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Illustration: Aïda Amer/Axios
The fundamental principles of investment are being upended, perhaps irreversibly, as the world enters an era of ultra-low and even negative interest rates.
What's happening: American consumers have seen the interest rates they're paid on savings accounts, bonds and CDs tumble this year and in places where central banks have actually set negative rates — like Japan and the eurozone — some consumers are actually being forced to pay in order to save money.
Driving the news: The European Central Bank will meet this week to consider lowering its interest rate on deposits, which has stood at -0.4% since 2016.
The Federal Reserve is gearing up to cut interest rates for the second time this year when it meets later this month, and banks are already cutting rates on savings accounts.
The big picture: The low-to-negative interest rate environment poses a major problem for people looking to save for retirement.
"Young people ... are going to have to substantially increase their contributions" to retirement accounts if they hope to actually retire one day, Alicia Munnell, director of the Center for Retirement Research at Boston College, tells Axios.
Between the lines: U.S. public pension and retirement funds are currently underfunded by trillions of dollars. And, states are already in a position where they’re either going to have to raise taxes or cut benefits for future retirees — or both, notes Jeffrey Hooke, a finance professor at Johns Hopkins University.
The bottom line: A fundamental element of our entire economic system — saving earns money and borrowing costs money — is being unhinged before our eyes.
The New York Fed’s monthly survey showed Americans' expectations of inflation over the next year dropped to the lowest since the survey was launched in 2013.
The big picture: Fed Chair Jerome Powell cited weak inflation as one of the concerns that motivated the central bank to cut interest rates in July for the first time in more than a decade. Despite strong retail sales and jobs growth numbers, inflation has been stubbornly below the Fed's 2% target.
American consumers loaded up on debt in July at the fastest pace since late 2017, the Fed's consumer borrowing report found, driven by a big jump in credit card use.
Two separate surveys released on Monday showed an increase in the percentage of Americans worried about losing their jobs.
The surveys follow a worrisome trend in corporate downsizing that has been playing out for much of the year and that picked up in August.
Yes, but: The increases were minor, with both the NY Fed and Fannie Mae job loss expectation numbers falling well within the typical range of responses over the past few years.
But, but, but: U.S. companies did ramp up the pace of job cuts last month, data from Challenger, Gray & Christmas shows, with firms announcing plans to axe 53,480 jobs. That a 38% increase from July’s total.
Photo: Joe Sohm/Visions of America/Universal Images Group via Getty Images
Axios' Rebecca Falconer writes: The federal deficit exceeded $1 trillion in the first 11 months of fiscal 2019, the Congressional Budget Office said in a report published Monday.
The big picture: The deficit is $168 billion more than the same period in the previous fiscal year.
Between the lines: Per Axios CEO Jim VandeHei, Trump "promised in a 2016 interview, with the WashPost's Bob Woodward and Robert Costa, to wipe out the national debt in 8 years. Instead, he's increased the deficit and inflated the debt by trillions."