16 December 2008: The Fed cuts rates to zero
The Federal Reserve cut its key interest rate to a range of zero to 0.25 percent, the lowest in its history, and promised to use every tool to fight the crisis. Savers were about to enter a long era of earning almost nothing on cash. Rates stayed near zero for seven years, a period in which stocks, bonds and real estate rallied hard while cash under the mattress quietly lost value.
The lesson: Zero interest rates punish savers and reward anyone who owns productive assets.
What it meant for investors
$1,000 in US Treasury bills (cash) at the start of 2008 → $1,262 today, vs $4,626 in the S&P 500.
We start the clock at the start of 2008, the year it happened. That is 1.3 times the money, but $3,364 less than a plain index fund made over the same years.
What US Treasury bills (cash) teaches: Cash is safe in nominal terms only; over long periods its real return hovers near zero, so the price of safety is giving up growth.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2008 | $210 | $1,262 | $4,626 |
| 2010 | $212 | $1,250 | $6,071 |
| 2012 | $213 | $1,244 | $5,312 |
green = beat the S&P 500 · red = lost money
What if you bought US Treasury bills (cash)? Every starting year and the full story →
More US Treasury bills (cash) history
- 16 May 2000: The Fed raises rates by half a point to 6.5%
- 30 June 2004: The Fed starts its first rate hikes in four years
- 23 December 1913: The Federal Reserve is born
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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