Friday, January 23, 2009

Can an interest rate of zero be too high?

Even zero isn't low enough to boost economy, Goldman Sachs study says

Can an interest rate of zero be too high? Unfortunately, yes. A new analysis by Goldman Sachs concludes that the Federal Reserve's cut in the federal funds rate to a record low of zero to 0.25 percent on Dec. 16 isn't going to be nearly enough to get the economy going again. The report says the Fed would need to reduce the federal funds rate to negative 6 percent by the end of 2010 to supply the needed amount of monetary stimulus.

Posted by malct @ 10:45 AM (1044 views)
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13 thoughts on “Can an interest rate of zero be too high?

  • happy mondays says:

    Sorry guy’s a little bit of this particular subject, I am no number cruncher and all this financial slight of hand throws me and messes with my mind ( maybe thats what the financial experts would like) Anyhow i understand how low interest rates is crap for savers, which i am one, and realise it weakens the pound against other currencies! what i am finding difficult to grasp is how this affects my savings against buying goods (ie a house) If i take my money out of the country i will be paying more for a house, however if i buy here, surely i am paying less, as my savings are still there (I hope) and house prices are coming down ( I hope) I no this sounds like if Johny had 6 apples and bob had 3 apples..But my economics is about as good as my cooking!
    I would be greatful if one of you more financially enlightened souls would fill me in if i am completly missing the point..
    regards, happy mondays

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  • Incidentally, all the indications are that it is private and commercial debt, rather than national debts, which cause inflation.
    The reason seems to be that, in an economy which relies on debt to create its money supply, national debts are the only debts which do not push up prices or reduce disposable incomes, because they need never be paid back.

    They are simply rolled over and increased each year — the government annually borrowing enough money into existence to pay the interest, plus extra for current spending.

    http://www.prosperityuk.com/prosperity/articles/debt1.html

    OUR ECONOMY RELIES
    on DEBT to FUNCTION

    by Gillian Swanson

    Prosperity, May 2005

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  • japanese uncle says:

    This info (or unpiad publicity) only suggests that this rotten institution is betting on yet lower IR in the derivative market. Nothing more.

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  • [email protected]…… I’m with you on the points that you make. Money in bank, ready to buy here, when the moment is right, but what do we make of the current events unfolding. Are we well placed or are our saving disappearing down the plug….

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  • Is this the real malct – rumour has it you were exiled from HPC?

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  • happy mondays you are right. But don’t expect to be able to go on holiday any time soon. And expect the cost of everything that is imported (almost everything) to increase.

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  • No, just a hardworking, hard saving individual who is sick to the back teeth for the way that our “leaders” have supported the feckless parasites, bailed out the greedy and stuffed the savers who just want a modest, fairly priced roof over their heads… Shame on this shambles that calls themselves “Leaders”….. I hope they have great difficulty in sleeping and dealing with the thoughts of their actions for the rest of their horrible lives…..

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  • Happy Mondays

    Yes you are right.

    The dilemma I’m having is that currently I can borrow ( 2 good years behind me) but if I wait to buy in a years time I may not be able to borrow if I have a really bad year this year and don’t make any money.

    I am about to take the gamble that houses will come down far enough in the next 18 months that I won’t need a mortgage. And that’s a big gamble given interest rates and every attemt being made to re-inflate the bubble.

    Re: your savings and this isn’t ramping as I don’t have any Gold but. If you’d put £20k into Gold about 2-3 months ago and bought the Gold with Sterling. If you sold that Gold today you’d get about £30k back in Sterling.

    That is what is being discussed in general here when they are talking about savings being eroded.

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  • malct……. is that you? My intuition meter reads ‘good’………..Banished to distant lands…….Back from the Crusades……… I can hear a few desperate cries in the distance.

    Anyway, back to the subject,”Can an interest rate of zero be too high?” — I’ve no idea……Just wanted to say hello.

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  • ;O)

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  • Forget fiat money. Its a fictional toy so bankers & politicians can play monopoly. Look for gold. It jumped to £650 this morning. I bought at £450 just this summer. Sovereigns/Brittannias are capital gain tax exempt! They will be 1000/oz v soon.

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  • Depends on respective, 0% is good for connected/sound speculators, bad for savers & producers (only source of real wealth), ir’s go negative when banks charge savers more than they charge interest to borrowers, e.g. Transactional & annual fees/penalties.

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  • jack, plato, tis me. password disabled but I’m not banned.

    hpc webmasters have been very helpful under the circumstances
    but the futility of not being able to engage in real time debate has caused me to move on
    I check back quite often as I have great respect for what is happening here and for most of those who post and engage.

    I hope they let this through in time for you to pick up on it.

    kindness and best wishes to all those who work hard to broaden the scope of the dialogue and refuse accept that they can’t change things for the better.

    malc (t)

    CHAPTER III.
    NATIONAL BANKING SYSTEM.

    THE next scheme for robbing the people was the national bank act, passed in 1863. Of all the villainous schemes of robbery ever practiced upon any people our national banking system stands preeminent. By it Shylock was permitted to invest his greenbacks in government bonds at face value ; upon these bonds he not only drew gold interest in advance but by means of the bank scheme he actually had 90 per cent of their value returned to him.
    http://yamaguchy.netfirms.com/7897401/emery/emery_index.html

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