Negative Interest Rates

[almost there]

If 2% didn't happen in 2012 (3.66% average 30 yr)
I cant see it ever happening..........
That was a goat show.............

 

[cyber888]

If 2% didn't happen in 2012 (3.66% average 30 yr)
I cant see it ever happening..........
That was a goat show.............

We’re at 3.37% today ...

 

[Badger]

Hahahah. Cool cartoon graphics gave a nice visual sense for what various amounts of cash look like. And I learned something else new: "hundo" is apparently a slang term for a hundred dollar bill. Don't think I'll be using that one, personally.

Cheers!

 

[almost there]

We’re at 3.37% today ...

View attachment 32535

I think thats an add. 30-year fixed-rate mortgage fell to an all-time low of 3.31 in 2012.
Now were getting close to it. No idea why though? lol lol


3.66 today, 3.70 ave last week.

https://www.valuepenguin.com/mortgages/historical-mortgage-rates#nogo

https://www.bankrate.com/mortgages/30-year-mortgage-rates/

https://www.bankrate.com/mortgages/analysis/

 

[cyber888]

I just think anything can happen. lol. Even below 2.9% will already put us in the negative interest rate as 25% tariffs are in effect causing more inflation.

I think thats an add. 30-year fixed-rate mortgage fell to an all-time low of 3.31 in 2012.
Now were getting close to it. No idea why though? lol lol


3.66 today, 3.70 ave last week.

https://www.valuepenguin.com/mortgages/historical-mortgage-rates#nogo

https://www.bankrate.com/mortgages/30-year-mortgage-rates/

https://www.bankrate.com/mortgages/analysis/

 

[almost there]

I am fine with tariffs. Have had enough with China currency manipulation, Intellectual property theft, Built in obsolesce, Slave labor etc. Not to mention China import tax on American goods. (Do you know what it is?) We are so late to the party its not even funny.
But the media does not seem to get it.

 

[2177V]

Historically the Fed has had to cut rates ~4-5% during recessions. Since rates started at about ~2.5% this time, there isn't headroom to cut that much in the next recession unless they go negative or QE/helicopter money again.

I agree that the Fed needs to cut rates 4 to 5% but they can't.... unless they go negative but this may bankrupt the banks. The other way is to stimulate the economy is QE/helicopter money which you cited. However, this may increase the $22 trillion national debt.

A lot of people do not understand that the government does not have many options available if the economy slows down. The last stimulus mostly made the rich richer.

I believe the Fed will cut interest rates to 0 to 1% and then do QE and the government will also have a stimulus program that will benefit everyone. They need to do this BEFORE the economy contracts and BEFORE the corporations start laying off people. Once people read about layoffs, people stop spending money. At that point, the recession is unavoidable.

 

[2177V]

FYI I cut and pasted the counties with the highest Debt to GNP ratio. USA's Debt to GNP has been increasing over the years which I find alarming. I do not want the USA to be associated with Japan, Italy, Greece and Portugal which all have slow national economic growth......


My point: With a huge national debt, USA does not have many options to spend itself out of a recession and therefore low interest rates are here to stay for a long time.

///////////////////////////////////////////////////////////////



What countries have the largest debt in the world? Here is a list of the top ten countries with the most national debt:

1. Japan (National Debt: ¥1,028 trillion ($9.087 trillion USD))
2. Greece (National Debt: €332.6 billion ($379 billion US))
3. Portugal (National Debt: €232 billion ($264 billion US))
4. Italy (National Debt: €2.17 trillion ($2.48 trillion US))
5. Bhutan (National Debt: $2.33 billion (USD))
6. Cyprus (National Debt: €18.95 billion ($21.64 billion USD))
7. Belgium (National Debt: €399.5 billion ($456.18 billion USD))
8. United States of America (National Debt: $19.23 trillion (USD))
9. Spain (National Debt: €1.09 trillion ($1.24 USD))
10. Singapore (National Debt: $350 billion ($254 billion US))

Japan, with its population of 127,185,332, has the highest national debt in the world at 235.96% of its GDP (although, notably, Japan is also one of the world's largest economies). This is followed by Greece, which is still recovering from the effects of its economic crisis and subsequent bailout, at 191.27%. Venezuela, which is currently undergoing serious economic difficulties, is also in the top five countries with the highest national debt, with a debt to GDP ratio of 161.99%. Several African countries also have high national debts, including Sudan (176.49%), Eritrea (129.43%) and Gambia (111.45%).
Of the world's major economic powers, the United States has the highest national debt at 108.02% of its GDP. China, the world's second-largest economy and home to the world's largest population (1,415,045,928), has a national debt ratio of just 51.21% of its GDP. Germany, as Europe's largest economy, also has a relatively low national debt ratio at 59.81%. Hong Kong, a major global financial center, has the lowest national debt in the world, at just 0.05% of its GDP. This is followed by the tiny Kingdom of Brunei with a population of just 434,076 and a national debt of 2.49% of its GDP
IMF data from the April 2018 IMF World Economic Outlook database.

 

[cyber888]

I am fine with tariffs. Have had enough with China currency manipulation, Intellectual property theft, Built in obsolesce, Slave labor etc. Not to mention China import tax on American goods. (Do you know what it is?) We are so late to the party its not even funny.
But the media does not seem to get it.

