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Germans Worried As Low ECB Interest Rates Hit Savings

Monday, November 25, 2013 - 5:07 PM
We are not the only country feeling the wrath of central bankers...

As the European Central Bank pushes interest rates to a new low, Germans are growing increasingly concerned about their savings. The money in their accounts is losing value and life insurance policies are yielding lower returns. Investors and central bankers feel trapped.

Germans Worried as Low ECB Interest Rates Hit Savings - SPIEGEL ONLINE
4
ShorebreakShorebreak2,683 posts since
Apr 6, 2010
Rep Points: 14,546
1. Monday, November 25, 2013 - 5:39 PM
One of the most disturbing problems in the article, to me, is that the insurance companies are not being able to pay off what was expected in policies.  When insurance companies can't find a way to make the money needed for payouts, we know we are in really deep trouble.  These low interest rates are beginning to be the "black plague" for finances and unfortunately, there may not be a cure for it.  These are frightening times to be living in especially for the younger generation hoping for a better future.
3
paoli2paoli21,401 posts since
Aug 10, 2011
Rep Points: 6,135
2. Monday, November 25, 2013 - 6:29 PM
Gee, remember this?

"AIG seems to have thought CDS were just an extension of the insurance business. But they're not. When you insure homes or cars or lives, you can expect steady, actuarially predictable trends. If you sell enough and price things right, you know that you'll always have more premiums coming in than payments going out. That's because there is low correlation between insurance triggering events. My death doesn't, generally, hasten your death. My house burning down doesn't increase the likelihood of your house burning down. Not so with bonds. Once some bonds start defaulting, other bonds are more likely to default. The risk increases exponentially."

http://www.reuters.com/article/20...7272008091
3
ShorebreakShorebreak2,683 posts since
Apr 6, 2010
Rep Points: 14,546
3. Monday, November 25, 2013 - 7:04 PM
Then why wouldn't that theory hold true for the Germans?  Why are they having such problems with their insurances?  Just curious.  Thanks.
2
paoli2paoli21,401 posts since
Aug 10, 2011
Rep Points: 6,135
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