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Low Interest Rates Are Hurting, Not Helping, The Economy: Sheila Bair

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Most of us here have said it many times, the irony is savers would have been a legitimate engine of spending had they not been stuffed by Bernanke and King etc

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Most of us here have said it many times, the irony is savers would have been a legitimate engine of spending had they not been stuffed by Bernanke and King etc

Savers by definition cannot be an engine of spending because they are ... wait for it....

Savers.

:blink:

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Savers by definition cannot be an engine of spending because they are ... wait for it....

Savers.

:blink:

You're too young to remember, but when there was sanity and prudence in the banking sector, savers used to receive an income if they deposited money somewhere. This was called "interest". Meanwhile, some people want those depositors to be grateful that their deposits are not lost and not raise any concerns about no longer receiving "interest". Those people are sometimes referred to by the more generous as "pedantic berks".

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I'll say it again.

Raise rates AND print to spend directly into the economy.

How about print and buy my house for several million quid and I will do the spending with no extra charge... ?

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Savers by definition cannot be an engine of spending because they are ... wait for it....

Savers.

:blink:

Savings are like 'cash-flow'....all businesses need cash-flow........borrowing cash-flow is counter productive.

So what are you saying people spend every penny they earn and riot on the streets when it has all gone never to be repeated......bucket out to the state for entitled handouts.

All savings will get spent when the time is right, if still of any value....savers forge their own safety net....savers do spend, everyone has to spend to live. ;)

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Most of us here have said it many times, the irony is savers would have been a legitimate engine of spending had they not been stuffed by Bernanke and King etc

Nobody wants to pay you a real rate to rent your money from you whilst you do nothing.

That's the long and short of it.

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Nobody wants to pay you a real rate to rent your money from you whilst you do nothing.

That's the long and short of it.

Seemingly they also don't even want to pay you a real rate to rent your money when you do something.

Edited by billybong

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Savers by definition cannot be an engine of spending because they are ... wait for it....

Savers.

:blink:

so, you put your cash in the bank....and expect a return....just wonder what the bank is supposed to be doing to earn for itself to pay you are return.

2 possibilities....1 they are investing the cash in projects that also offer a productive return...

2 they are collecting deposits and use the later payments to pay interest to the early depositors.

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Nobody wants to pay you a real rate to rent your money from you whilst you do nothing.

That's the long and short of it.

Surely the banks would, if Mystic Merv wasn't printing them up oodles of it for free?

Peter.

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Surely the banks would, if Mystic Merv wasn't printing them up oodles of it for free?

Peter.

they would, cos apparantly this is a liquidity crisis...which means liquidity is in short supply...which means those with some, ie savers, should be cashing in.

The QE and other bailouts simply destroy the demand for liquidity.

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You're too young to remember,

meh

but when there was sanity and prudence in the banking sector, savers used to receive an income if they deposited money somewhere. This was called "interest". Meanwhile, some people want those depositors to be grateful that their deposits are not lost and not raise any concerns about no longer receiving "interest". Those people are sometimes referred to by the more generous as "pedantic berks".

If savers are receiving an income then someone is paying that income. If less income is paid to savers then borrowers have more to spend and vice versa. So in so far as that is concerned it ought to make no difference to total spending.

The original assertion that I responded to implied that savers would be more likely to spend interest income than borrowers would be to spend funds freed up by having to pay less interest. Which raises the question, if that is true, what is it that borrowers are doing with the extra purchasing power they now have, if they are not spending it?

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meh

If savers are receiving an income then someone is paying that income. If less income is paid to savers then borrowers have more to spend and vice versa. So in so far as that is concerned it ought to make no difference to total spending.

The original assertion that I responded to implied that savers would be more likely to spend interest income than borrowers would be to spend funds freed up by having to pay less interest. Which raises the question, if that is true, what is it that borrowers are doing with the extra purchasing power they now have, if they are not spending it?

except, borrowers were able to maximise their borrowing due to low rates....meanwhile, new entrants who need to borrow are also spending the max on their borrowings.

In spite of all this high intensity borrowing, banks have a liquidity issue

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except, borrowers were able to maximise their borrowing due to low rates....meanwhile, new entrants who need to borrow are also spending the max on their borrowings.

In spite of all this high intensity borrowing, banks have a liquidity issue

All the liquidity is tied up in debt inflated assets that will never be repaid........underlying deflation and low growth will see to that.....all one sided out of kilter......pay rise anyone? ;)

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If savers are receiving an income then someone is paying that income. If less income is paid to savers then borrowers have more to spend and vice versa. So in so far as that is concerned it ought to make no difference to total spending.

The original assertion that I responded to implied that savers would be more likely to spend interest income than borrowers would be to spend funds freed up by having to pay less interest. Which raises the question, if that is true, what is it that borrowers are doing with the extra purchasing power they now have, if they are not spending it?

From the perspective of the user of debt, whether a business or an individual, it does not matter where their payments are going. What has happened is that income streams which used to go to the owners of capital (the savers) are now being siphoned off by the intermediaries.

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From the perspective of the user of debt, whether a business or an individual, it does not matter where their payments are going. What has happened is that income streams which used to go to the owners of capital (the savers) are now being siphoned off by the intermediaries.

