Sweden Cuts Interest Rates To Zero

[200p]

Wow

The world's oldest central bank has slashed interest rates to a record low of 0pc as it battles to ward off deflation.

Sweden's Riksbank decided to cut its benchmark "repo rate" by 25 basis points from 0.25pc at this month's monetary policy meeting, following three previous rate cuts this year. The decision was not expected by polled analysts who forecast the benchmark rate to be lowered to 0.1pc.

http://www.telegraph.co.uk/finance/11191997/How-low-can-you-go-Sweden-cuts-interest-rates-to-zero.html

[200p]

If I can only access those low low rates, and buy up some prime London property, that'll be free money.

Perhaps, thats the problem. People borrow low, and spend it elsewhere - outside of Sweden. That might be globalisation!

Edited October 28, 2014 by 200p

[winkie]

If I can only access those low low rates, and buy up some prime London property, that'll be free money.

Not even if you pay me.

[R K]

The Black Hole at the centre of Europe which is the Bundesbank. Sucking everything into its vortex (or something like that)

[gf3]

I posted this on the bank of England clueless thread.

http://www.ft.com/cms/s/0/3033b236-5e7e-11e4-a807-00144feabdc0.html?siteedition=uk#axzz3HRpmuEVO

I find it interesting that they slowly raised their rates up to 2% and then cut them to zero.

I think that maybe what the B of E may do.

[200p]

Not even if you pay me.

FREE MONEY. Come and get it!

Edited October 28, 2014 by 200p

[200p]

I posted this on the bank of England clueless thread.

http://www.ft.com/cms/s/0/3033b236-5e7e-11e4-a807-00144feabdc0.html?siteedition=uk#axzz3HRpmuEVO

I find it interesting that they slowly raised their rates up to 2% and then cut them to zero.

I think that maybe what the B of E may do.

Yeah, I noticed that. But I thought it was worth a thread of its own. So are there any other western central banks on zero? Or is this the start of a new trend. Is this the beginnings of the great cash bull market of 2015?

[zugzwang]

ZIRP is forever not just for christmas, says BoE deputy governor Jon Cunliffe.

LONDON (Reuters) - The Bank of England can afford to keep interest rates at their current record low for longer than thought, due to weak pay, low inflation and a darker international outlook, Deputy Governor Jon Cunliffe said on Tuesday.

Cunliffe's comments are similar to those from chief economist Andy Haldane and fellow deputy governor Minouche Shafik - and suggest that two other policymakers who have backed a rate rise recently are unlikely to find further support soon.

Cunliffe said that there were signs that Britain's economy was slowing after a year of rapid catch-up growth, and that the continued weakness of pay and productivity was striking.

"The softening in the pay and inflation data, together with the weaker external environment, for me implies that we can afford to maintain the current degree of monetary stimulus for a longer period than previously thought," he said.

Sterling fell slightly against the dollar and euro after the remarks in a speech to students at the University of Cambridge, which reinforced the market's view that the BoE is unlikely to raise rates before the middle of next year.

"The likelihood of a near-term interest rate hike from the Bank of England is rapidly receding, and this is a message that a number of Monetary Policy Committee (members) currently seem keen to get across," said Howard Archer, UK economist at IHS Global Insight.

Consumer price inflation fell to a five-year low of 1.2 percent in September, yet official data show wages rising even more slowly - something Cunliffe said was a surprise, given the very rapid fall in unemployment over the past year.

http://www.theguardian.com/business/feedarticle/11611868

Edited October 28, 2014 by zugzwang

[R K]

They'd rather have an inflationary 'surprise' to the upside, which they can then ignore, than to the downside.

They're going to maintain this stance (with maybe a token rise at some point) until nominal wages are 4-5% p.a. across the board and not just in London/financial services as they are at present.

DCan there be anyone left on the planet who doesn't get this by now?

[200p]

They'd rather have an inflationary 'surprise' to the upside, which they can then ignore, than to the downside.

They're going to maintain this stance (with maybe a token rise at some point) until nominal wages are 4-5% p.a. across the board and not just in London/financial services as they are at present.

Can there be anyone left on the planet who doesn't get this by now?

I think we get it, but find it hard to swallow. I don't want to take out the biggest mortgage that I can get, on a tracker that's interest only. I want to be able to retire, and enjoy all those things previous people have. We don't want to work until the grave, and continually look over our shoulder as job security isn't brilliant and hope HPI pays off thirty years down the line!

[gf3]

OK I think a lot of people on here have got it wrong. They think that asset prices going up by 10% is the same as a 10% yield. The rich are getting richer but they cant have their cake and eat it.

Rent seeking assets can only go up by so much once the yield gets below a certain amount no one will buy them. It is yield that people want.

Quick example say my house bought for £100,000 is now worth £200,000. I could turn the house into a maisonette and sell half of it off for £100,000 on paper I have made £100,000 but am I any wealthier living in a maisonette than I was in a house?

