Negative interest rates and what it means

Quote: AZDuffman

Slow growth in basic industries. 20 year boom. Financial crash. China is nearing the end of the boom phase.

I don't understand China. They build
cities nobody can afford to live in.
Freeways nobody drives on. Airports
nobody uses. How did they pay for
all that. Most of their population
lives in poverty. We didn't build
freeways until we had so many cars
we absolutely needed them. We don't
build office or apartment buildings
unless there are paying tenants already
lined up. China does everything ass
backwards.

Quote: Evenbob

I don't understand China. They build
cities nobody can afford to live in.
Freeways nobody drives on. Airports
nobody uses. How did they pay for
all that. Most of their population
lives in poverty. We didn't build
freeways until we had so many cars
we absolutely needed them. We don't
build office or apartment buildings
unless there are paying tenants already
lined up. China does everything ass
backwards.

Much of it they are doing to keep people working. They built in 10 or so years what it took the USA 100 years to build. But it is so much just to keep the wheel turning. Same as a store that sells at cost, the product moves and people work, but no wealth is created. They probably have planned that at some point the locals will consume and produce on their own. It is going to hurt us all when they fall.

By the time the average Chinese can
use all the infrastructure, it will be
falling apart from non use. I remember
a 60 Minutes piece a few years ago
about a town of high end condo's
that has not one person living there.
Condo buildings as far as you can see.
All has electric and plumbing and
fixtures, ready to be lived in.

Quote: Evenbob

We didn't build freeways until we had so many cars we absolutely needed them. We don't build office or apartment buildings unless there are paying tenants already lined up. China does everything ass backwards.

It's a feature of government directed development. By nature the government tends to direct the grandest experiments because the government officials are awarded with high GDP growth. It isn't totally absent in the USA, where you tend to see powerful Congressional Representatives overbuild tiny airports and develop office parks which can barely be filled.

We have a society that adds 17.4 to 35.3 million urban citizens in a ten year period since WWII probably in largely equal parts foreign and domestic immigration. China is trying to create hundreds of millions of urban citizens every ten years almost entirely through government directed domestic immigration.

Year	rural	urban	comments
2010	+0.4	+26.9
2000	-2.6	+35.3	illegal migration
1990	+2.2	+20.0
1980	+5.9	+17.4	birth rate drops
1970	-0.5	+24.4
1960	-0.4	+28.4
1950	-3.0	+22.1
1940	+3.4	+5.5	great depression
1930	+2.3	+14.9
1920	+1.6	+12.2	southern Europe
1910	+4.2	+11.8	southern Europe
change	13.5	219.0
1900 millions	46.0	30.2

In the PNW there is a cash and also a barter society.
Consider mushroom pickers... they sell to a broker for straight cast, no names, no tax data. He sells to Japan at a great profit.
Most people seem to live by 'barter'... sometimes inventing pre-existing "debts" to defeat a divorce court.

I don't know if countries really plan on removing a currency or simply make it possible to prevent a "run" on currency. If its all debits and credits in a computer, you can easily cap the transaction at a modest amount... thus stopping any 'run' on the central bank.

Cashless? Why not.... At eighty percent taxation, alot of people are already cashless. That twenty percent is easy to monitor and ends such things drug dealing, black markets, prostitution, anti-social activities.

Quote: Fleastiff

I don't know if countries really plan on removing a currency or simply make it possible to prevent a "run" on currency. If its all debits and credits in a computer, you can easily cap the transaction at a modest amount... thus stopping any 'run' on the central bank.

Cashless? Why not.... At eighty percent taxation, a lot of people are already cashless. That twenty percent is easy to monitor and ends such things drug dealing, black markets, prostitution, anti-social activities.

Cashless is a hypothetical state that is given a lot of discussion, but no country has ever tried. Quite a number of super high denomination banknotes have been removed from circulation in the last century. US $500, $1000, $5000 and $10000; Canadian $1000 banknotes; Swedish 10,000 Crown banknote, Singapore $10,000, and the 500 Euro banknote is coming under increasing criticism, not to mention the high denomination banknotes in Germany, Belgium, Finland, Austria and Latvia,that were replaced by the Euro.

