Wednesday, December 07, 2011

Nonflation Non-story

There is a PG story on a McKeesport councilperson upset that some cash in the city budget there was deposited in an account with a ZERO PERCENT INTEREST RATE.

The caps are just my channeling of the anger the local councilperson seems to be exhibiting if this has been raised to an actual news story. 

I really hate to say that this may rank as the non-story of the day.  I presume that any cash on hand in McKeesport is really a short term holding based on the timing of revenue and expenditure, not some long term investment they are investing with a multi-year horizon.   Anyone can look at the short term interest rates these days.   The one month t-bill is actually showing up as ZERO percent.

The 3 month interest rate is .01..  Not as in 1% but 0.01%, and for those who don't realize it those are annual rates.  So for the $14 mil in question, a 3 month CD of some sort would earn $1,400 annually.  Over 3 months we are talking $467.   Now let's talk about fees associated with all of this or maybe just the opportunity cost of the time spent debating this on their council. 


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