US is losing in the trade war and tariffs are paid by US consumers, not China. China is going to tap other markets and only the US farmers are losing out. The media gets it - the US government is not getting it.

 

[2177V]

US is losing in the trade war and tariffs are paid by US consumers, not China. China is going to tap other markets and only the US farmers are losing out. The media gets it - the US government is not getting it.

I agree. USA had the right idea in addressing the unfair trade problem but the wrong strategy. In hindsight, USA should have allied with the Europeans, Canada, Mexico. Japan, South Korea, etc., and then addressed the problem together.

Instead, China used a "divide and conquer" counter-strategy. China raised the tarriffs on US goods while lowering goods from other countries and this protected the Chinese consumers.

Whether to go into a "trade" war or a "real" war, you generally lose if you go to war alone....with no allies supporting the USA's objective.

 

[RISP]

Germany is running budget surpluses. So in addition to asking why their bonds are selling at negative interest rates, we should be asking why they are issuing bonds at all.

It's simply a rollover of older, expiring bonds. The total national debt is declining, both in relation to GDP and in absolute terms: https://www.smava.de/eurozone-schulden-uhr

And yes, there is talk about taking on more new debt and using the revenue for investments in infrastructure or education (not tax cuts, that's not how we roll ). But the government's hands are somewhat tied by the 'debt-brake' implemented in 2009: https://en.wikipedia.org/wiki/Debt_brake_(Germany)

 

[NW-Bound]

If Germany's government either cannot or does not need to borrow money, who can blame them for not paying any interest?

The question is then, why businesses and people have no other places to put their money to use? Is it really that economic condition can be so bad, such that people do not want to invest in anything?

It makes me wonder if this is what we are coming to in the developed world. All the easy investments with good returns are gone. All that is left is either fluff, or too hard and has little return. Yes, we can use more miracle cancer cures, but those are difficult and very costly to get. How many more smartphones/TVs/laptops can we use? Bigger homes?

I don't know what it is, but I do not like it. A decade ago easily, I read of Japan's problem with stimulating its economy. They had a lot of money, but nowhere to put it to good use.

 

[RobbieB]

You have to be creative and give the people what they want before they want it.

Like facebook which evolved from a college dating site.

 

[Badger]

US is losing in the trade war and tariffs are paid by US consumers, not China. China is going to tap other markets and only the US farmers are losing out. The media gets it - the US government is not getting it.

+1 So many US citizens are not getting it either.


Cheers!

 

[almost there]

U.S. tariffs are among the lowest in the world – and in the nation’s history.... How did we get here?

 

[NW-Bound]

You have to be creative and give the people what they want before they want it.

Like facebook which evolved from a college dating site.

The US has the record of having the most creative entrepreneurs, as evidenced by all the inventions and innovations that started here first.

A lot of wealth is created. It however adds to the wealth and wage disparity that people often lament about.

Can anyone find something worthwhile for Joe and Jane Doe to do to make a decent living?

Oops, perhaps this post should be in the other thread about the decline of rural towns.

 

[davidfin]

Do you think if I paid my part of the national debt today, I could get a lifetime pass on future federal taxes?

 

[Theo]

Do you think if I paid my part of the national debt today, I could get a lifetime pass on future federal taxes?

The debt will get paid regardless of whether you pay your taxes or not.

 

[jazz4cash]

I would say the debt will be rolled over regardless of whether you pay your taxes or not.

 

[2177V]

I would say the debt will be rolled over regardless of whether you pay your taxes or not.

I agree the debt will be rolled over. However, there is an impact if you do not pay any principle. For example: If a home borrower has a mortgage that pays zero principle but an interest of 3%, the remaining balance goes up. If that home borrower can sell bonds to cover the 3% interest rates, then the principle balance of the original loan does not go up ....but now there is an additional principle from the bond that pays for the interest. Nothing is free and rolling over a debt is one of them.

 

[GrayHare]

The federal gov't could sell $1000 lottery tickets, the prize being no income taxes for life. It would be a way to get high-income people to play a lottery.

 

[2177V]

The federal gov't could sell $1000 lottery tickets, the prize being no income taxes for life. It would be a way to get high-income people to play a lottery.

Great idea. Here is another one. Give the 1% or CEO who took the tax reduction and have the company buy their own stock. When the company back back stock, the stock prices tends to rise so the CEO can cash out their stock options. Change the tax law to tax them retroactively.....or give them an option to donate money to the federal government to pay down the government national debt. Any ideas to get the rich to pay more taxes should be on the table.

 

[Out of Steam]

I could never understand how weaker economies in Europe pay less interest on bonds than US.

Perhaps people are concluding the opposite on relative economic strength when betting their own money, thinking that the lower interest rate buys them a currency with appreciation potential relative to the US Dollar.

 

[audreyh1]

I could never understand how weaker economies in Europe pay less interest on bonds than US.

Simple - a growing economy usually commands higher interest rates. If an economy falters, interest rates usually drop.

 

[2177V]

Simple - a growing economy usually commands higher interest rates. If an economy falters, interest rates usually drop.

Here is a good article on negative interest rates in Germany:

https://www.cnn.com/2019/07/29/business/deutsche-bank-ecb-negative-rates/index.html

Bottomline: Pick your poison: Recession or Negative interest rates.

It appears that Germany decided on the latter. Ironically, the recession may happen anyway. This is the reason that I believe the USA will pick the former and stop at 0.5% to zero.