US interest rates and inflation are on the rise again, which means Americans can expect to pay higher rates for mortgages, auto loans, and credit cards. But don’t expect it to lead to higher interest on your savings account anytime soon.

Banks don’t want your money. That’s why they’re offering such low rates.

Today, the average US savings account pays 0.06 percent interest annually. Put another way, in one year a saver will earn just $6 in interest on $10,000 in deposits. Even many of the top online “high-yield savings accounts” in the US pay a negligible 0.5 percent interest annually. And the average one-year certificate of deposit (CD), typically one of the highest-yielding savings vehicles, pays 0.15 percent.

While savings accounts and CD yields are at historic lows, inflation this year is expected to increase at the fastest pace since 1991, eroding consumers’ purchasing power and reducing the value of their dollars. Normally, high inflation leads to higher interest rates that translate to higher rates on savings accounts as banks seek out deposits. But that’s not the case in 2021.

In July, Americans who put their money in savings accounts were hit with the most negative real average savings rate in US history: -5.34 percent.

At that rate, $10,000 deposited in a savings account would be worth only $9,460 in equivalent dollars at the end of a one-year period. In essence, the saver loses $540 in buying power to earn $6 in interest.

Yet, Americans are pouring money into savings accounts at a historic rate. The US personal savings rate in 2020 rose to 13.7 percent, the highest in the 62-year history of the measure; in 2021, it has so far averaged near that rate. 

The buildup in savings is the byproduct of a confluence of events related to the Covid-19 pandemic: a reduced ability to spend on service-related purchases such as dining out and travel, government support like stimulus checks and enhanced unemployment benefits, and fear that the February 2020 to April 2020 recession would cause financial instability and wide-ranging job losses. It was also a call to action for many, as more than half (51 percent) of Americans have less than three months’ worth of emergency savings.

However, financial professionals say the call has now gone too far, especially given the paltry payoff for those who save.

“We are seeing clients with too much cash in their portfolios, and that could impact their purchasing power,” says Michael Briese, a senior vice president and private client adviser at J.P. Morgan Wealth Management. “Think about it this way: If the economy grows and prices rise but your savings stay the same, what you can buy with that money shrinks in the long term.”

Banks have been inundated with deposits from consumers since the start of the pandemic. Cash assets at commercial banks totaled $4.7 trillion as of September 15. That’s more than double the $1.8 trillion of cash held at such banks in February 2020.

The trend is a reversal of the one that had been in place from 2014 to 2019 when Americans — seemingly fed up with near-zero returns on their savings accounts — started pulling money out of commercial banks. Between October 2014 and October 2019, commercial banks’ cash assets declined from just under $3 trillion to around $1.7 trillion.

“All this money has been deposited but banks can’t find good loans to make,” Gary Zimmerman, founder and CEO of fintech savings vehicle MaxMyInterest, says. “There’s been a big slowdown in lending, and because banks have more deposits than they can find a home for, their only option is to try to lower their interest rates to get you to go away. Large lending institutions are actively hoping you’ll withdraw your money.”

Data from the Federal Reserve show that as deposits have grown, loans have fallen, in large part because banks are also socking away money in the form of securities guaranteed by the federal government. And while mortgage lending has largely held up, thanks to the booming US real estate market, commercial and industrial loans have been in freefall since May 2020, declining by nearly 20 percent.

The share of total assets devoted to loans at the 25 biggest US banks fell to the lowest level in the nearly 36-year history of the Fed’s weekly data this year. The ratio of loans to deposits at US banks also fell to its lowest level on record in the second quarter, according to S&P Global Market Intelligence’s database, which dates back to 2003.

In theory, banks need deposits to be able to make loans, which are their primary revenue driver. But in reality, the Federal Reserve — the all-powerful central bank of the United States — pushed the reserve requirement ratio (RRR) to zero percent in March 2020. 

The RRR is the ratio of actual cash banks must hold in relation to how much money they lend. If the reserve requirement ratio is 10 percent, banks that want to lend $100,000 must hold $10,000 in cash. With the ratio at zero, commercial banks have the ability to lend much more money without needing a corresponding increase in deposits.

In addition to taking RRR to zero percent, the Fed also has been flooding markets with cash through its quantitative easing (QE) program since March 2020, pushing $120 billion into the economy every single month. That gives banks further access to capital and even less reason to incentivize consumers to save or make deposits.

Making it unattractive to save is a feature, not a bug, of the Fed’s policy. Low interest rates and abundant capital are intended to push consumers to buy instead of save or to take additional risk and do things like start a business or take out a second mortgage on a home in order to spend more money. 

The goal is that this money gets out into the economy and encourages businesses to hire more workers and pay them more money, furthering a virtuous circle of spending that benefits everyone.

But some argue that the Fed’s extraordinary support since the start of the pandemic has not helped the economy as much as it has fueled asset bubbles in stocks, real estate and even commodities as more investors borrow money that they use to speculate in these markets.

