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Negative interest rates and what it means
| May 7th, 2016 at 6:45:20 PM permalink | |
| AZDuffman Member since: Oct 24, 2012 Threads: 135 Posts: 18221 |
Because the BRICS have to earn the dollars to buy the petrol while the Fed just prints it. The BRICS were the toast of the town 5 years ago, now they are in a bad way. Brazil is collapsing (again.) Russia has a terrible economy and her demographics are literally killing her. China is looking more and more like a stratified Potemkin Village all the time. India is stable but poor. South Africa I cannot comment much on except to say it is too isolated geographically to really make it. Yeah, they want oil in something else. Not much can stand up at the moment. The President is a fink. |
| May 7th, 2016 at 8:44:22 PM permalink | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pacomartin Member since: Oct 24, 2012 Threads: 1068 Posts: 12569 |
At 2700 years old, one of the oldest coins in the world.  "Making money" has always been about, well, "making money" starting in ancient times . British "sterling" was 92.5% pure silver. A pound "sterling" had a built in profit because the coin was worth a pound of silver. Profit is made by selling the coins above the melt value in exchange for guaranteeing the weight of the coin. Now normally a central bank makes a profit on the interest payments received by central banks on the total amount of currency issued. This usually takes the form of interest payments on treasury bonds purchased by central banks, putting more dollars into circulation. Currency that vanishes overseas where it is "store of value" means the back end of the deal never occurs . Thus the issuer of the currency keeps the whole profit by not having to buy worn out issued currency back at face value. Europe always wanted a slice of the action that USA was getting. On 1 January 1999 the 11 countries fixed their exchange rate permanently to the euro. So for the year 2000, the amount of banknotes could be measured in Euros without any error. In the year 2000 the banknotes were worth 380 billion. Now many were dumped the next year in anticipation of hiding assets after the official changeover, but they got back to 380 billion in 18 months (mid 2004).
At present the ECB circulates 500 banknote over 300 billion 100 & 200 banknotes ~ 250 billion smaller denominations ~ 500 in the How much currency per capita your country has is a complex mix of wealth of the country, sophistication of banking system, and cultural mores. While Greece and Portugal are relatively poor countries, Finland is a wealthy country, but culturally a very ethnically homogeneous, with the only significant minority being Russians, and they are less than 5%. About 79% of Finns are in the Lutheran Church, and about 25% of the country lives in Greater Helsinki. Like other Nordic countries, they are very accustomed to doing most transactions electronically. For the first 7 years, the Euro-zone could participate with the USA in the highly profitable game of printing currency for a few dollars, and distributing it at face value. But while the Euros circulation briefly passed the US dollar in value, the ECB currency has run into conflict with zero or negative interest rates. You can't let people store their money in currency where it can't be taxed and it isn't mobile. So even though 29% if the value of circulating Euro banknotes is in the 500 banknote, the ECB has announced that they will stop producing new ones and destroy the old ones that come into their possession. Obviously some extra of the unpopular 200 banknotes will have to be produced to make up the difference. But even if they produce the same number of 200 banknotes for every 500 that is destroyed, there will still be a significant reduction in cash. Britain , who's £50~63 banknote is their highest (except for Scottish and Northern Ireland £100~126) was very against the Euro-Zone printing anything higher than the 200 banknote. So we can presume that after 15 years, the ECB has not suddenly discovered that the 500 banknote is popular with criminals. But while the banknote was formally extremely profitable, it now represents a threat to monetary policy. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| May 8th, 2016 at 8:05:21 AM permalink | |
| Fleastiff Member since: Oct 27, 2012 Threads: 62 Posts: 7831 | >> Brazil is collapsing (again.) And ever will. >> Russia has a terrible economy and her demographics are literally killing her. No one cares how many old Russians die of starvation or alcoholism. No one cares about the Russian economy; only the economy of Putin and his cronies matters. >China is looking more and more like a stratified Potemkin Village all the time. Good phrase. > India is stable but poor. India is unstable and its people are poor, but richer than Russians. >South Africa I cannot comment much on except to say it is too isolated geographically to really make it. And too at risk to ever rely on other countries. What is the difference between a dollar and a petrodollar. Are not all dollars exchangeable? Dollars owned by rich Arabs are no different than dollars owned by the Finns or US citizens. Dollars are fungible. Other than US cigarettes I know of no other world currency. |
| May 8th, 2016 at 8:47:06 AM permalink | |
| AZDuffman Member since: Oct 24, 2012 Threads: 135 Posts: 18221 |
They are, until you put them into the bank. Then the USA can block you at will. That is where the real power is. Like if you had 100 lavender cheques at the cage at Wynn but the same day the state of Nevada put you in the black book. Getting oil priced in dollars only was a stroke of genius. One more reason why I say when the USD collapses the USA may cease to exist. World control will be gone. The President is a fink. |
