Minus interest rates!


JLM
+1
#1
It's been on the news all night. How's that going to work? They won't be attracting any of my money!
 
Danbones
+1
#2
if you want to know how this works look at japan...and the US
they can't get out of it
japan has been there for quite some time now
once in the negative position, raising rates will KILL the economies deader 'n a hammer
*sigh*
negative interest rates tells exactly what a currency is worth

also
Harper has apparently, in the 2014 budgie also set us up for haircuts
bailins...for when not if the banks fail
and they will have to take more, because it will be worth less....
Last edited by Danbones; Dec 9th, 2015 at 01:13 AM..
 
captain morgan
+2
#3  Top Rated Post
Gubmint doesn't want you saving money, they want it out and circulating in the economy
 
JLM
+1
#4
Quote: Originally Posted by captain morgan View Post

Gubmint doesn't want you saving money, they want it out and circulating in the economy

They already do a good job of doing that don't they? Too many useless bureaucraps!

Quote: Originally Posted by captain morgan View Post

Gubmint doesn't want you saving money, they want it out and circulating in the economy

Upon further thought, this doesn't appear to be entirely true. Six or seven years ago they brought in tax free savings accounts. (From the few $ I have invested I'm not sure how effective they are)
 
tay
#5
In practice, thereís a risk that the policy might do more harm than good. If banks make more customers pay to hold their money, cash may go under the mattress instead.

Janet Yellen, the U.S. Federal Reserve chair, said at her confirmation hearing in November 2013 that even a deposit rate thatís positive but close to zero could disrupt the money markets that help fund financial institutions. Two years later, she said that a change in economic circumstances could put negative rates ď on the table Ē in the U.S., and Bank of England Governor Mark Carney said he could now cut the benchmark rate below the current 0.5 percent if necessary.

Deutsche Bank economists note that negative rates havenít sparked the bank runs or cash hoarding some had feared, in part because banks havenít passed them on to their customers. But thereís still a worry that when banks absorb the cost themselves, it squeezes the profit margin between their lending and deposit rates, and might make them even less willing to lend. Ever-lower rates also fuel concern that countries are engaged in a currency war of competitive devaluations.

Less Than Zero - Bloomberg QuickTake
 
Curious Cdn
#6
I'm afraid that I don't "get" the logic of giving people money to take your loan. I wonder what his old boss Carney thinks of his outrageous statement?
 
tay
#7
Quote: Originally Posted by Curious Cdn View Post

I'm afraid that I don't "get" the logic of giving people money to take your loan. I wonder what his old boss Carney thinks of his outrageous statement?

Bank of England Governor Mark Carney said he could now cut the benchmark rate below the current 0.5 percent if necessary.
 
mentalfloss
#8
The best time to have significant investment in infrastructure.


Bank of Canada willing to resort to below-zero interest rate in face of major economic crisis, Poloz says

TORONTO — The Bank of Canada would be willing to cut its benchmark interest rate to below zero per cent if the country is faced with a major economic shock, says Stephen Poloz, governor of the Bank of Canada.

In a speech to the Empire Club of Canada in Toronto, Poloz described the use of negative interest rates as one of four “unconventional monetary policy measures” it would be willing to deploy if faced with a major economic crisis. Yet he said the bank is unlikely to use such measures as it expects the Canadian economy to grow in 2016 and reach full capacity in mid-2017.

“We don’t need unconventional policies now, and we don’t expect to use them,” Poloz said. “However, it’s prudent to be prepared for every eventuality.”

The bank’s new willingness to consider sub-zero interest rates modifies the “toolkit” of policy responses the bank has at its disposal in the event of an economic crisis. The other policies are providing guidance on the future path of its benchmark interest rate policy, stimulating the economy through quantitative easing and providing credit to key economic sectors.

FP1208_Zero_rates-GS-C

The bank’s trend-setting rate is currently 0.5 per cent, and Poloz said that if the bank implemented negative rates, it would not go below -0.5 per cent. He said it would take an event similar to the global financial meltdown of 2008-09 before the bank would consider such a move.

“What we’re saying today is that we now believe that we have roughly a hundred basis points’ worth of room to manoeuvre underneath our current interest setting,” Poloz told reporters after his speech. “But we also have the opportunity to do these other unconventional things. All these things would be on the table in the face of a significant shock.”

