Thursday, Jul 25, 2019

I thought they were already zero

BBC: European Central Bank opens door to interest rate cut

And the over night bank rates negative, leading to negative interest rate government bonds.
What is happening here, I just do not understand. Time people will have to start keeping money under the mattress.
How many times can you resuscitate a dying duck with more QE and lower interest rates. Do they not understand the status quo needs to change, we have reached the maximum extent of the current structures

Posted by deepak @ 01:30 PM (1015 views)
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6 Comments

1. stillthinking said...

They can't go to absolute zero because it becomes ever less profitable to make loans, he probably doesn't want to mention further money printing.

Friday, July 26, 2019 04:47AM Report Comment
 

2. taffee said...

All I can say is that unless all this cheap money is the new economic miracle then the results of this financial experiment could be catastrophic

US apparently booming but needs a rate cut?

Very strange and a complete disrespect of what money is and what it represents the consequences of which are unknown which is why historically gov and central banks steered clear!

Friday, July 26, 2019 06:09AM Report Comment
 

3. deepak said...

@stillthinking
I was in Germany a decade or so ago, there were negative interest loans for new businesses. i.e. you Euro 100 loan you could pay back 99.70 in 2 years.

It is still profitable, as the cost of holding this money overnight with ECB is .40%, so you would loose more if you kept the money with ECB.

Friday, July 26, 2019 02:09PM Report Comment
 

4. deepak said...

@taffee
This the problem with GDP. If you are calculating the economy by value and you are inflating the value of good and services, does not mean economy is growing as the GDP figures show, you are just paying more for the same items. That is not growth, that is inflation.

Friday, July 26, 2019 02:11PM Report Comment
 

5. stillthinking said...

@deepak i have no problem with negative interests I don't see it as strange in real world at all. i can easily imagine that being repaid a ripe apple during winter would need me to pay a 100 apples during summer. during excess saving periods prices drop against gold as it becomes very hard to get hold of, and during spending periods stuff becomes very cheap (becomes easy to get gold). but the ECB is booking up problems because they are dealing with the excess saving environment by secretly spending peoples savings, because its not like money is harder to get at the moment, and that presumably leads to inflation

i was thinking the other day, that when the ECB prints money to bail out banking institutions, the inflationary costs are borne by the -entire- eurozone, rich or poor.
but!
the ECB mainly prints to support french and german banks i.e. greek and italian assistance is principally to assist exposed french and german institutions i.e. only some countries benefit from the ECB

I wonder if at some point the inflationary "tax" that is levied on the net-recipients of EU largesse will (or has already been baked in) be in excess of directly received "assistance/development" funds. Because if it ever did oooo cripes

Saturday, July 27, 2019 10:41AM Report Comment
 

6. nickb said...

bump

Wednesday, July 31, 2019 06:12PM Report Comment
 

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