Imagine a Return to "Normal" Interest Rates

Charles Schwab: Raise Interest Rates, Make Grandma Smile - With the Fed’s near-zero policy, households headed by someone 75 or older have lost $2,700 annually in interest income.

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Normalized interest rates are also good for the economy broadly. Total short-term interest-bearing assets are today close to $11 trillion. Based on that, a 1% increase in interest rates will generate over $100 billion in increased income. And there is ample room to raise rates. Today the one-year return on a CD is just north of 1%. In a more normal environment, the annual return on a one-year CD has been about 6.15%. As interest rates begin to normalize, increased personal income will drive spending, economic growth and jobs. Will more historically normal interest rates have negative impacts on others? The cost of homeownership may be higher and borrowing in general will be more expensive. But these costs are largely born by middle-class and higher-income families and they will see that impact lessened over time through inflation. But is it fair that seniors subsidize cheaper credit for others? Most people wouldn’t think so

Long-Term Interest Rates Have Been This Low Only Twice In The Last 214 Years

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As of the close of business on Tuesday, long-term US Treasury bonds were yielding 2.83%. The long-term Treasury composite rate is a combination of bonds that aren't due or callable within 10 years. This rate is historically low. And if you mentioned that yields are "historically low" to most folks on Wall Street, they would likely say that they know that. But here's some context. This chart, via Credit Suisse, shows the long-term composite rate on US Treasury bonds dating back to 1800.

Comment: Image is screen capture from 2nd article.  With rates as low as they are,  there is little incentive to save.