Negative interest rates?

Ipv6Ready said:
End of the day it could have been somone who won the powerball last week and thought having 1 million for treasury notes was cool and priced it to gurantee getting 1000 notes to wallpaper his bedroom.... not realising that there is no paper notes but just account :) ...
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:D They could take a screenshot and print it out.
 
Analysts said the sale at a negative yield was likely a result of strong investor demand due to the surging Australian dollar, rather than a signal the country is moving rates to below zero anytime soon.

“This buying may have come from offshore, from an investor motivated by current extremely low FX hedging costs, which add to the attractiveness of Australian dollar securities,” said Andrew Ticehurst, an economist at Nomura.
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https://thefinanceinfo.com/2020/12/10/australia-issues-negative-yielding-debt-for-first-time/

Not that we'll find out.
 
Zero interest rates are (almost) tolerable, but negative would be a mental illness.

Under zero interest rates you could still keep your money at the bank for safety reasons and in order to make larger purchases (e.g. a car), but you'd still have to pay a number of bank fees.

Negative interest rates are financial suicide and I think they could destroy many banks too. Smaller ones with few creditors for sure.

What I am trying to figure out is how negative interests will influence our lives, so long as we will still have cash (at a deeper level I would like to know how this would really play out).
 
TreasureHunter said:
Zero interest rates are (almost) tolerable, but negative would be a mental illness.

Under zero interest rates you could still keep your money at the bank for safety reasons and in order to make larger purchases (e.g. a car), but you'd still have to pay a number of bank fees.

Negative interest rates are financial suicide and I think they could destroy many banks too. Smaller ones with few creditors for sure.

What I am trying to figure out is how negative interests will influence our lives, so long as we will still have cash (at a deeper level I would like to know how this would really play out).
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Just have to look at Europe and Japan, answer is not much really. Negative rates just put the whole ecoNomy.on life support. Economy just flat for decades with not much inflation and currency gets devalued at the initial onset.

Central banks can only.do so much to support ecoNomy. Structural issues and budgets need to be fixed, but govs are politicians and want to maintain status quo to get votes and not do anything too radical and kick the can down the road.

So once u get to negative rates there's no way to climb out unless unpopular economic reform is implementated
 
^
I am very curious what negative interest rates will do to the economy and the way we live.
Logically I think this brings higher PM prices. Much higher. Am I wrong?
 
I can't help but think that now the talk of negative interest rates has become so mainstream that the opposite is now about to happen. The pendulum is at its maximum travel and now swings back.
 
Slimey said:
I can't help but think that now the talk of negative interest rates has become so mainstream that the opposite is now about to happen. The pendulum is at its maximum travel and now swings back.
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They wont raise the Interest Rate in AUS, it will kill whats left of the economy and peoples lives.

Ive heard horror stories from a friend who is a Financial Advisor about clients who are running neck deep in credit card dept with a mortgage they can barely keep up with and they think its OK. With the number of people who have that attitude and play with money as if its free, any change to that system will send the entire boat under.
 
Slimey said:
I can't help but think that now the talk of negative interest rates has become so mainstream that the opposite is now about to happen.
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The RBA has made it clear in their forward guidance that rates will not be raised until the inflation target is met.

This is a marked change from the past where rate rises were introduced in anticipation of rising inflation in other words they won’t lift rates until we get inflation.
 
If you look at the early 70's inflation was tame. There are similarities between then and now. Massive government borrowings, a crisis ( oil vs virus ) and inflation jumped to 15% within 3 years. The RBA, the Fed Reserve etc control nothing. They simply react. Banks can and will determine rates outside whatever the official interest rate and irrespective of the loan stress upon people. 25 years of falling interest rates. Everything is under control right? Be very, very careful. Personally I am about to lock in all my current debt and extend it at about 2% per annum fixed for 5 years. This is virtually free money. To me it is like those that took 7 year fixed term deposits in the 90's at 15-16% when the interest rates peaked.
 
Slimey, forgive me ignorance, why would you bother locking in at this current low rates (which fixed rates are usually a touch higher than variable) when its expected to stay at this level for some time.

My only thought is your expecting a decent uptick in inflation pretty soon and in turn eroding debt away.

Your thought ?

Timmy
 
Cheers Timmy....Bank Australia variable home loan is about 2.6% but the 5 year fixed is 2.25%. One of the guys I work with got the fixed down to 1.75% ( I am not sure how but he put me on to this ). I have never seen this before. Are the banks expecting negative rates also or are they about to make a mistake? 2.25% is CHEAP money.
 
I should point out that I have made an art form out of being dead wrong when it comes to economic matters..( still waiting for Newcrest shares at $5 )......but I can't help seeing parallels with the 70's. U.S. dollar peaked in the mid 70's and then started to drop....gold took off in price....economies were stagnating...unemployment skyrocketed. In amongst it all was that inflation. Inflation levels we haven't seen in at least 30 years. Nobody talks about inflation anymore. Only the older generation remember it. Just like the last gold boom. It is simply a line on a chart. Those that profited from it are now old and retired but what is old soon becomes new again. It is a cycle that repeats through history due to incompetent government ( creating money from nothing). ...of course I could be wrong (again).
 
mmm....shiney! said:
The RBA has made it clear in their forward guidance that rates will not be raised until the inflation target is met.

This is a marked change from the past where rate rises were introduced in anticipation of rising inflation in other words they won’t lift rates until we get inflation.
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that target will be met then possibly go the other way. rates to go higher to counter the inflation from the enormous expansion in money supply
 
mmm....shiney! said:
Japan. :)
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yep thats the most likely scenario for Oz, as well as USA and Europe and even eventually China.

flat inflation, high asset prices and just flat economy and negative rates with little hope of improvement due to lack of structural change in gov and economy.
 
Macquarie bank is paying 0.95% on their saver account. Some banks don't pay any on their saver yet gold price keeps falling.
 
GOLD1 said:
Macquarie bank is paying 0.95% on their saver account. Some banks don't pay any on their saver yet gold price keeps falling.
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Mac Bank has a S&P rating of BBB/A- thus it's more expensive for them to raise funding in the wholesale market as compared to the big 4 Aust bank with AA S&P, plus as corporate lenders to more risky companies and projects, they charge like wounded bulls for their loans, thus increasing their self funding ability through retail / corporate deposits at such a rate is most likely the cheapest way to fund their loan book.
 
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