Firstly, if what you say is true then why has the banking sector contracted dramatically in the last 5 years? There is a smaller number of bankers with smaller average salaries. The reality is both savers and intermediaries are getting less now than then.

Secondly, if what you say is true then having the borrowers spend the extra purchasing power would cut out the intermediaries entirely so would increase spending more.

The entire premise of the notion being advanced that if interest rates were higher aggregate spending would be higher is utter bunk.

The argument essentially boils down to 'give me the money, not him'. And that applies whether you view matters from the saver or borrower perspective.

It has nothing to do with spending levels.

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Yet, without an interest rate we do not have capitalism to help us to decide what to do next. What do you suggest replaces capitalism?

Capitalism is the high growth phase of an immature ecosystem/economy. High reproduction rates, low fixed costs, low cost of young, energy inefficient. r-type species.

Once maturation has happened, a k-type situation emerges with high fixed costs, high energy efficiency, low reproduction rates and high cost of young.

Capitalism is the attempt to always keep the system in its immature 'teenage' phase, if necessary by tearing everything that is mature down.

Gotta grow up at some point, Peter Pan!

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Capitalism is the high growth phase of an immature ecosystem/economy. High reproduction rates, low fixed costs, low cost of young, energy inefficient. r-type species.

Once maturation has happened, a k-type situation emerges with high fixed costs, high energy efficiency, low reproduction rates and high cost of young.

Capitalism is the attempt to always keep the system in its immature 'teenage' phase, if necessary by tearing everything that is mature down.

Gotta grow up at some point, Peter Pan!

Do you regard the current situation(ZIRP, QE) as inevitable, satisfactory and desireable?

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Do you regard the current situation(ZIRP, QE) as inevitable, satisfactory and desireable?

I view it as inevitable.

Whether its desirable/satisfactory depends on what you think a plausible alternative outcome is over the long run, and who you happen to be.

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Capitalism is the high growth phase of an immature ecosystem/economy. High reproduction rates, low fixed costs, low cost of young, energy inefficient. r-type species.

Once maturation has happened, a k-type situation emerges with high fixed costs, high energy efficiency, low reproduction rates and high cost of young.

Capitalism is the attempt to always keep the system in its immature 'teenage' phase, if necessary by tearing everything that is mature down.

Gotta grow up at some point, Peter Pan!

but Capitalism also has a means of letting these immature megaliths decay...they are innovated out of existence....

Today, we dont have Capitalism, we have CRONEYISM, where big monoliths buy their business through bribery and corruption at many levels.

We also have Globalists moving their Capital out of the Country...this keeps prices low and profits up...until the home economy can no longer support a daily bag of crisps for most people....without subsidy and theft from future generations and savers, we are forced to innovate to survive.

With subsidy and deficit spending, we can survive a bit longer...

The key is that Wealth must be produced locally.

And I dont think a chattering class of Lawyers, insurers and bankers actually produce much wealth.

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but Capitalism also has a means of letting these immature megaliths decay...they are innovated out of existence....

Constant tearing down of structure and recycling it is very energy costly. THis mode is akin to a new hardy species colonising a the blasted landscape of a major volcani eruption or something..

Once the niche in question has been filled and pretty much all of its energy flows appropriated, and this activity has changed the face of the ecosystem itself, you end up with something more like a rainforrest.

Capitalism is the former.

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Savers by definition cannot be an engine of spending because they are ... wait for it....

Savers.

:blink:

Isnt their money saved to be spent by someone else, at least in a debt-money and fractional reserve systems.

The key is lending it to young, growing markets with a future like India - at least if you want to get it back with value. Not like the Germans have done by lending it to the deadbeats in Greece and Spain.

I guess our retirees should have been doing this in the 60s/70s when we were a surplus nation, instead they spent it on package holidays and Japanese cars. Its too late now, only way out it to sell whats left of our country. The roads, schools, hospitals might give a few years comfortable retirement for the boomers.

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that's why I asked you. Is it satisfactory and/or desirable, in your view?

I don't have a particular preference either way in my finances, which is a deliberate hedging on my part. I have a house with good equity and a mortgage. Likewise I have pension assets and savings. Happily I also have a job in a good industry.

If house prices go down I can trade up more cheaply in real terms. If they go up I get a short term boost in wealth at the expense of making trading up harder.

Either way my mortgage debt and assets are more or less a wash against one another, especially if one considers that if the end of the world comes the vast majority are much much closer to the edge than I am.

I guess what I care most about is my job and career. So if I had to pick a selfish outcome I'd pick whatever maximised this asset of mine at the expense of all else.

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Constant tearing down of structure and recycling it is very energy costly. THis mode is akin to a new hardy species colonising a the blasted landscape of a major volcani eruption or something..

Once the niche in question has been filled and pretty much all of its energy flows appropriated, and this activity has changed the face of the ecosystem itself, you end up with something more like a rainforrest.

Capitalism is the former.

This is an extremely dangerous and complacent view. Any structure in human society needs constant renewal because the people who ultimately make up that structure are constantly dying. Human beings are not like ants who will simply do what they are programmed to do. If this process stagnates then you end up not with a rainforest, but with a forest fire.

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  • 244 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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