Iceland got down to 1% of GDP, but only because inflation made the currency relatively worthless, but credit cards took up the slack. But when all the banks crashed the currency became popular again and is now back to 3% GDP.

Sweden has been on a reduction campaign for several years, which went into overdrive this year. They are down close to 1.5% GDP. Their largest denomination banknote, worth US$120 has been reduced to under 2 million notes (for a country of almost 10 million). The next size denomination worth $60 has been reduced to 88 million notes or roughly 9 banknotes per capita. I am very curious how far they intend to reduce this stock of banknotes. Banks have almost no currency, and most banks will not give currency at a teller window (only an ATM). The numbers of ATMs per capita is also very low. It is possible that ATMs will stop dispensing the ~$60 banknote later this year, and only dispense the ~$24 banknote (similar to USA and Canada). That would aid in reducing the amount of currency even further.

Currency "factoids" for entertainment and enlightenment:

In Somalia there was no central government and no central bank for fifteen years yet the Somali Sovereign was still accepted, as were counterfeit versions provided they were of sufficient quality to be recognized as good counterfeits. It has no intrinsic worth, no fiat worth, but was continued to be accepted as the unit of currency.

Quote: Fleastiff

Currency "factoids" for entertainment and enlightenment:

The German Marks that were never returned add up to roughly 80 Euros per capita. Sometimes they organize flea markets where the German Mark is used as a medium of exchange for nostalgia's sake. Nothing illegal about that!

The British one pound coin is widely counterfeited. Most people don't turn them in as they will simply lose the money. They try and spend them, and if they are rejected they usually spend them somewhere else. Most people don't call the police on an individual in for passing a counterfeit coin.

Unlike most of Europe, cash in USA and Canada is never declared invalid. Very old banknotes retain their face value forever. You can still spend a $1000 bill in USA and Canada as it is legal tender. Of course in the USA the latest $1000 bill is from the 1934 series, was last printed in 1945, and in 1969 the government swore never to print a bill over $100 and to destroy all the high denomination notes that come into their possession. So most $1000 banknotes are resold as collectibles for more than $1000. Canada stopped printing their $1000 banknote in the year 2000, and there is still a significant fraction of a billion dollars in circulation. They are more valued by high end criminals than by note collectors. They are still "legal tender", but that term only means you can offer them as payment, but the payee is not obligated to accept them.

Quote: Pacomartin

n 1969 the government swore never to print a bill over $100 and to destroy all the high denomination notes that come into their possession.

"As of May 30, 2009 , only 336 $10,000 bills were known to exist; 342 remaining $5,000 bills; and 165,372 remaining $1,000 bills."

A pristine $10K bill is now worth north of
$150K, if you can find one.

Quote: Evenbob

"As of May 30, 2009 , only 336 $10,000 bills were known to exist; 342 remaining $5,000 bills; and 165,372 remaining $1,000 bills."

A pristine $10K bill is now worth north of
$150K, if you can find one.

Production statistics of the high denomination notes follows. It is not clear if all those notes were ever circulated
3,943,708 $500
2,675,016 $1,000
71,904 $5,000
64,624 $10,000

Treasurers were:
Andrew W. Mellon Pennsylvania 4. Mar. 1921 12. Feb. 1932 1928 series
Ogden L. Mills New York 13. Feb. 1932 4. Mar. 1933
William H. Woodin New York 5. Mar. 1933 31. Dec. 1933 1934 series
Henry Morgenthau, Jr. New York 1. Jan. 1934 22. Jul. 1945 1934A series

Some of the notes were still 1934A series, but were printed up until Morganthau's end of term (1945)

If you compare those production quantities with the over 20 billion big headed Benjamin c-notes produced since 1996 (about 11 billion still in circulation), remember that in those days circulation was less than $20 per capita. I think a lot of rural citizens didn't handle anything larger than coins on most days, as they were fairly self sufficient in eating their own food and making their own clothes.