Holy cow, alt134. You're a lot younger than I would have thought to not
know what a passbook is. Wonder and SG both gave pretty good explanations
regarding passbooks. They were still quite prevalent in the late 70's when
I got my first job as a teller at a local bank that hasn't forgotten who
pays the bills and keeps them in business. (Funny how a tag line that is so
repressive can be taken as a positive thing) I do remember how hard
it was for "older" people to get over the whole passbook mentality and
just accept that their money was "safe" without carrying a ledger with
them that showed how much was in their account.
No chance this will happen, but just for argument's sake, consider this
solution to Mr. Yorgason's question: Congress instructs the Federal Reserve
Bank to raise interest rates on money it lends to banks (it currently provides
near-free money to lenders – 0.00 to 0.25%) to let’s say 7%, and the
lending banks then lend that money out for home loans and other purposes at 9%,
and therefore can offer their depositors 5% interest and keep the 2% difference
as profit. In so doing, depositors would be spared from the erosion of inflation
and would be able to earn a modest--but reliable--return on their savings.Home buyers would have to pay about double the interest than on loans
now being offered, but the current low loan rate has done little to relieve the
rigor mortis of the real estate market while threatening to drag savers into
Thank you, Steven Yorgason for asking the question.“What will
it take to create an economy where an average person can earn a simple,
dependable and safe return on savings that will enable him or her to stay sabove
water?”Stop trying to live by the rules and programs of the
people who lived 250 years ago. We need to rewrite the book, change the rules,
come up to date with the needs and realities of civilization in the 21st
century. We need to recognize that people have lost the ability they once had
to provide the necessities of life and liberty. That ability has a name and a
cause. It’s called unemployment and it’s fire is fueled by the
improper operation of the capitalistic economic system. Unemployment should not be allowed. A persons success in life should depend
on his abilities and ambitions, not on the mere availability of his labor. The capitalist of today have gone too far and turned a good and proper
way for people to live into a tool of oppression. They are not evil or
particularly bad people, it’s just that they don’t know when to
@atl134Wonder is right. The term "passbook" hearkens back
to the days when you would take your savings account passbook (which was sort of
like a check register, with the account number and the name of the account owner
at the front) to the teller at the bank, and they would record in it your
interest earned on your account (typically quarterly). Passbooks have obviously
long since gone the way of service station attendants who would pump your gas,
check your oil, and clean your windshield for you.Today, they are
called "statement savings accounts", or something similar.
@alt -- Passbook savings is just the regular savings account you can get at a
bank. It's an old school term because you used to get an actual little
book that the bank could write your balance/interest earned/deposits/withdrawals
in. At least that's the way I remember it from when I was a kid.
What will it take to create an economy where an average person can earn a
simple, dependable and safe return on savings that will enable him or her to
stay above water? Interest rates that are much less attractive to borrowers.
Banks used to pay you interest for the money you put into an account. Now
you pay the bank for the privilege of putting your money in their bank.That is why I put my money in a credit union. they do not pay you much; but
at least you do not lose money in your account.Banks could get by without
charging customers, but why should they?Its not like if they fail; the
federal government will not force us all to bail them out.
SEY,I don't know about the 1960s (in terms of interest rates on
passbook savings). During my adult life, passbooks have never yielded much
above inflation - at least not for long. And, from the rather large fees now
being charged to small deposits I assume small deposits are less valuable to
banks today.Part of that is likely that deposits are less stable
than they once were and are not seen by banks as reliable. Back in the day,
deposits were more stable and banks valued them more.Of course there
is also the rise of non-banking options (some sold by banks) in the form of
money market accounts and mutual funds.Online banking can offer some
better rates (especially on CDs where the accounts are guaranteed to be more
stable given the penalties).Not sure what else to say.
Twin Lights:The inflation rate in 1960 (according to the BLS) was
less that 2%, yet passbook savings at that time were in the 5% range, plus or
minus. I'm pretty sure when I had a passbook back then, I was staying
slightly ahead of inflation. What changed? People then were smart enough to use
passbooks accounts frequently. Now they're smart enough not to. Something
is not making sense. How am I supposed to stay even or maybe get ahead like I
could then without taking on riskier investments?
Anyway, interest rates are based largely on interest on the debt rates the
gov't pays. Right now those rates are so low that a 10yr US debt investment
actually would pay out less than inflation because the US dollar is such a safe
investment (well, until maybe the tea party makes us crash into the debt
ceiling) that people are willing to buy US debt for less.
I've never heard of the term passbook before. Is that just referring to
normal bank/credit union savings accounts everyone has and passbook is just an
old school word used for it?
Once upon a time, the banks needed depositors so they would have capital to
loan, even offering free toasters etc., to new depositors.That is no
longer the case. They can borrow from the Federal Reserve at very low rates.
By regulation, they must continue to offer savings accounts, checking accounts,
and other services, to the public.Until, unless, the Federal Reserve
is abolished, don't look for any change to your savings.
SEY,Reference passbooks, perhaps I should have said “the best
they will do is keep up with inflation”. They are not going to return
much if anything above that even in other times. They are a safe place to park
money and are essentially a cash asset. Nothing more.Beyond
conspiratorial explanations (which, I assume you are not interested in) the
govt. mostly (not in every case, but mostly) changes the measurements to fit the
realities on the ground. How do you account for the price of a 1960s iPhone? I
certainly do not feel like I am experiencing 9% inflation currently (and my
income has been relatively flat). So, the answer to your final question is
both were right at the time.
Twin Lights:Two things: first, my credit union is currently paying
0.10% on "dividendes," which is their version of a passbook account.
Checkbook savings can be as high as 0.55% The latest CPI is 1.8%. Please comment
on how savings are keeping pace with inflation.Second, John Williams
of Shadow Government Statistics has been keeping track of how the BLS has
changed their methodology over the years for calculating the CPI. Using 1980
methodology, the CPI would currently be at about 9%. Even using 1990
methodology, the CPI would be above 5%. If I were staying current with inflation
in, say 1960, with a passbook savings rate of 4%, shouldn't I be earning at
least 9% with a passbook account today since they were using the earlier method?
How did banks in the past afford to overpay me if the 1960 methodology was wrong
and today's is right?
The Fed Reserve sets interest rates. If a bank can borrow from the Reserve at
less than 1% why would they pay more on savings accounts. If interest rates
were allowed to rise to 3 to 4% that would triple the interest on our 16 (soon
to be 17) trillion debt, and our house of cards would collapse.
Passbook savings interest rates essentially mirror inflation. With low
inflation comes low interest rates on savings accounts. All you can do with a
passbook account is keep pace with inflation. You do not actually earn