Not just Cyprus! Who Else Has Plans To Grab Small Depositor Savings To Bail Out Failing Big Banks?

[Benton D Struckcheon]

15. I don't want to totally hijack this so I'll start a new thread on usury itself,

however, to answer your question, the rate banks are going to either give you on a deposit or charge you on a loan is tied to what they can get risk free via buying and selling Treasuries.
You have to put yourself in the shoes of a banker. Would you give a customer more for his deposit than you could make on a Treasury, given that with the Treasury bond you know the term of the deposit, that is, if you buy a 10 year, you've got that money for those ten years, whereas if the banker takes a deposit from you, he'd have to guess how long you keep it with him.
Unless of course you buy a cd, and there of course the rate is going to be tied to Treasuries, as they aren't going to give you much more than what they could get from buying a Treasury. Unless they desperately need cash for some reason. In that case you have to ask yourself a very sensible question: why do they need my cash that badly? You may not want to give it to them if it looks too good to be true.

My basic rule for everything is this: every basis point (one hundredth of a point) you make over the prevailing Treasury you make because there is some risk you're taking. You have to think this way, especially today. Those rates may seem too low, but if someone offers to pay you more for your money than the prevailing Treasury rate for the term (one year, two year, whatever) it's because they're taking some risk with that money. In the case of a bank it's lending your money on to credit card customers, homebuyers, and so on.
Interest rates are a measure of risk. The more you make over Treasuries the more risk you're taking. Most people don't realize this. Burn that into your brain. It's valuable information.