there are lower interest rates is simply because investors use debt to finance assets. The income from those assets covers the debt payment and provides cash flow every month. A lower payment on debt simply means more money in cash flow.
At the same time, most people use debt to finance liabilities such as their homes, cars, and college educations. Those things take money out of their pockets.
interest rates will go back up. But that will happen only if the economy recovers. As it stands now, the stimulus payouts are fading and state and local governments are cutting back, which means the economy will sink rather than rise. This means debtors who use debt to invest in assets will be the winners for a while more. Financial education is more important than ever before. It’s vitally important to know the difference between assets and liabilities.
After 2007, when the subprime mortgage bubble began to burst, many people found out how big of a liability their homes really are…especially if they lose their jobs.
take some time to learn more about money. The money of my parents’ generation, the World War II generation, is not the same as the money of today’s generation.
Today, savers are the biggest losers, and they will continue to lose for years to come, simply because, after 1971, the rules of money changed.
At the same time, most people use debt to finance liabilities such as their homes, cars, and college educations. Those things take money out of their pockets.
interest rates will go back up. But that will happen only if the economy recovers. As it stands now, the stimulus payouts are fading and state and local governments are cutting back, which means the economy will sink rather than rise. This means debtors who use debt to invest in assets will be the winners for a while more. Financial education is more important than ever before. It’s vitally important to know the difference between assets and liabilities.
After 2007, when the subprime mortgage bubble began to burst, many people found out how big of a liability their homes really are…especially if they lose their jobs.
take some time to learn more about money. The money of my parents’ generation, the World War II generation, is not the same as the money of today’s generation.
Today, savers are the biggest losers, and they will continue to lose for years to come, simply because, after 1971, the rules of money changed.