| May 8th, 2016 at 11:21:03 AM permalink | |
| Pacomartin Member since: Oct 24, 2012 Threads: 1068 Posts: 12569 |
In 1971 the US went off the gold standard. A few years later the term "petrodollar" was invented as OPEC (formed 1960) started restrictions in oil production which led to a dramatic rise in oil prices. OPEC developed far more revenue and wealth than they could possibly invest in their own countries with their limited population. Petrodollars referred to the dollars that were recycled in the Western economies that were the primary consumers of the oil. In the 1950's Saudi Arabia began issuing paper money instead of just coins. The Saudi riyal was pegged to the US dollar at U.S. dollar = 3.75 SR. So their largest banknote is 500SR. Other Arab currencies are also pegged to the US dollar. So the economies of OPEC are intimately bound to the US dollar. While technically they are now bound to Special Drawing Rights of the IMF, the SDR is bound to the US dollar. Petrodollars are necessarily invested in such a way so as not to make the US dollar go down, as the economies are so intertwined. A 1976 novel , The Crash of '79, became a best-seller. The author, economist Paul Erdman, portrays the Saudi Arabians causing the collapse of the Western financial system by abruptly withdrawing their money in U.S. investments.  |
| May 8th, 2016 at 5:59:21 PM permalink | |
| Fleastiff Member since: Oct 27, 2012 Threads: 62 Posts: 7831 | Fiction, as I recall. I thought Arab funds were only invested in weapons systems and businesses in the Middle East such as slavery nightclubs in Lebanon or the like. Did the Arabs accumulate dollars? I thought all those Cadillacs to families of those killed in war bankrupted Iran and that Saudi Arabia financed all wars in the area anyway. |
| May 8th, 2016 at 6:20:20 PM permalink | |
| Pacomartin Member since: Oct 24, 2012 Threads: 1068 Posts: 12569 |
Yes, the book was fictional, but the concept that Arab countries would accumulate so much property in the USA that they would be able to influence policy was fairly superficial. I don't think that they ever come even close to UK investment in the USA. They clearly developed a taste for high profile glamour investments like Harrod's Department Store in London, Plaza Athénée in Paris, Saks Fifth Avenue in New York. Qatar Airways: The state-owned flag carrier of Qatar, a constitutional monarchy ruled by Emir Sheikh Tamim bin Hamad Al Thani, has had a corporate campus in the Trump Tower on 5th Avenue in Manhattan since at least 2008. I assume that these are not the Muslims that Trump was talking about in December.  "Without looking at the various polling data, it is obvious to anybody the hatred is beyond comprehension. Where this hatred comes from and why we will have to determine," Trump said in a statement. "Until we are able to determine and understand this problem and the dangerous threat it poses, our country cannot be the victims of horrendous attacks by people that believe only in Jihad, and have no sense of reason or respect for human life." Trump's campaign added in the release that such a ban should remain in effect "until our country's representatives can figure out what is going on." |
| July 14th, 2016 at 2:18:09 AM permalink | |
| AZDuffman Member since: Oct 24, 2012 Threads: 135 Posts: 18221 | It continues in Germany. These are 10 year bonds, not some short-term type of bond. Guarantee you lose money over 10 years! The President is a fink. |
| July 14th, 2016 at 6:11:11 AM permalink | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pacomartin Member since: Oct 24, 2012 Threads: 1068 Posts: 12569 |
The ECB Executive Board decided to phase out the 500-euro bill. The easiest way to phase out the 500 is to simply stop producing it, and let wear and tear do the rest. Naturally the 500 will be omitted from the new line of euro banknotes that is gradually being introduced by the ECB. Since reaching a peak in December, the total number of these banknotes in circulation has dropped by about 6%, but looking at the big picture the number in circulation has been fairly steady since the end of 2008. May 2016 287.69 billion 500 notes Dec 2015 306.78 billion 500 notes Dec 2008 265.03 billion 500 notes .. Dec 2006 209.69 billion 500 notes Dec 2003 119.24 billion 500 notes Dec 2000 379.76 billion (total value of banknotes in 11 national currencies for all denominations. Conversion rate to Euros was fixed)
The 500 banknote is more suitable to hold large amounts of cash for 10 years, but the 100,200,50 will be easier to liquidate in ten years. It's not immediately obvious that a 10 year negative interest rate bond is better than cash. What happens if you cash it in early? Do they charge you a penalty? Perhaps there is more expense in securely holding cash for 10 years that I am not aware about. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| August 12th, 2016 at 4:09:43 PM permalink | |
| AZDuffman Member since: Oct 24, 2012 Threads: 135 Posts: 18221 | Now retail bank customers get hit! Yes, it is for larger but not huge accounts. However, this is a fairly big thing. Banks not hiding it with fees, but simply passing on the negative rates of the central bank. That they cannot lend the funds out is very troubling. Can't even turn at least some of it to large paper and put it in the vault. The beginning of this was passed a year or more ago, but now will be interesting to see how depositors behave. The President is a fink. |