The effects can be seen in the rise of not just the overall stock market and housing prices, but in cryptocurrencies (hailed as a savings asset that the Fed can’t manipulate), the frenzy in “meme stocks”  like GameStop and AMC, and in the skyrocketing price of trading cards, art and things like non-fungible tokens, or NFTs. 

Investors are largely just following the lead of US companies, which borrowed a record $1.3 trillion last year and held a total of $13.5 trillion in debt for the 2020 financial year.

Large companies are able to eschew banks and traditional lending by borrowing money in public debt markets through bond issues, meaning they draw money from investors as loans that are paid back with interest over time.

The Fed helps here as well. By lowering US interest rates and buying U.S. government bonds through QE, the average amount companies have to pay in interest is near the lowest it has ever been. That’s especially important for risky companies with “junk” credit ratings that would otherwise find it very expensive to borrow.

In light of this new environment, some wealth managers like Douglas Boneparth, president of Bone Fide Wealth, are encouraging their clients to adopt a similar strategy to corporations.

Boneparth, who works primarily with older millennials, typically advises his clients to hold nine to 12 months of living expenses in cash. But he is now suggesting that some clients who have stock portfolios or own their home open up lines of credit backed by those assets instead of holding all that cash.

“What it really boils down to is [that] having too much money out of the market is a missed opportunity to compound your wealth,” Boneparth says.

Because it pays so little to save and costs so little to borrow, Boneparth advises some clients to have six months of living expenses in cash and the equivalent amount available through either a home equity line of credit or a margin loan from a brokerage firm.

“You’re playing rates to your advantage. Rates are low, money is super cheap right now,” he says. “[However], the advice isn’t to go leverage yourself or take on a bunch of debt. If you’re disciplined enough to utilize credit responsibly, here is a way it can prove to be very powerful.”

More clients are looking to take advantage of such opportunities, Boneparth says.

That’s not surprising to Zimmerman, who created MaxMyInterest in response to the anemic yields offered on savings accounts at big banks. The company aims to help consumers holding high amounts of cash automatically find the best available interest rate.

The combination of the Fed’s massive intervention into markets and the government’s big spending on stimulus and recovery bills “has put so much artificial money into banks,” Zimmerman says.

“People are taking on more risks because they’re saying, ‘If the bank doesn’t want my money, I’ve got to find somewhere else to put it.’”

Bret Raybould is a 29-year-old comedian in New York City. He’s also a publicly traded security, known on markets as bretcoin.

“The world’s first publicly traded comedian,” Raybould says. And unlike many of bretcoin’s board members — who include “Mark Cuban,” a.k.a. Bret’s Cuban friend Mark — bretcoin is not a gag. It’s a real asset with 100,000 available tokens currently priced at around $17,500, or about 18 cents a coin, on the cryptocurrency exchange Uniswap.

Raybould is betting that when his comedic star rises, so too will the value of bretcoin, rewarding early believers with more than just bragging rights as additional investors buy in and the price increases. He’s currently hoping to use proceeds from bretcoin to finance a film project.

“Never before has a comedian asked for fans to invest,” Raybould says. “They’ve asked for fans to send them money, and they send them back a T-shirt or put their name in the credits [of a movie]. But do you want that, or do you want cold, hard cash?”

Raybould created and listed bretcoin with the help of 17-year-old high school student Matthew Garchik, who sought him out on Twitter. When the comedian mentioned his desire to start a cryptocurrency, Garchik — a fan of Raybould’s standup — told him, “Say no more.” The pair brought the token to Uniswap, a decentralized crypto platform that operates on the ethereum blockchain.

While bretcoin is a bit of an anomaly in the finance world, the publicly traded comedian is part of a larger movement that is changing the way the world invests its money.

With emerging technologies such as blockchain, the increasing power and importance of retail traders, and a growing appetite for new assets, everything from shoes to artwork to classic cars is being broken up into pieces and offered to investors in bite-sized portions through a process called fractionalization.

These new investments, which include non-fungible tokens (NFTs) and cryptocurrency, are also growing as the result of another phenomenon: a heightened distrust of traditional institutions.

Investing is garnering more interest than ever before, but surveys show that in addition to a loss of faith in entities such as government, law enforcement, and the Federal Reserve, a fast-growing swath of Americans are losing trust in financial institutions like banks.

Sophisticated Wall Street investors have been using fractionalization for years to mix and match intricate securities from commercial real estate to agriculture futures. Now, fractionalization is making its way to the general public in just about every way imaginable.

One interesting caveat to most fractional investments aimed at retail investors is that buyers don’t actually own the things they buy. They’re simply buying a stake in the asset, betting that it will rise in value and they’ll be able to sell their portion at a higher price than what they paid.

Companies like Rally Rd., which lets users buy small shares of assets like classic cars and wines; Masterworks, which offers fractional ownership in fine art and other collectibles; and Otis, which provides fractional investment in goods such as sneakers and comic books, all allow access to investment but not to the pricey assets themselves.

