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Germany's Schaeuble Warns Against Addiction To Low Interest Rates

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https://uk.news.yahoo.com/germanys-schaeuble-says-not-happy-low-interest-rate-084531112--business.html#iBWUCo8

German Finance Minister Wolfgang Schaeuble said on Tuesday he was unhappy with the low interest rate environment and called for rates to rise "sooner rather than later".

His call comes amid a vigorous debate at the U.S. Federal Reserve over whether to push ahead with an interest rate hike this year or hold off until the risks associated with a slowdown in China and other global headwinds become clearer.

Although it was not the first time Schaeuble has voiced support for a "normalisation" of rates, it also comes at a time when the German economy faces new threats from weakness in emerging markets and a diesel emissions scandal that has damaged its top carmaker Volkswagen .

Speaking at an engineering conference in Berlin, Schaeuble described interest rates as "too low" and said this was causing problems, particularly with regard to pension provisions.

The European Central Bank has pushed its benchmark interest rate down to a record low of 0.05 percent and is also printing money to lift the euro zone economy and push up low inflation.

Schaeuble said the monetary policy being pursued by central banks meant that there was sufficient liquidity on the markets around the world but he added: "I don't want us to get used to it remaining as it is."

He warned policymakers against falling into the trap of keeping rates low to actively support the economic outlook, comparing this to the situation of a "drug addict".

The world has been hooked on ever decreasing interest rates for decades!

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The European Central Bank has pushed its benchmark interest rate down to a record low of 0.05 percent and is also printing money to lift the euro zone economy and push up low inflation.

It doesn't work - the central bankers themselves admit that.

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My granny says the same.

So she's worked out what it took research by the central bankers' BIS to work out and publish - low rates bet lower rates and ZIRP/QE doesn't work. Good on her. She and everyone else for that matter should tell anyone who will listen and keep repeating it over and over and over again.

Edited by billybong

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So she's worked out what it took research by the central bankers' BIS to work out and publish - low rates bet lower rates and ZIRP/QE doen't work. Good on her.

I suspect the effectiveness of ZIRP/QE diminishes with time until it becomes negative.The first shot kicks some life back into the economy but the effect is quickly absorbed. Repeated application saturates the absorber, ultimately causing it to break down.

NIRP is even worse. De facto fiscal tightening in the presence of large QE reserves.

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Sounds and looks like many people's view of the archetypal hpc'er. He's probably a goldbug too. ;)

(actually he looks like the dentist who would remove your gold fillings in Marathon Man)

Scheuble1.jpg

Bit old for the HPC massive? Bit of a boomer? Not sure the chewing-a-wasp look is sufficient for admission in and of itself....

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I suspect the effectiveness of ZIRP/QE diminishes with time until it becomes negative.

That is true of all things is it not? All things in moderation?

We could say that the effectiveness of positive interest rates diminishes with time until it becomes negative.

And while we have decades of concrete evidence for the diminishing utility of positive interest rates, we don't actually have any concrete data points for NIRP, do we?

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Imagine you are the biggest bank in the world.

You take income fom the worlds debt. You know lower and lower rates are needed to keep this current system working, so you keep getting income. You will have to go down this road until the end. At some point in the graph of interest rates and where defaults rise intersect, that time will come. There's not a lot you can do about it. Then a new system will be born, just make sure you are still the biggest bank of them all in the new world.

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The problem now is an inability to face reality.

They all know what needs to be done but do not have the stomach for it...to be honest our western voting systems promote this extend and pretend approach.

A professional politico would be mad to implement the required policies.

It would be career suicide for the individual and the party.

So here we all are, waiting for the storm to hit and we all know that it gets worse with each passing day.

You can ignore reality but not the consequences of ignoring reality.

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It doesn't work - the central bankers themselves admit that.

herr schauble has rather more to worry about than interest rates now.

we've known it was a trap for years.

europe,on the other hand, has a geopolitical problem to deal with AS WELL AS an economic one.

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The problem now is an inability to face reality.

They all know what needs to be done but do not have the stomach for it...to be honest our western voting systems promote this extend and pretend approach.

they all know what needs to be done do they?

then why,on god's earth are they actively trying to exacerbate the problem,rather than step out of the way and let it correct naturally.?

the reason for that being they are addicted to power and control,so must be seen to be doing something in order to make themselves look useful.

oh,what a tangled web we weave,when first we practice to deceive.

Edited by oracle

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they all know what needs to be done do they?

then why,on god's earth are they actively trying to exacerbate the problem,rather than step out of the way and let it correct naturally.?

the reason for that being they are addicted to power and control,so must be seen to be doing something in order to make themselves look useful.

oh,what a tangled web we weave,when first we practice to deceive.

Yes, I believe they do know...professional politicians that make it to positions of influence in Government are not stupid.

There are many stupid ones but they don't make the sift.

They are sly, cowardly, disloyal etc, etc.

As implied above they are only bothered about their own careers and will therefore avoid any actions that may have a negative effect on them.

Our systems promote their ridiculous responses to this crisis.

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herr schauble has rather more to worry about than interest rates now.

we've known it was a trap for years.

europe,on the other hand, has a geopolitical problem to deal with AS WELL AS an economic one.

We've known for years but the point is that the central banks also know now officially because they've published their own central bank research this year saying it doesn't work. They've admitted it themselves. Indeed there are other problems but there always are - that hasn't stopped them in the past.. In the meantime they continue their thieving and duplicity - as well as wrecking the economy - using policies that they know do precisely that..

It bears repeating over and over and over again that they themselves know it's wrecking the economy (officially) and it isn't helping any problem it's ultimately making any problems far worse- except their own bank balances.

Edited by billybong

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