Although Poloz said the bank has no immediate intention to use unconventional measures, the bank announced on Tuesday that it would update its “toolkit” of policies that it would use in response to an economic crisis.

“I certainly hope we won’t ever have to use these tools,” he said. “Should the need arise, we’ll be ready.”

If it did feel that it was necessary to introduce one of these measures, the bank wouldn’t roll them out in any particular order, Poloz said. It would use whatever combination it judged appropriate in the circumstances.

The bank’s new willingness to adopt a policy rate of zero per cent or even -0.5 per cent is notable because back in 2009, the bank said it would never cut its policy rate below 0.25 per cent.

Negative interest rates have been tried by other banks, among them the European Central Bank and the Swiss National Bank, whose rate is currently -0.75 per cent. The Bank of Canada has studied the use of those tools in those markets and found that markets were able to adapt.

“The bank is now confident that Canadian financial markets could also function in a negative interest rate environment,” Poloz said.

That said, the bank says that it would not follow Switzerland’s lead and consider a move beyond -0.5 per cent.

Poloz said that the Canadian economy is going through a “complex and lengthy adjustment” to a drop in resource prices, and said that this adjustment will last a couple of years. At the same time, he said the non-resource economy continues to gather steam, driven by exports. The bank therefore expects the Canadian economy will result in inflation climbing toward a sustainable level of two per cent by mid-2017.

“The Bank will keep its primary focus on achieving the inflation target,” Poloz said.

“The overall economy is growing again, even as the resource sector contends with lower prices, because the non-resource sectors of the economy are gathering momentum. This is all taking longer than we imagined back in 2008, but our judgment is that our economy can get back to full capacity with inflation sustainably on target around mid-2017,” he said.

Bank of Canada willing to resort to below-zero interest rate in face of major economic crisis, Poloz says
 
Walter
#9
That's an investment that Analfloss would make.
 
Locutus
#10
Quote: Originally Posted by mentalfloss View Post

repost

quit being such an attention whoar dick cheese.
 
mentalfloss
#11
Low interest rates make this a great time to invest in infrastructure | Troy Media
 
darkbeaver
#12
Cash gold silver all will be confiscated, plastic will rule, eventually chips under the skin will be mandatory.
 
JLM
#13
Quote: Originally Posted by darkbeaver View Post

Cash gold silver all will be confiscated, plastic will rule, eventually chips under the skin will be mandatory.

God forbid!
 
IdRatherBeSkiing
#14
I think the negative interest rates are on the loans from BoC to the banks. This would translate to a lower interest rate on the money the bank loans its customers (there is usually about a 3% spread). I don't think the banks could pay you any less than what they are doing now and certainly aren't going to charge you to put money in the bank (other than their current service charges that is).
 
tay
#15
Citing the late British economist John Maynard Keynes, the central bank chief reminded his audience that when interest rates are already low, fiscal policy (the willingness of governments to spend more than they take in) is always more powerful than monetary policy (attempts by central banks to promote investment).

In effect, he was telling Prime Minister Justin Trudeau and Finance Minister Bill Morneau to go for it ó to run deficits if necessary in order to get the country working again.

Being prudent, Poloz didnít commit the sin of formally recommending anything to Morneau in this speech.

Central bankers tend not to comment publicly on what finance ministers should do, and vice versa.

But the message was there nonetheless. And itís worth dissecting Polozís speech to see how he approaches the current slump.

Another is to encourage banks to lend more money by penalizing them when they donít.

This is the so-called negative interest-rate scenario. It would involve the central bank not paying but charging interest on commercial bank monies deposited with it.

Poloz said the penalty negative interest rate could be as much as 0.5 per cent.

Would this rebound on people who, in turn, park their savings in commercial banks? In response to questions, Poloz said no. But he may be overly optimistic

In Switzerland, where the practice already exists, one commercial bank has served notice that it will start explicitly charging its depositors negative interest next year.

This means that those who insist on leaving their savings deposited in this particular bank could see them shrink bit by bit until nothing is left.

Poloz was quick to say that he has no plans to use unconventional methods, that he is just being prudent.

more.....

Bank of Canada’s Stephen Poloz tells Trudeau government to spend: Walkom | Toronto Star
 
Walter
#16
Keynes has been proven wrong every time his ideas have been tried.
 

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