15/5/20: Generational Effects of Ultra Low Interest Rates


Just because jobs are so plentiful and careers are so rewarding in terms of potential growth in life cycle income. the Millennials are really cheering their future in the Social Mobility Central, the US of A... oh, wait, sorry, theatre of absurd is so 1990s...

Here is the chart showing returns on savings for the already financially-distressed younger generations, updated through March 2020:


Things are ugly. In March 2020, retail nominal deposit rates for 3 months-duration Certificates of Deposit in the U.S. banks have fallen from December 2019 levels of 1.76% (annualized) to 1.35%. This is the lowest level since November 2017.

Think of the longer term comparatives. During the decade of the 1960s, average nominal rate of return on 3mo CDs was 5.51% with real return of 4.76%. In the 1970s, this rose to 7.27% and 5.66%, respectively. Through the 1980s, nominal average was 9.89% and real average was 8.73%. In the 1990s, things crumbled, with the nominal savings returns falling down to 5.32% and real rates down to 4.75%. The first decade of the 2000s saw nominal rates averaging 3.2% and real rates falling to 2.67%. And over 2010-2019, average nominal rate was 0.76% and average real rate was 0.39%.

Yes, avocado and toast are killing Millennial's financial wealth. Not ultra low returns on savings.