Negative interest rates and what it means
March 4th, 2016 at 3:22:44 AM permalink | |||||||||||||||||||||||||||||||||||||||||||
Pacomartin Member since: Oct 24, 2012 Threads: 1068 Posts: 12569 |
You meant to say the payment falls by so little.
I think that the interest only loans for those Manhattan apartments have a balloon at 12 or 15 years. In the above example the payment on the 100 year note is only $2.30/month more, but the homeowner gets to decide when to sell, even if it is at 15 years and 3 months.So "locking in a rent payment" is a good analogy. |
March 4th, 2016 at 3:40:03 AM permalink | |
AZDuffman Member since: Oct 24, 2012 Threads: 135 Posts: 18136 |
Right, I am just used to talking like a banker and not a normal person.....
Balloons on real property should almost always be able to be rolled over. Examples of when you cant would be if your credit falls. the collateral value falls, or there is a capital shortage like the Panic of 2008. In the USA the Feds are not keen on 100 year credit. IIRC after a few corporations put out 100 year bonds the Feds told them to cut it out. Even the Treasury limits to 30 years when it might be time to have a CONSOL-type offering of prepetuals. Some places have real estate that will forever skyrocket. Japan, Brazil, and California all have the problem of topography that limits home building. Large numbers of people have to cram into valleys. Prices skyrocket and people have to do what they have to do. People in Omaha just pay off in 30 years. The President is a fink. |
March 4th, 2016 at 3:56:43 AM permalink | |||||||||||||||||||||||||
Pacomartin Member since: Oct 24, 2012 Threads: 1068 Posts: 12569 | Sweden's numbers as of 29 Feb 2016 US $545 per capita in 500 Crown banknotes (worth about $60 apiece) US $63 per capita in coin US $728 per capita in coins and valid banknotes Banks have almost no cash at all It remains to be seen if the government is going to go wholesale slaughter on the 500-kr banknote leaving most people with only petty cash in banknotes. Numbers in the table are millions of Swedish Crowns for both inside and outside of banks.
A think one important thing from the Swedish example is that it is too confrontational to actually cancel denominations. What you do is keep the denomination, then reduce the circulation by 90%. Since most people don't use the high denomination notes they don't actually notice. But the 500 kr banknote is a different story. It's just barely large enough to be a store of value, but it's small enough to use for transactions. People are used to handling them or getting them from an ATM. It's important to keep up the idea that cash is dirty and obsolete. It's a race to see if they can get rid of the cash before the repo-rate drops below -1%. |
March 4th, 2016 at 5:36:58 AM permalink | |
odiousgambit Member since: Oct 28, 2012 Threads: 154 Posts: 5055 | An article today in the WSJ [online you only see a preview, below, unless you subscribe] says Insurance companies in particular cannot go forever with negative interest rates in effect ... they depend too much on bonds. This is one of the few things I have seen that really gives caution to the move ... this article says "be afraid" in the title. http://www.wsj.com/articles/negative-rates-and-insurers-be-afraid-1457030114 PS: that 'something that cannot go on forever will stop' is something more than a quip, but is considered a fact in economics it seems https://en.wikiquote.org/wiki/Herbert_Stein I'm Still Standing, Yeah, Yeah, Yeah [it's an old guy chant for me] |
March 4th, 2016 at 3:44:35 PM permalink | |
petroglyph Member since: Aug 3, 2014 Threads: 25 Posts: 6227 | I agree that folding money is dirty, as are grocery cart handles and anything else the public touches, however. A pre 64 Washington .25 piece will still buy 2 gallons of gasoline. http://coinapps.com/silver/coin/calculator/ http://www.gasbuddy.com/GasPriceMap?z=3&lng=-51.28397081249998&lat=30.67549905852339 Money should be able to be a store of value. The central banks are desperate. Inflation or deflation is a monetary policy, hyperinflation is a loss of faith in the currency. The last official act of any government is to loot the treasury. GW |
March 12th, 2016 at 1:07:41 AM permalink | |
Pacomartin Member since: Oct 24, 2012 Threads: 1068 Posts: 12569 |
Latest repo rates in central banks around the world. The repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. -0.75% Jan 2015 Switzerland -0.50% Feb 2016 Sweden Sweden's . Repo-rate history 10/28/2014 0.00% 02/12/2015 -0.10% 03/18/2015 -0.25% 07/02/2015 -0.35% 02/11/2016 -0.50% -0.10% Jan 2016 Japan 0.01% Jul 2015 Bulgaria 0.05% Nov 2012 Czech Republic 0.05% Jan 2015 Denmark 0.05% Sep 2014 Eurozone 0.10% Feb 2015 Israel 0.50% Jul 2015 Canada 0.50% Mar 2009 United Kingdom 0.50% Dec 2015 United States It should be noted that Sweden's repo-rate was 0.50% (same as current USA, UK and Canada) as far back as 2009. A special law had to be implemented just to take it that low as one of the ancillary interest rates (seldom used) was always 0.75% lower than repo rate and would hence be negative. |
March 24th, 2016 at 2:26:39 PM permalink | |
Pacomartin Member since: Oct 24, 2012 Threads: 1068 Posts: 12569 |
Swedish banks opposed to the new law, but the government has cracked down on mortgages. From now on you can pay interest only for just 5 years, after that they have to pay off the balance in 100 years. Swedish regulators calculated in 2013 that the average mortgage term was around 140 years. Nearly one-third of mortgages issued in 2014 allowed borrowers to repay only interest. Hence the serious crackdown. I suppose if they really cracked down (like 30 year mortgages) their whole financial system with the negative interest rates and the near cashlessness would come crashing down. What a world we live in! How did we get to this position? |
March 24th, 2016 at 2:33:43 PM permalink | |
Evenbob Member since: Oct 24, 2012 Threads: 146 Posts: 25010 |
By giving people mortgages who couldn't afford them and then selling the bad paper worldwide. So everybody has to pay for our PC mistakes. Prior to WWII, the rate of home ownership in the US was quite low per capita. People just couldn't afford it. So they rewrote the lending laws and they eventually caught up to us. Took decades and decades. Just like the open border problem. We don't see the effects of it right now, but we will further down the road and then it will be way too late. If you take a risk, you may lose. If you never take a risk, you will always lose. |
March 24th, 2016 at 3:00:12 PM permalink | |
Dalex64 Member since: Mar 8, 2014 Threads: 3 Posts: 3687 |
Some people might say the same thing about global warming/climate change. "Everyone is entitled to his own opinion, but not to his own facts." Daniel Patrick Moynihan |
March 24th, 2016 at 3:22:19 PM permalink | |
Evenbob Member since: Oct 24, 2012 Threads: 146 Posts: 25010 |
Except GW is unproven theory, and thousands a day coming across the border is fact. If you take a risk, you may lose. If you never take a risk, you will always lose. |