Posted on 02/19/2015 7:36:29 PM PST by Lorianne
From engaging in 'competitive easing' to provoking international currency wars, have we finally reached the limit of what monetary policy can achieve? Click on the countries below to find out ___ The world's oldest central bank has ventured into uncharted territory.
Last week, Sweden's Riksbank slashed its main policy rate into negative territory.
In doing so, it became the 14th central bank to ease monetary policy so far this year, but the first to actually take its "repo rate" below zero to -0.1pc. This means Sweden is actually charging its banks to lend money. In Britain, the same interest rate currently stands at a historic low of 0.5pc, but could well be cut further if Mark Carney is to be believed.
Switzerland and Denmark have already sent their deposit rates to -0.75pc to prevent currency appreciation and defeat deflation.
The map above shows how this extraordinary central bank action has become the new normal in the developed world.
Faced with the twins threats of deflation and economic stagnation, monetary policymakers are reaching for their interest rate levers and digital money-printing tools in a bid to stave off recessions and debt deflationary dynamics.
(Excerpt) Read more at telegraph.co.uk ...
An aging population and high consumer and public debt levels are suppressing demand and having a deflationary impact on the world’s developed countries. As in the early 1980s, cuts in taxes and regulation are needed to spur private sector demand.
Folks, this is very serious.
Don’t leave sums of over $100.00 in your bank account. Withdraw it as soon as it arrives. The bank could decide to take your money for its own use.
I leave just $10 in my checking account. I have been paying all my bills with cash.
bfl
“but the first to actually take its “repo rate” below zero to -0.1pc. This means Sweden is actually charging its banks to lend money.”
Uh,wouldn’t this mean Sweden’s central bank is PAYING its banks to lend money?
Since I have no experience with minus rates, I may be off on this, but:
If you borrow money at 6% it means that you pay back the principle plus 6%.
If minus means minus, unless Bill Clinton defines it, minus 6% would mean that you pay back $94 on every one hundred you borrow.
Talk about creating bubbles!
Imagine an eight year loan on an expensive car at minus 4%.
The world has gone mad.
Haircuts are certainly possible...given the state of things.
It would be something along the lines of... we are taking 35% of all deposits in excess of 100,000 .. the rich bastards can afford it and we need to spread the wealth to help the needy.
Same thing may happen with retirement accounts... it’s the largest hoard of cash there is... it’s very tempting for the morally bankrupt to seize it and buy votes with it.
I was not aware that central banks were supposed to control the world
To pursue the matter further:
Minus .2% is not much, but the number will grow as all libs when their ideas fail, always say it was because they did not do enough.
So say it goes to minus 3%.
No bank is going to loan money out at a loss, so they stop loaning. That will insure a financial collapse.
So eventually the government will step in and tell them they must make loans or be taken over.
So the FED prints money, “loans” it to the banks and forces the banks to loan it out.
As I said, the world has gone mad. The one thing that is certain is that no government can handle money wisely. Never ever.
Let me add this to your what if: Say your have $100 in your savings or checking account. And someone borrows $100 @ -6 percent from the bank and pays back $94 at the end of the term. They have made a $6 profit at somebody’s expense.
Which account did the $6 come from? The bank or you. Do you still have $100 in your checking or savings account, or do you now have $94? Or does the bank take the loss? Somebody has to take the loss for the transaction to balance.
What is this? New math or the inverse of fractional banking?
I thought banks were in business to make money, not lose it.
Doesn’t quite work like that.
And loans were (at one time) allowed to the inverse of the reserve rate.
At 10% RR, $100 could be loaned as $1000.
at 8% RR, $100 could be loaned as $1,250.
Banks have become technically-insolvent if their loans (assets) were not in proper proportion to their deposits (debts to depositors).
Thanks. These negative central bank rates have thrown me for a loop. These attempts to control the money supply look like they are getting way out of control. I wonder who would benefit the most from an economic collapse? The saver or the borrower?
Nobody will benefit.
At 6% simple per year, the $100 loan is paid back as $106. The other money is “created” by services, like housecleaning, haircuts, or is transferred between moneyholders.
Now, in times of economic depression, those who have hoarded cash or other monetary instruments, or have things of value, like food, etc. can trade. They can buy property cheap, whether real estate, used cars, etc.
But there are almost always taxes, storage, maintenance, etc.
Money works because you can’t take in 10,000 chickens to pay for a new car. But it’s all dependent on the flow being maintained.
It all works fine, relatively, until the currency is devalued and nobody wants it. This happened with the ruble years ago. It’s why you have some countries where it is a million of something, and it’s not worth that much.
To me, it’s disconcerting to a significant level that this country is bleeding jobs, racking up insane debts and printing money like there’s no tomorrow.
But there’s very little I can do about it.
Note: 2-19-15 on the Worldwide EXCHANGE, it was noted that because the Euro yields so low that the pension funds will have to move out of Europe and go globally elsewhere for sufficient returns.....Guess where,.... and what the U.S. is using for securing....by the Body Mortgage EXCHANGE
“The vases showed they were made by a Messalla’s slave. Indeed they were stamped with the Latin inscription “Hermia Va(leri) (M)arci s(ervus) fecit,” meaning “Made by Hermias, slave of Marcus Valerius.” [Laura Pagliantini]”
Messalla = Body Mortgager, Exempt One
Hermia = Mortgage Exchange, Stamped and Registered.
Human Trafficking trading.
http://www.freerepublic.com/focus/f-chat/3259302/posts
Same here. But we can study Argentina and others who have experienced economic chaos after a banking collapse and determine what measures would be applicable to us in the same situation.
Unfortunately, many will not recognize the peril and will not be able to prepare and survive an economic collapse. I'm concerned my kid's and grandkid's won't.
Thanks for the replies. I'm going to get some z's.
“charging its banks to lend money.”
Doesn’t a negative rate mean it’s charging their banks if they don’t lend the money out? or does the rate work opposite between the central and commercial banks then it does between the commercial banks and the businesses/people?
A negative rate means a saver is charged if he saves, but the rates to take a loan (if negative) means your being paid to take a loan out. So if the centrals are loaning at a negative rate then aren’t the banks being asked to take out additional loans at a benefit to the bank?
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