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Online Savings & Money Market Account Rates 2022

Online Savings & Money Market Account Rates

Recent Articles


The Federal Gas Tax Was A Huge Climate Change Initiative Missed By the Obama Administration: Biden Can Fix It Now

The Democrats last controlled the Senate, the House of Representatives and the Presidency in the 111th Congress from January 2009 to January 2011.   For most of that time, crude oil prices ranged from $100 to $120 a barrel.  Oil prices crashed in 2014 and have remained largely below $60 a barrel since then.

One of the challenges that we have faced as a society in the intervening years has been to reduce our dependence on oil in order to lower CO2 emissions and to meet the Paris Climate accord standards.   We have done very little to mandate that automobiles become more efficient, and while some states have added small state-level taxes on gasoline, we have had no new federal taxes on gasoline.   As a result, driving is essentially free.   Buying a Tesla would have given you a $7500 tax credit (which it no longer does) but - for anyone crunching the numbers – the actual cost of gasoline remains virtually inconsequential in the purchase decision about whether to drive a Tesla, a hybrid Lexus or a gas guzzling Cadillac or BMW. 

The missed opportunity of the 111th Congress was to begin a transformation by guaranteeing to American consumers that they would always be paying the same price at the pump that we were paying when gas was at $100 to $120 a barrel (about $5 / gallon along the East Coast and in California).  This would have been palpable to the American consumer at the time and it would have forced all automakers to become more efficient over the last decade or to face erosion in demand for their vehicles.

Because that opportunity was missed, we are left with an odd environment where we are continuing to give incentives to electric cars that may or may not be the answer to our environmental issues long-term.  Rather than focus exclusively on incentivizing electric cars through tax breaks, the US needs to implement a gas tax now which will meet much more resistance if it were to come anywhere close to bringing prices back to that $5 level.   Such a tax will fund infrastructure, will result in more environmentally friendly ride sharing, and will lay the foundation for a much quickly move into more efficient vehicles.


Bask Bank Is A Very Compelling Option For Anyone Looking to Travel in the Post-COVID-19 World

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We are still in the midst of an horrific pandemic but we have vaccines going in arms now and that is a good time to look at how and when you are going to travel when this pandemic ends and it becomes easier to do so.

I last wrote in some detail about Bask Bank's proposition in February, having first written about it in December 2019.

I found Bask Bank very compelling when it was launched by Texas Capital Bank back then.   It provided a chance to earn lots of American Airlines AAdvantage® miles instead of cash.   Since I frequently have extracted 5 to 6 cents in value per mile when redeeming AAdvantage® miles for tickets to Hawaii or Europe, I advised folks to consider seriously stocking up on this AAdvantage currency with rates so low.

The comments to these two articles are full of analyses by readers comparing interest income with miles, both before and after considering tax consequences (Bask Bank will send you a 1099 that reports all miles earned at 0.42 cents per mile).  While I found Bask Bank to be instantly compelling since I value AAdvantage® miles so highly and did not view a detailed pricing mechanism, these readers’ analyses showed that in many scenarios they were effectively purchasing AAdvantage® miles for under a cent a piece when compared to the prevailing interest rates at the time.

Since those articles were written, we went through a period where nobody was thinking about traveling or earning airline miles.   But, as we come out of that period, it is clear that American is going to survive and AAdvantage® miles will again have value to those who want and need to travel by air.

At the same time, interest rates have come down dramatically and they aren’t about to rise any time soon.  While the small promotions that Bask Bank offered earlier in the year are largely expired (you will still earn 1,000 AAdvantage® miles for a new account with over $5,000), Bask Bank is still offering 1 point per dollar on deposits annually.   Since the best online savings rate is now 0.75% APY and most of the top online one-year CD rates are below that level (compare online CD rates here), those who crunch numbers will find that you can now effectively buy (or earn) AAdvantage® miles at well under 1 penny a point.

And, for anyone who travels or is familiar with the American AAdvantage® program, that is a no-brainer.

 


Federal Reserve Holds Fed Funds at Zero to 0.25 Bps; Cash Looks Like a Loser

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Federal Reserve Chairman Jerome Powell has ended 2020 with all sorts of dovish, benign language, holding monetary policy as easy as possible.

He isn’t forecasting any rate hikes before 2023, with only one Fed governor suggesting that rates will rise in 2022.    The Fed continues to target inflation around 2.00% and will ultimately like to see the Fed funds rate around 2.50%.   At the same time, the Fed remains committed to using its full range of tools until the pandemic ends.   Since the prevailing view on Wall Street is that the pandemic will end and the Fed will taper its bond buying in 2021, the yield curve is widening following this Fed’s announcement.

The Fed’s policy is the one that helps financial managers and puts support beneath the US stock market.   It isn’t the right policy for maintaining the purchasing power of the dollar.  And, it is a policy that is unfortunate for an aging (and increasingly risk-adverse) population where interest does not come anywhere near the rates required to maintain real wealth.

Yet, it is the prevailing view that it is the right policy for an economy grappling with a virus, and it is becoming the unanimous view that President Biden and Treasury Secretary Janet Yellen are going to reappoint Jay Powell.  So, it looks like cash is going to be trash for a quite while.

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