Bank rates are at the mercy of increasing public debt these days.
With a 2010 proposed White House budget that would result in a $1.6 trillion deficit if it passes Congress, the impact for bank rates would be substantial.
There are several schools of thought on what would happen to bank interest rates if the U.S. can’t bring its deficit down, but the primary impact of all this spending is to scare the U.S. consumer.
Already saddled with an employment market where at least 10% of the adult population is out of work (and millions more have likely settled for part-time jobs or have given up looking), and having seen the value of their homes decline and their retirement plans plummet, Americans are reluctant to spend with the economy so weak.
Thus, a $780 billion stimulus package; a budget-busting health care bill, and potentially hundreds of billions more potentially on a “cap-and-trade” energy bill have all set the stage for an exploding national deficit and a skittish consumer base.
History shows that when money grows scarce, bank rates rise. But that hasn’t been the case so far, even as the government borrows hundreds of billions to keep the money train rolling. In addition, economists typically worry about inflation in times of high deficits. High government debt usually devalues the U.S. dollar, causing interest rates to rise. But the problem there is that even if bank rates go up as the dollar goes down, inflation rises even more aggressively, taking even more cash out of the American consumer’s pocket.
So it’s not a pretty picture for bank rates and for consumers these days. All the more reason for BankingMyWay’s Deals of the Week to scour the banking landscape for the best deals.
This week, the focus is on three hot-button areas: bank rewards checking accounts, credit cards and personal checking accounts. Let’s take a look.