[200p]

I think it is time to do a bit of time traveling and find out how people prosper in low interest rates. So the homework starts here:

http://www.forbes.com/japan-billionaires/

[winkie]

A diaper billionaire.....people will always need diapers.

[R K]

I think we get it, but find it hard to swallow. I don't want to take out the biggest mortgage that I can get, on a tracker that's interest only. I want to be able to retire, and enjoy all those things previous people have. We don't want to work until the grave, and continually look over our shoulder as job security isn't brilliant and hope HPI pays off thirty years down the line!

Agree. Hence why higher nominal wages would be rather excellent.

[Dorkins]

They'd rather have an inflationary 'surprise' to the upside, which they can then ignore, than to the downside.

They're going to maintain this stance (with maybe a token rise at some point) until nominal wages are 4-5% p.a. across the board and not just in London/financial services as they are at present.

DCan there be anyone left on the planet who doesn't get this by now?

And what happens if nominal wages never start rising by 4-5% pa? ZIRP hasn't caused wage inflation so far, why would that change? Politicians are not going to be able to let central bankers keep inflating living costs ahead of wages indefinitely, the proles are already angry and only going to get more so.

[200p]

Aug 2014

THE Swedish word bo means to live; sambo to cohabit. As more people struggle to get on the housing ladder, a new word has been coined: mambo, to live with your mum. After Oslo, Stockholm is Europe’s fastest growing capital—its population is expected to expand by 50% by 2030—yet cranes are scarce. The 30,000 new arrivals each year have increased competition for housing, and record-low interest rates have allowed Stockholmers to afford bigger mortgages. As a result, Swedish house prices have more than trebled since 1996 and household debt has reached 174% of after-tax income. There is talk, naturally, of a bubble.

http://www.economist.com/news/finance-and-economics/21614165-house-prices-europe-are-losing-touch-reality-again-deflating-bubbles

[19 year mortgage 8itch]

I think we get it, but find it hard to swallow. I don't want to take out the biggest mortgage that I can get, on a tracker that's interest only. I want to be able to retire, and enjoy all those things previous people have. We don't want to work until the grave, and continually look over our shoulder as job security isn't brilliant and hope HPI pays off thirty years down the line!

A chink in your armour or another facet of your act?

[200p]

Only trying to prosper and survive in a world run by mad men.... A sprat cannot swim against the current, and it would be futile trying to do so.

[Bloo Loo]

I think, they have no clue what to do.

Their brief is to look after their industry, that is, banking, and banking, being unproductive, needs its 2% margin artificially produced.

The banks are therefore not earning, liquidity is drying...they have but one tool to use, as they wont close the weak banks, and that is, reduce the cost of money on deposit...

And this rate reduction hasnt worked in the real World at all.

The fact is, we produce too much we dont need..and keeping zombies alive to keep producing it is producing cash mountains...and that finds its way in the Shadow banking system buying stocks, debt and other financial jibber jabber...keeps trading desks busy but adds little, if any wealth.

[interestrateripoff]

Start of the Krona carry trade?

[winkie]

There is far much excess in the wrong places.....not enough productive real work for people to do......so keeping prices of stock, currency, rates,commodities, any old stuff volatile, betting on the ups and downs, can't have things staying the same so force the changes....unproductive guess work now makes more money.

[FallingAwake]

"Should inflation fail to pick up, UBS expects the central bank to move towards the type of forward guidance adopted by the Bank of England and Federal Reserve, and could even begin asset purchases with a programme of quantitative easing."

And there ya go.

Solve the issue of prices not going up with a big dollop of freshly printed cash. Magic.

[gf3]

I know it's not a popular view on here. But I think we need to cut the rates to 0% and start increasing minimum wage by at least 2% a year. The problem is lack of demand and the only people that are lightly to increase their demand spending are the poor who haven't got everything yet. Savers just save that's why they have savings. Their is no point in using those savings to invest if there is no demand.

The problem is if the rich can no longer get a yield they have to start selling assets to get an income. This is a one way street. And because TPTB are rich it's a street they don't want to walk down.

[MarkG]

The problem is if the rich can no longer get a yield they have to start selling assets to get an income. This is a one way street. And because TPTB are rich it's a street they don't want to walk down.

The problem is that governments have ******ed everything up, and there's no way out other than some kind of economic collapse. And governments don't get re-elected when the economy is in the crapper and people are fighting in the street over cans of dog food.

So they keep doing the same thing, and hoping to put off the collapse until after the next election. Which only means that the ultimate collapse will be even worse.

[gf3]

The problem is that governments have ******ed everything up, and there's no way out other than some kind of economic collapse. And governments don't get re-elected when the economy is in the crapper and people are fighting in the street over cans of dog food.

So they keep doing the same thing, and hoping to put off the collapse until after the next election. Which only means that the ultimate collapse will be even worse.

When the poor can't afford to pay their debts either the banks collapse and the rich don't get their money or they do a bail in where the rich don't get their money. The only other thing they can do is print. This is what TPTB would prefer.