Outward Arbitrage

We’re here today to hit everyone with a harsh truth: interest rates are not always the same in other countries as they are in the United States.

Okay, so maybe that wasn’t exactly “harsh,” but it’s still a truth. And big banks, clever as they are, often try to take advantage of those interest rate differences to make extra money. When interest rates are higher outside of the U.S., this process is called “outward arbitrage.” It basically means that American banks are putting money in accounts in other countries with higher interest rates (typically in Europe), accumulating more interest on that account than they would here, and pocketing the extra dough as profit.