Negative interest rates: Lessons learned...so far - Part 1

On June 6, the Hutchins Center on Fiscal and Monetary Policy at Brookings examined the recent experience with negative interest rates, particularly in Europe, and their possible use in the U.S.
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[@ihague4568]

With negative interest rates, 100% of my savings will go under my mattress. After that, I will borrow $1 million at -5% for 30 years, and live off the (negative) interest.

[@chrislambert1617]

In Science lessons I was told that matter begins at -273.15 degrees Kelvin, not 0 degree Celsius perhaps they will begin Bank lending interest rates at -274.15

[@luckymtshali1762]

NOT DEBT ARE U USING A COMPUTER OPR TALKING TO YOUR FRIEND

[@rf9164]

Negative rates are not creating jobs anyway. They just make people borrow to buy houses and stocks and bonds. Can't they just set the rate at say 3 percent and let savers earn something and borrowers pay something and the system should work. All this chasing after growth rates is not going to work if people don't work to produce something.

[@slovokia]

The more I listen to central bankers, the more convinced I am that they are dangerously overconfident, and it is dangerous that markets have so much faith in their powers.

[@birdbirdbird1565]

I am pretty sure Japan will be screwed big time in negative territory. Japan will get stuck there in a deep hole, while America is actually increasing interest rates.

[@anthonycapitan5802]

I love how they justify what they're doing with sophisticated computer modeling, as if their motivations are sophisticated. In reality, negative interest rates are just central banks' refusal to stop throwing good money after bad, for fear of deflation. But trying to reanimate an economy that has been killed by excessive debt, with more debt, just makes the eventual purge of unsound debt bigger, and pulls more and more debt into the category of bad debt - the more criminals (bad debts) that are around, the more likely law-abiding citizens (sound debt/investment) will fall victim to guilt by association. Thanks to their meddling, the line between good and bad debt is impossible to surmise, there's no telling the appropriate price of anything, and when their fiat power of pushing our collective, utter lack of confidence further into the future fails - the unwinding of the entire system of debt will be catastrophic.

[@abdulshabazz8597]

The banks have no obligation to pass the benefits of negative interest rates onto lendees and mortgagers in the form of zero percent loans, banks are more likely to keep the rates on that end positive, in essence now profiting on both ends.

[@abdulshabazz8597]

The power structure is shifting from equity to debt

[@logical-brain-]

Really feel like I'm listening to super villains discussing their plans...

[@mikestanmore2614]

Could we, perhaps, see the graphs these bankers are referring to? As pleasant as it is to watch a blonde banker talk, the graphs would probably have been more informative.

[@harold4506]

What we've learned so far...there's going to be another MASSIVE CRASH.

[@DemocraticSolutions]

There are demographics, micro and macroeconomic factors that can explain as to why negative interest rates are inevitable. Additionally, unfounded earnings growth targets are one factor of other factors that is continuing to cause cyclical economic downturns.

[@jsherwood1295]

The Federal Reserve changed what they use to calculate the inflation rate in the 1990s... if the original formula was still being used, the current inflation rate would be 5-6% and interest rates on US Gov't Bonds would be around 8-9% as I type this in Aug 2019! Why isn't anyone talking about the math used to determine the inflation rate??? www.shadowstats.com/alternate_data/inflation-charts

[@anthonycapitan5802]

How are the rates on US government bonds affected by the CPI and inflation? Isn't the yield on bonds determined by their face value, not by the value of consumer goods?

[@ihague4568]

They'll do whatever they can to ensure the system grows ever more distorted. I'd rather invest all my money in canned ham then pay a single cent of interest to a bank for holding my money.

[@crl157]

Once cash is gone your savings will be paying your neighbours morgage.

[@ihague4568]

@@crl157 Not my savings. There are an infinite number of alternative stores of value. I'd keep $10K or so in the bank (for liquidity) but the rest would go to alternatives. The storage costs on my physical gold, for example, are not dependant on borrowing costs. It is a function of the fixed storage and insurance costs at the facility. Think of it. Negative interest rates are a wealth tax. Since when have politicians ever done anything to harm the wealthy.

[@lissettewendymorenovillanu3111]

It is necessary to consider the importance of entrepreunerial or investment rentability. Something called financial equilibrium point, as point of departure in order to make the lower interest rate useful. But rentability not only depends on monetary estimations, but also of expectations about political, economic and financial stability. So as long as the institutional environment does not provide security and lower uncertainty, neither the lower interest rate, nor the management of inflation will permit reactivate the real growth of the economy. An international agreement among the biggest economies is necessary to provide the international economy of legal certainty.

[@georger6624]

I heard people that have fairly decent jobs not making a lot of money or living on the streets today this is crazy

[@darinmullins4770]

Has there ever been negative rates with fiat currency over printing ?

[@barbwire3507]

Who’s watching this in March 2020? The past two weeks we’ve had in the US a global viral pandemic, everyone is told to stay indoors and don’t go to work or in large crowds. The economy is tanking and the Fed just lowered our interest rate to zero! I foresee another Recession coming, worse than the Great Depression of 1929! We’re living in a dystopian society right now and people are dying in bigger numbers everyday and there won’t be a viable vaccine for Covid-19 for a year to 18 months! Can we as a society just shutdown completely?

