Letter: Institutions can entice borrowers to start saving more

Published: Saturday, Oct. 6 2012 12:00 a.m. MDT

Michael Brandy, Deseret News

Financial institutions derive their profit based on the "spread" (usually about 4 percent) between what they can loan money for and what they have to pay in interest on savings. In our society, as these institutions compete to satisfy society's "thirst" for borrowing, the "spread" kills the ability of savers to earn any interest on their savings.

If loan rates were to jump to say 10 percent, institutions, in theory, could pay 6 percent out in interest, without hurting their bottom line. This might help borrowers think twice about going into debt and maybe even entice them to start saving more.

Jeff Porter

Sandy

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Curmudgeon

Salt Lake City, UT

"in theory"

Your theory doesn't match reality, Jeff. You forgot to factor in competition among financial institutions. Suppose Bank A decides to loan money out at 10%, and pay 6% interest on savings accounts, while Bank B More..

6:23 a.m. Oct. 6, 2012
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Eric Samuelsen

Provo, UT

Yeah, that's exactly what our economy needs. More money sitting on the sideline. We're in a demand side recession. Spending is good.

6:44 a.m. Oct. 6, 2012
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a bit of reality

Shawnee Mission, KS

The fundamental problem with the economy isn't that there isn't enough savings. Quite the opposite, actually. In aggregate, people are more inclined to save than to borrow. It is this macro-economic reality that has driven down interest More..

11:28 a.m. Oct. 6, 2012
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