1. The official Sherdog Store is back! Check it out! » Discuss it here! »
Violence/Genocide: Do not condone violence or genocide on a person or group of people. You are free to attack a person or groups ideas but you are crossing the line when calling for violence. This will be heavily enforced in threads with breaking news involving victims.

Economy ECB gets negative interest rates

Discussion in 'The War Room' started by Lead, Jun 5, 2014.

  1. Lead /Led/ like an old Nellie Platinum Member

    Joined:
    Nov 13, 2009
    Messages:
    41,814
    Likes Received:
    6,791
    Location:
    409
  2. Uchi Mata Preaching the gospel of heel hooks and left kicks

    Joined:
    Jun 21, 2010
    Messages:
    18,578
    Likes Received:
    0
    Location:
    Denver, CO
    It makes a lot of sense from a monetary perspective. Indicidentally, the elmination of physical cash would make this process a lot easier and is one of the main reasons that might be a good idea.
     
  3. Lead /Led/ like an old Nellie Platinum Member

    Joined:
    Nov 13, 2009
    Messages:
    41,814
    Likes Received:
    6,791
    Location:
    409
    I've read about it being used if our system was entirely electronic and the theory is definitely interesting. I just seems like interest rates are nowhere close to returning. We've nearly bottomed out and ECU went even farther.
     
  4. KOQ24 Gold Belt

    Joined:
    Oct 5, 2008
    Messages:
    19,734
    Likes Received:
    1,026
    Location:
    Grimmen, Germany
    we lose more money through inflation that we gain with these interest rates
     
  5. Lead /Led/ like an old Nellie Platinum Member

    Joined:
    Nov 13, 2009
    Messages:
    41,814
    Likes Received:
    6,791
    Location:
    409
    I think a lot of politicians don't understand this argument and it is a cause for some of our problems. I watched a speech Clinton gave explaining his economic policy and he specifically mentioned this when it came to the middle class with one of his campaign proposals. I wish I could remember the specifics.
     
  6. Jack V Savage Secretary of Keepin' It Real/Nicest Guy on Sherdog

    Joined:
    Oct 30, 2004
    Messages:
    80,941
    Likes Received:
    10,211
    Yeah, though given how minimally negative they are, it's not worth the hassle of converting to physical cash to avoid charges so this should be workable.

    I don't understand this point. Who is "we"?
     
  7. Uchi Mata Preaching the gospel of heel hooks and left kicks

    Joined:
    Jun 21, 2010
    Messages:
    18,578
    Likes Received:
    0
    Location:
    Denver, CO
     
  8. Jack V Savage Secretary of Keepin' It Real/Nicest Guy on Sherdog

    Joined:
    Oct 30, 2004
    Messages:
    80,941
    Likes Received:
    10,211
    Everyone/society doesn't gain or lose anything from the transaction or from inflation. That's what has me confused.
     
  9. Zankou Bringing peace and love Staff Member Senior Moderator

    Joined:
    May 24, 2004
    Messages:
    31,740
    Likes Received:
    2,083
    Location:
    Los Angeles
    Although negative v. positive is just a technicality, I have to say that it isn't exactly encouraging to see banks handing out currency as a loss-leader. It has the indicia of a baby ponzi scheme.
     
  10. Uchi Mata Preaching the gospel of heel hooks and left kicks

    Joined:
    Jun 21, 2010
    Messages:
    18,578
    Likes Received:
    0
    Location:
    Denver, CO
    The money you have in the bank loses purchasing power when inflation rate > interest rate. It encourages spending, right? That's the whole point.
     
  11. MadSquabbles500 Steel Belt

    Joined:
    Jun 29, 2011
    Messages:
    28,241
    Likes Received:
    5
    Location:
    New Jersey now Queens
    I may be misunderstanding this zero interest rate, but wont that mean banks will loan out uncontrollably? Isnt that bad, wont that just cause inflation to skyrocket? Pardon muaah if I am going in the wrong direction.
     
  12. Jack V Savage Secretary of Keepin' It Real/Nicest Guy on Sherdog

    Joined:
    Oct 30, 2004
    Messages:
    80,941
    Likes Received:
    10,211
    No, I got that. I didn't get what the other guy was saying.
     
  13. KOQ24 Gold Belt

    Joined:
    Oct 5, 2008
    Messages:
    19,734
    Likes Received:
    1,026
    Location:
    Grimmen, Germany
    germans,might be true for more nations.

    the interest rates are so low at the moment that we simply lose purchasing power through inflation alone
     
  14. shera Brown Belt

    Joined:
    Jan 9, 2009
    Messages:
    3,767
    Likes Received:
    0
    Location:
    NYC
    With depositing money with the ECB now costing banks, wouldn't that also encourage them to park their money elsewhere e.g. US Treasuries? It's not like lending is the only option to them, especially if the economy is in a situation where repayment ability in impaired.
     
  15. Jack V Savage Secretary of Keepin' It Real/Nicest Guy on Sherdog

    Joined:
    Oct 30, 2004
    Messages:
    80,941
    Likes Received:
    10,211
    So what's happening is that banks get charged a very small fee for excess reserves. I'm not sure how that relates to a Ponzi scheme. Can you elaborate? "Ponzi scheme" seems like "terrorism," "neoconservative" or "bailout"--something that used to actually mean something but now just gets tossed around to insinuate something negative about something the speaker doesn't like.
     
  16. Seriously-Dead wubbalubbadubdub

    Joined:
    Nov 11, 2008
    Messages:
    2,717
    Likes Received:
    0
    And so begins the most counter-intuitive monetary experiment ever. It will be interesting to see how this turns out.
     
  17. IDL Steel Belt

    Joined:
    Sep 17, 2009
    Messages:
    25,044
    Likes Received:
    109
    Location:
    Lending money to your government
    Money in the bank is like a hot potato. The longer you hold onto it the more you get burned!
     
  18. Jack V Savage Secretary of Keepin' It Real/Nicest Guy on Sherdog

    Joined:
    Oct 30, 2004
    Messages:
    80,941
    Likes Received:
    10,211
    It's not counter-intuitive at all. The idea that that's what's needed is pretty basic. The problem has always been that the existence of physical cash sets a zero limit on how low rates can be because banks can always just keep their reserves in cash. But as noted earlier in this thread, preventing that hassle is worth an extremely low negative rate.
     
  19. Zankou Bringing peace and love Staff Member Senior Moderator

    Joined:
    May 24, 2004
    Messages:
    31,740
    Likes Received:
    2,083
    Location:
    Los Angeles
    There's an element of desperation that you project when you go to negative interest rates. "We'll pay you to take and use our money." Why? Because we have faith that things will turn around ...

    Now that's to some extent artificial, and you can't say that -0.1% is really that much different than 0%, but the willingness to ignore the message and say yes, we literally will loan our currency out at nominal negative interest rates suggests extreme desperation. It's the monetary policy equivalent of this:

    [​IMG]
     
  20. Damnami Yellow Belt

    Joined:
    Nov 9, 2013
    Messages:
    163
    Likes Received:
    0
    I don't know if I really understand this, but European banks aren't lending enough even with a low required reserve ratio so the ECB made it so that it will cost banks to hold excess reserves in the hopes that this will provide an incentive to them to lend more?
     

Share This Page

  1. This site uses cookies to help personalise content, tailor your experience and to keep you logged in if you register.
    By continuing to use this site, you are consenting to our use of cookies.