based on Roubini/depression outlook, will CD interest rates go up or down? any guess?

[zazen]

I managed to get my daughters' ESAs out on Monday, so we recovered some of their value--though I should have had the guts to act on what I was reading and get out a year ago-- and I'm a longterm credit union member. So, I'm going to open up some CDs, but I can't read the tea leaves on whether, with their lowering the rates recently, if I'm lucky to get 3.5% and should lock that in for at least a year, or if it's likely that we'll see inflation and/or with so much investment going back into banks by people fleeing the stock market that this will someone cause interest rates to rise.

Any predictions on where it's gonna go, or a couple of if/then scenarios? I know just enough to do a lot of damage.

thanks

[GliderGuider]

1. The name of the game is not return ON capital, it's return OF capital

I think worrying about a couple of points of interest here or there misunderstands the nature of the crisis. The goal is to get your money into as safe and liquid a form as possible, and be prepared to keep it in that form for the next few years. Worrying about whether you're going to get 2% or 3% on your money is a waste of effort IMO. Anything better than a negative return is perfectly satisfactory, even if it's 0% (i.e. you keep it in greenbacks in the Bank of Posturpedic). This is the big time.

Don't even worry about inflation. We may see a year or ven two of inflation, but I think it's a dead-bang certainty that this is going to be a deflationary event. When that happens, having cash on hand will make you a king.

FWIW I liquidated all my investments back in January, sold my house in April, moved to an apartment and put it all the money into federal T-Bills.

[2Design]

2. fnbodirect.com is fdic and is 3.5 without long term commitment

I suspect as with Jimmy Carter who I believe inherited Nixon mess of no war and high cost - the interest rates should go up - I would have thought they would be up now to get people to save money but banks don't seem interested in Cash from us, only from the FEDs and therefore from taxpayers as a huge group -

I am not sure anything is safe

for me I am not in Treasury because I don't want to finance the government

[Warpy]

3. Short term, they'll go down

because as businesses go under and unemployment soars, we're entering a deflationary cycle. As bad as inflation is, deflation is worse since it throws people out of work and our social safety net has been shredded to nothing by the GOPs.

I'd advise getting 3 month CDs both to preserve liquidity and to be able to take advantage of higher rates when they do occur. What I do know is that we're going to be in a world of suck for a while when liquidity will be very important due to changing life circumstances. You can get the higher interest, longer term CDs if you've got funds over and above a 6 month emergency living expense fund.

Good luck on getting 3.5%.

[zazen]

4. thanks everyone for great advice--I've got them in 6/12 mo CDs at 3.25 in credit union

This is validating to know that the consensus I did the right thing by getting their money out of something that's still going to tank and got it into something safer and more liquid.

I really appreciate it.