A Real Life Scenario

I work in the financial industry – for a Credit Union actually. Working in this industry, coupled with my understanding of economics from my Business Degree, I feel I have a fairly good grasp on market mechanism movers and what stimulates the economy.

Over the last year, I witnessed first-hand how consumer confidence in the market has plummeted. People have flooded the banks with deposits – getting their money out of the market – and saving instead of spending. People are upset, and they tend to pick the path of least resistance when it comes to blame. They blame the banks, and they blame those big bad, out-to-get-you corporations. It isn’t helping anything that we have a President in office assigning blame to everybody except where blame is actually due -- to bad government policy and legislation which in reality goes back to the Clinton years.

Describing how the current economic crisis came to pass would actually take a whole separate article, which I may oblige at a later date, but for now – suffice it to say that government was actually the main culprit for the bad economy – not just the banks or corporations. Liberals incessantly cry about how horrible banks and corporations are, when in reality, banks and corporations are actually some of the best job creators, producers, creators, innovators of technology, and stimulators of our economy. Inhibiting our job creators and producers with high taxes, stifling regulations, and disincentive to excel in the market just hurts the middle and lower class – the very people the Democratic Party claim to represent.

Anyway, at work, I respond to members emails. I have to share this email and my response. This member wrote because he was upset over the fact that interest rates on deposit accounts are so low. I hope my response made him think a little…

Here is the email:
“Every month, without fail, like clockwork you drop your interest rate on my money market. This really starts to look contrived, to gradually eliminate the interest completely. I would like to see just one month when you don't automatically lower it. The bad economy only goes so far as an excuse.”

My response:

Dear Member:

Thank you for your correspondence. I apologize if you feel that it is “contrived” that the Credit Union and financial institutions have had to lower interest rates on deposit accounts over the past year. The Credit Union's interest rates on deposit accounts is still well above the national average. Our lowest rate on a Money Market account right now is .5% while the national average is .32%. Although I know low interests rates are not desirable to consumers, low interest rates on deposit accounts are a sign of low consumer confidence in the market. Until people start to increase their spending and taking money out of savings, you can expect to see interest rates at very low numbers.
Contrastingly, if you see a financial institution offering uncharacteristically high interest rates it is actually a sign that they are in desperate need of liquidity and funds. Thus, it is a signal that their financial viability and solvency is precarious. As a member of the Credit Union, you are an owner, which means we take your opinion and concerns seriously. We are in no way attempting to restrict interest rates on members just because we want to. Once consumer confidence rises and people start spending more you will see interest rates increase.
I recommend making a concerted effort to help elect legislators and politicians that actually help consumers stimulate the economy by providing incentive to spend. When legislators enact policy that increases taxes, hinders small business, and inflates government programs, consumer confidence and spending dwindle.
Please feel free to call the Credit Union at ***-***-**** or ***-***-*** and a representative will be happy to help you further. We appreciate your business and continued support of the Credit Union. Please let us know if we can be of further assistance.

Thank you,

Noah Kline
Member Representative