Bank of Japan Decides Negative Interest Rates

And so, if there was a FREE MARKET where interest rates are a function of supply and demand would today's rates be anywhere near zero?

 

Log in or Sign up to hide this ad.

Sure. Except for extraordinarily short term rates, which are set by the Federal Reserve's Open Market Conmittee's actions, all interest rates are PRECISELY a function of supply and demand right now.

 

A bank would be better off sitting on the money themselves or paying the small penalty of a negative rate then handing out a bunch of bad loans to try and make a profit on the money. I understand the idea behind trying to encourage loans with the negative rate, but at the same time loans being handed out to freely or in amounts that were above peoples ability to pay it back are a large part of what caused the housing bubble. You do need loans to be available but being to available can be just as bad as being to tight with them in the long run.

 

If we hadn't already swung the pendulum WAAAY too far the other way, your analysis would be spot on. The fact now is even the old school creditworthy can't qualify.

 

If one wonders why 10 year Treasury yields remain low, just take a look at the even lower rates offered by other countries' bonds, especially Europe. Those investors are buying US bonds because the rates are so much higher, comparatively speaking.

 

Safer too

 

The expected increase in value on the currency exchange for dollars makes them even better, in terms of any other major currency.

 

They don't FIND LOOPHOLES, THEY BUY THEM by paying BRIBES TO POLS...

 

I anticipate the dollar to continue to strengthen short term, but how long do you anticipate it to strengthen (or hold)?

I'm expecting parity between USD and Euro. It's gotten close but taking some time to break clear of the $1.05 barrier.

 

Pretty much lol. If there was one way to put it... the leaders lawmakers of this country have sold their souls to the devil. Pretty much the same song and dance though that you see throughout human history. Roman empire, Spain, British, etc. This country was started by Europeans fleeing their country's corruption and over taxation, mostly British. The only difference this time is there isn't any unsettled land left. I guess Yukon and Northwest Territories area could be next, especially with global warming and all. Maybe someone will invade Canada lol. Who knows, maybe the next band of renegades settles on the Moon or Mars.

 

Gee. And all this time I thought negative interest meant that when I go to take a loan, the bank will pay ME money instead of me having to pay them .

 

No other banks including the ECB are looking to go to negative rates. A few are on the cusp.

It's a sympton of debt deflation which is BAD for commodity prices.

 

they would just send everything else over to china and india

 

On a side note I'm surprised this thread was not terminated by the mods for the politics. I guess things are a little more lenient here nowadays and that's cool I guess.

 

Actually I think intellectual discussion on subjects that verge on politics are OK, but when people want to rant and rave about certain politicians and policies/laws, that would be shut down FAST.

 

The whole idea of negative interest rate is that Japan is in an unique situation where deflation has been persistently going on for the past TWENTY+ years.

While there were some minor success in breaking out of the vicious deflation cycle a couple of years ago, Japan has fallen into recession again and some extreme measures are needed.