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Durumbuzafeju t1_jeeaq3o wrote

This might be a dumb question but where does this money go? People/companies are keeping billions in safes?

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JPowsSecretlover OP t1_jeebdkw wrote

Half of it goes to bonds / money markets

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Only-Shame5188 t1_jeei0qp wrote

I moved some money out of my savings into VMFXX to get a better return.

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SuperDadTrapp t1_jefeam1 wrote

Can you tell me a little bit about this?

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conkers15 t1_jefmg9y wrote

If you don't need cash on hand for anything right now, you can buy VMFXX and make more money than if you let said cash sit in a bank that probably pays you close to nothing in interest.

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SuperDadTrapp t1_jegxqw6 wrote

Awesome I got some cash to spare for investing. I like the way it sounds I’ll do some more research thank you

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Sattu10 t1_jeen9y1 wrote

So it’s just moving from consumer banks to investment banks.

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EducatorReasonable51 t1_jeemvv5 wrote

Who wants to park cash at .5% at your bank when you can park it at 4%+ in money market accounts or bonds and 5%+ in a medium term CD?

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markgriz t1_jeez3gp wrote

If your bank is paying you 0.5% on your cash, find a better bank.

Capital One is currently paying 3.4% on their savings accounts. Discover is paying 3.5

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Trest43wert t1_jefj29b wrote

This is a big part of the story - many banks can't pay more than 0.5% interest because the money from their deposits are locked up in low interest loans from the past. Their overall portfolio may average 2% given that they had to sell recent bonds to fund outflows to money markets. Basically, bank holdings have dwindled to the assets with shit yield and they are trying, and failing, to pass that shit yield to grandma's savings account. Grandma aint having it so they sell more assets. Spiral ensues.

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Chishuu t1_jef1pjl wrote

UFB is paying 5.02%

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markgriz t1_jef2wmv wrote

I saw that. Read the reviews, sounds like a nightmare

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Chishuu t1_jef5acl wrote

How so? Seems to be solid

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ItsDijital t1_jefddsq wrote

Ally has a no penalty CD at 4.75% 4.35%

https://www.ally.com/bank/no-penalty-cd/

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Chishuu t1_jeg1xaj wrote

Yes, but there’s a 18 month hold. And there are penalties for withdrawing early. And it’s 5%.

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ItsDijital t1_jeg5r55 wrote

No, the minimum holding time is like 6 days. That's what makes it "no penalty".

Edit: it's 4.35% now

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Chishuu t1_jeg73es wrote

Ah, I didn’t see the no penalty link. Thanks.

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mogarottawa t1_jefoixd wrote

This is just a dumb take. Anyone who had 100k+ cash would not be sitting on 100k+ cash unless they need to use it in the short term. People who have 100k + ash are not dumb enough to not invest that money if they don't need it. Anyone sitting on 10k or less cash is not going to bother buying bonds. This mythical millions of people who has been holding a lot of cash in their bank account story is just BS.

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Celtic_Legend t1_jeepttk wrote

Money markets. Even retail is pulling out. Why keep money in bank for 0.02% interest when fidelity will automatically put any unused cash in their 4% yield money maket. Other brokers offering similar.

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W2ttsy t1_jeetq02 wrote

Man what is going on with your banks where interest rates are still this low with such high inflation?

Here in Australia 4.25% is about the average savings interest you can get on any standard bank account. Higher if using fixed term deposits or saver accounts.

I mean I’ve got my money parked in an offset account on my mortgage netting me a guaranteed 6.09% return (more if there are further rate rises) and far less volatile than anything I could buy on the ASX or NASDAQ.

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Celtic_Legend t1_jeeuvdb wrote

My guess is that getting a full 6-8%+ return with less customers is more profit than retaining customers by offering 4% and making 2-4%.

Small banks are happy to offer 5% right now though. Bank of america and chase are offering essentially 0% which are the 2 biggest banks. Cba googling more.

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tjonesmachine93 t1_jeh225l wrote

Because banking is sticky. People are more reluctant to change banks than cell phone providers. Consider a big bank like BofA with $2T in deposits. Let’s assume 1/3 is just going to be your average Joe or Joe’s plumbing with 10-20k in checking accounts and another 20k in an emergency savings account. Those accounts are yielding 0.02% currently and have been (or less) for a while. So the price to service these accounts is 130M annually. If they were to just automatically pay a competitive 3-4%, that 130M goes to $20B. They know they are too big to fail and if they experience a run the fed will are in, which they have already. Large banks have literally no reason to pass along a good interest rate to customers bc, frankly, they don’t want their deposits.

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Trest43wert t1_jefjejx wrote

Bank bond portfolios are filled with low interest bonds from a few years ago. They are stuck with them and are unable to pay more yield given how their bonds are positioned. Its a death spiral.

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dayby_day t1_jef1ebo wrote

Money market accounts are still bank accounts, they just pay higher interest. So banks still have the money, they're just paying mote for it.

This isn't going to make banks insolvent, it's just going to pinch margins because the cost if funds are going up. It's a profitability issue not a liquidity issue.

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SwimmingEnd1 t1_jef3b2d wrote

The reason why OP’s chart doesn’t tell the whole story is assets may be leaving deposits, and going to MMAs or CDs, but those MMAs and CDs are offered by banks. So net 0. A lot of grasping at straws to convince people we’re about to be in some major depression. It’s just not the case.

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josephbenjamin t1_jeh0qtw wrote

Lots of people get credit from regional banks while big banks are stringent and under heavier “regulation”. If more regional banks close up or tighten up, it will create massive credit crunch. With bond prices up, you will essentially have low credit availability, since people can be more picky. It’s not simple math as most people assume. You can’t solve calculus formula with arithmetic level knowledge. Many issues are involved in this.

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Goracij t1_jegbbd1 wrote

This. One should look not where money were, but where did they go. And at this moment I can see only one place - the stock market and bonds.

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