April 2019

Cost of Money

How Much Does Money Cost?

The Federal Reserve Bank of St. Louis caught my eye with a tweet the other day: “If you would know the value of money, go and try to borrow some.”  This quote from Benjamin Franklin got me thinking about the cost of money and how it impacts a few different aspects of financial life.  The St. Louis Fed was looking at what it costs the unbanked to borrow their next paycheck, but it is instructive to look at interest rates as they relate to things like the pensions and housing, too. Pensions Despite ten years of stock market gains, many pensions are underfunded.  Much of the blame has gone to retirement systems overpromising unrealistic payouts.  Their assets haven’t returned as much as expected, providing a double whammy.  The investment research guy in me wants to dig into the underlying investments and asset allocation.  Many pensions got hurt by stocks during…