Hi Toof, Re: "Normalized" interest rates on PB savings or MMFs.....
Historically the 13 Week Treasury Rate has been higher than inflation as you mentioned. Interest on passbook savings and money market funds are linked to short term interest rates.
However, interest rates and inflation have been inverted for many years with inflation higher than savings. This is through FED intervention. I guess what I meant was to say if PB Savings and MMFs interest is to rise to something more market driven (as apposed to Egghead driven) we should see rates return to something better than inflation and also far higher than today.
As interest on savings rises, AIM does better as there is less cash drag on the total performance. So, if your core portfolio is geared to produce 5% yield from the invested side and cash pays 4%, the total package is better than 5% on investments and just 0.9% on cash.
I fully agree that penalizing people for frugality is essentially very bad psychology. It's like punishing the best students in the class. Only a numbknutt IRS tax law planner would think it a good idea.
We can only keep writing to our senators and congresspeople and hope someone there can read.
