Negative interest rates idea floated by Bank's Paul Tucker

[Totally_Baffled]

http://www.bbc.co.uk/news/business-21589128

LOL?

[Little John]

http://www.bbc.co.uk/news/business-21589128

LOL?

Negative interest rates were always a possibility. They are a logical consequence of current monetary policy. It's a measure of their desperation, however, that they are now considering them.

[Totally_Baffled]

Will we get paid to take loans out?

Oh for a negative interest rate mortgage, it would pay itself off!

[UndercoverElephant]

Only the banks will get the negative interest rates. Ordinary people will still be charged positive rates.

[Totally_Baffled]

Only the banks will get the negative interest rates. Ordinary people will still be charged positive rates.

I know, I was larking about

[acman]

Have the banks painted them selves into a corner here?, are they losing control of the situation?, where this ends, well that's the unknown, as we are told, we've never been here before. Seen a few who've muttered currency devalution coming, unsure on that though as that would up fuel & energy prices almost straight away.
acman.

[Little John]

Let's face it folks. QE and the consequent inflationary prices rises are essentially negative interest rates by any other name. In other words, we already have negative interest on our cash. All that "negative interest rates" will do, is make it more formal and transparent.

The point of inflation and the point of negative interest rates is the same. Namely, to make it punishing to store cash and to make it beneficial to circulate it in an economy. In other words, to stimulate monetary velocity.

[woodburner]

..........., to stimulate monetary velocity.

Thus causing further inflation.

[UndercoverElephant]

Have the banks painted them selves into a corner here?, are they losing control of the situation?, where this ends, well that's the unknown, as we are told, we've never been here before. Seen a few who've muttered currency devalution coming, unsure on that though as that would up fuel & energy prices almost straight away.
acman.

There is already an ongoing currency devaluation war. The only reason all this QE hasn't caused much devaluation so far is because everybody is doing it. We have crossed a rubicon. Since 1971, when the US dollar was de-linked from gold, the primary mechanism for controlling the relative value of fiat currencies was by setting interest rates. This is no longer the case, because everywhere is stuck on near-zero interest rates, and will remain so for as long as the current monetary system continues to exist. The only remaining mechanism is therefore QE: if you want your currency to fall, then print more money. Inflation is the least of their worries. Everybody WANTS their currency to inflate more than everybody-else's, because that is the only way for any individual country to boost exports and growth. But again, if everybody is doing this then you have to print money just to stand still.

I agree with Nouriel Roubini. I think we are at the beginning of what will prove to be the mother of all asset bubbles. All that money has to go somewhere, especially if we have negative interest rates. As a result, stock markets will rise and so will property prices. Where this ultimately leads I do not know, but I suspect it will result in increasing levels of trade protectionism, bilateral deals bypassing the free market and eventually a very large war when the whole thing becomes completely unmanageable.

As for negative interest rates...as soon as one nation does it, others will follow. It's all relative. How far into negative territory does it go? It's another rubicon being crossed. Once you start down the path of negative interest rates, where does it stop?

[acman]

I agree UE, Marc Faber, 'Dr Doom', has said, once you go down the route of money printing there is no turning back,
Gerald Celente, quotes, First Currency wars, Then Trade wars, Then real war,
Currency wars are now under way, despite denials from TPTB, but it's pretty obvious really, if Celente is correct, what type of trade wars could take place in the current modern world, bearing in mind what is imported nowadays,
Regards, acman.

[JavaScriptDonkey]

-ve rates are a sap to beat savers with. It is an attempt to get people to invest and spend rather than simply save.
Leaving money in the bank would not only see it eaten by inflation but you would actually be paying for the privilege.

[UndercoverElephant]

-ve rates are a sap to beat savers with. It is an attempt to get people to invest and spend rather than simply save.

Uh-huh. So the solution to an unmanageable debt problem is to discourage savings and encourage people to borrow?

[Totally_Baffled]

Uh-huh. So the solution to an unmanageable debt problem is to discourage savings and encourage people to borrow?

This is what makes me chuckle too....

Suprised this point doesn't get made more often.....

[RenewableCandy]

Didn't Japan have -ve interest rates once upon a time?

[kenneal - lagger]

The negative rate only applies to bank's deposits in the BOE. Many banks "park" money overnight in the BOE and get interest on it, albeit at a low level, But if that were at a negative interest rate they would look elsewhere more productive to put their money.