Playboy, which has rebranded as PLBY Group under new leadership, became a stock market darling early in 2021 when it began selling fractional ownership in the company’s original artwork. Examples include legendary centerfold photographs of actresses such as Marilyn Monroe and memorabilia from the Playboy Mansion, like a Matisse painting that features a cigarette burn from the Beatles’ John Lennon, PLBY Group CEO Ben Kohn told me in April.

Divvying up and selling digital rights while still holding on to the physical versions and the copyrights to the works helped Playboy’s stock jump almost sixfold in a matter of months and its enterprise value nearly triple to more than $2 billion.

One of the only speed bumps to the fractionalization of literally everything has been the fear of possible action by the US Securities and Exchange Commission (SEC), which has recently begun exploring the question of what qualifies as a security and what does not. The answer to that question will be incredibly important, says Guy Hirsch, USA managing director at the online investment brokerage eToro.

When companies break up an asset and allow investors to buy and sell pieces of it, they “run the risk of that thing being a security,” Hirsch says. That’s especially true for smaller players who may not have the lawyers, business advisers, or market savvy to avoid running afoul of SEC regulations.

“The SEC would tell you [that] you have to go register not just the company or the actual asset but also the exchange on which these assets are going to be trading on the secondary market,” he explains. “Because of that, you have a lot of things that are not being fractionalized because people don’t want to break the law.”

Registering with the SEC is a potentially long and expensive process that comes with significant reporting requirements. The commission’s goal is to ensure that anything sold as a security to the public has ample safeguards for investors, opens itself up to monitoring, and can be reined in if it doesn’t meet the SEC’s standards.

That has kept many investments from being offered through brokerage firms that cater to retail clients, but it has opened up unique opportunities for shrewd investment professionals and their well-heeled clients.

Ben Tsai, president and managing partner at Wave Financial Group, decided to create a real asset fund investing in roughly 2,700 barrels of whiskey. The investment thesis for the Wave Kentucky Whiskey 2020 Digital Fund is simple: Purchase thousands of barrels of whiskey wholesale and let them age for three to five years, at which point the barrels, originally purchased for around $1,000 each, would be worth $3,000 to $5,000 apiece.

Wave then breaks the investment into fractional shares, offering clients the option to sell their shares in the whiskey business on a secondary market.

Tsai, an investment veteran who, prior to joining Wave, cut his teeth at firms like Merrill Lynch, AllianceBernstein, and Bank of America, initially considered fractionalizing things such as Japanese racehorses, clean water, real estate, and even carbon credits, but eventually settled on whiskey.

“We like the simplicity of it, and discussion around being able to insure it, being able to store it. We’re not playing with it much,” Tsai says. “And people like whiskey.”

Currently, the whiskey investment is available only to high-net-worth investors who do business with Wave. Tsai thought about making it available to retail investors but noted there were “a lot of hurdles built around that,” including SEC exemptions and possible reporting requirements.

So, even as fractionalization has allowed for a more democratized investing landscape, investing in many fractional assets remains available only to those who can easily part with hundreds of thousands of dollars for a single investment.

But that’s changing, albeit slowly. Peter Krull, CEO and director of Investments at Earth Equity Advisors, has started offering fractionalization of sustainable investment portfolios to everyday investors. Like many wealth advisers, in recent years Krull had turned away from retail clients because, in his words, “The economics simply don’t work.”

“At the same time,” he tells me, “our mission is sustainable investing for all, so we had a disconnect between what our mission was and what we could offer.”

While many players are pushing the envelope on fractionalized investments, there has also been opposition. Washington Wizards guard Spencer Dinwiddie’s attempt to fractionalize and trade shares of his contract was rebuffed by the NBA, and similar attempts to sell shares of intellectual property or patents have been met with resistance from regulators and exchanges wary of becoming government targets for investigation.

This has also kept fractionalized assets from being listed on most well-known brokerage firms, like Robinhood or Schwab. It’s why bretcoin exists on the smaller, niche Uniswap, which allows most anyone to list tokens, provided they’ve got the cash to back it with enough liquidity that investors can freely buy and sell as needed. In fact, eToro’s Hirsch, who also leads the company’s NFT arm, says most of the ideas he hears for fractionalization are not pursued.

For now, most fractionalized securities are operating in what SEC Commissioner Gary Gensler has called the “wild west,” an unregulated environment where — for now at least — most anything goes, and where buyers with the funding and access can put their money in everything from digital whiskey funds to bretcoin.

But the big question is what comes next. Gensler, who was confirmed and sworn into office in April 2021, has made a point of talking up the SEC’s plans for regulating cryptocurrencies and NFTs, and any decisions on those could be seen as applicable to all fractional assets.

How the commission decides to regulate and enforce those rules could mean a lot more publicly traded comedians or whiskey barrels, and a lot more people investing in them. Or it could mean a lot less.