[@logical-brain-]

Lowering interest rate in hard times can lead to more savings and that's a problem.... Right..... Also politicians, "There is too much wealth inequality" Hypocrisy at it's finest

[@ztech6596]

I want negative interest rates. I want bank to take my money, I don't deserve money.

Keep the Ponzi scheme rolling - What ever the cost...

[@cathyglascock1370]

Haha Just like I don't deserve privacy...... I want my iPhone to surveil me.

[@sumdudenorris106]

We are so so screwed

[@anthonycapitan5802]

I love how they justify what they're doing with sophisticated computer modeling, as if their motivations are sophisticated. In reality, negative interest rates are just central banks' refusal to stop throwing good money after bad, for fear of deflation. But trying to reanimate an economy that has been killed by excessive debt, with more debt, just makes the eventual purge of unsound debt bigger, and pulls more and more debt into the category of bad debt - the more criminals (bad debts) that are around, the more likely law-abiding citizens (sound debt/investment) will fall victim to guilt by association. Thanks to their meddling, the line between good and bad debt is impossible to surmise, there's no telling the appropriate price of anything, and when their fiat power of pushing our collective, utter lack of confidence further into the future fails - the unwinding of the entire system of debt will be catastrophic.

[@vidaripollen]

Closely connected with demographic changes

[@sandymilne224]

Absolutely correct, but also the effect of the negative rates must be to spark borrowing. BUT, that doesn’t work under certain circumstances. Such as, corporates taking the opportunity to pay down debt, instead of expanding the balance sheet. Richard Koo with experience in both America and Japan lays that out. Japan instead went to infrastructure spending to take up the slack. Govt borrowing is a replacement for corporate borrowing and unfortunately adds to the state debt, but... without it, countries move into deflationary times. That’s the worst. Watch the interview on Real Vision by Grant Williams and Richard Koo to understand why most of these guys are on the wrong path.

[@Imafungi123]

banks require money outside of their bank, to pay interest to those who keep money in their bank; inflation is a way to have a source of new money that the banks can try to capture to pay their holders interest; I suppose this is due, 1 for banks being for profit/able to offer interest to those whose money they hold, 2 maybe necessarily related, banks doing investing; perhaps all banks should be non profit and offering no interest to those who store money in bank, and the concept of bank then being entirely separate from concept of investment.

[@Imafungi123]

but yes, I forgot the physical. energetic expenses required to construct and maintain the service, so profit is necessary somehow. Unless there was only 1 bank and it was paid for by taxes, and its only role was to securely place money into it for saving, checking. Loans and investments would then be as is, private for profit as they are, I suppose.

[@666cccccc]

before assumeing consiracy theories maybe you should look up fischer's eqquation

[@georger6624]

Taxes are too high people don't have the money put in the banks they had to pay bills negative interest rates will shut down the banks in the country

[@sandymilne224]

...and that’s why the sovereign has to take the place of corporations to borrow. BUT the borrowed money needs to be used for infrastructure spending. Negative interest rates don’t spark spending IF corporations are using the opportunity to pay down debt with the low interest rates. That’s when the state needs to do the borrowing.

[@luckymtshali1762]

SOME KIND OF A ROLLOVER LOOKS LIKE WE ARE TALING TIOO ARGENTINA... CORONATION FUND ON NEGATIVE RASTES NOT ALLAN GRAY...DONT ASK ME WGHY NOT RAND DENOMINATE D FUNDS...

[@davidouellette6833]

IT HAS BEEN DONE ON PURPOSE

[@jsea8987]

I don't know if I can through almost 3 hours of this when the VERY sentence out of this lady's mouth is an inaccurate statement. "It was previously considered a really, largely a theoretical curiosity that nominal interest rates would turn so low that it would constrain monetary policy options to respond to negative shocks... that's no longer the case..." First, let's not focus on the loaded, confusing language, but on the substance. She states nominal interest rates have been able to be controlled , even though we previously thought they could not be. How can this statement even have the gall behind it to be uttered is quite comical, when you consider that they only kept interest rates at one place for the past decade: LOW! Now consider, before this past decade the United States (and before them Japan, and after the EU) engaged in QE as a ONE TIME PROMISE to keep OUR GREAT COUNTRY afloat and that nothing ever had happened which necessitated action like it did in that time following the Financial crisis. And the WHOLE TIME these people went in front of our TVs and congress to tell us this and how it would be paid back and that the Fed and the US government are not one in the same, because that would mean that we could just print ourselves money. And they said interest rates would go up according to plan, and as promised in legislation and before our congress. Yet, they didn't go up as promised. Why not? The lady clearly states that ' We got everything under control with interest rates.' So which is it ? How come we can't get an answer to this question, but all we get is a whole bunch of hot air and misleading jargon?

[@peterwilson9327]

Central banker propaganda sponsored by the Brookings institute. BS

[@luckymtshali1762]

CENTRAL BANK MY FRIEND///DO U KNOW THAT PERSON NOT THE BANKER...THATS YRE MONEY

[@georger6624]

Negative interest rates happen put your money in your mattress

[@shirleydiwert943]

Lost in legalesse, running in circles as they gorge themselves others are homeless

[@inveritategloria]

Respectfully, since when is it an acceptable international policy to force certain countries into spending or others into borrowing, and nobody into saving? isn't this meddling in international affairs?

[@waqarjan2738]

SO sweet nice

[@harryballs2927]

GOLD Negative Interest Rate = Dead Currency