Negative interest rates?

Discussion in 'Markets & Economies' started by stackmans, Mar 19, 2020.

  1. leo25

    leo25 Well-Known Member Silver Stacker

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    I wonder why Evans thinks negative rates in and of itself would cause our dollar to go down in value?
     
  2. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I'm not really over the explanation but this what Evans argues:

    https://westpaciq.westpac.com.au/wi...Australia/2020/June/WestpacWeekly20200601.pdf

    His official advice is that we're unlikely to see negative rates this year simply because of the forward guidance from the RBA. But he then adds that's we shouldn't rule it out, in case they change their mind.

    It's an easy listen:

     
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  3. leo25

    leo25 Well-Known Member Silver Stacker

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    Good clear talk, something you don't normally hear. Though the advantage he talks about is at best short lived. Lets be more direct, what he is really talking about is more currency devaluation/money creation, but if everyone is doing it then it has no net effect.

    But lets be even more direct to why he wants to go negative and that's to boost bank profits. He is hoping at some lower rate people will start borrowing more and thus banks making more money. But they can only do that once rates go negative, so they can maintain a healthy spread.

    Even if they do drop rates, this doesn't guarantee people will increase borrowing and might have a negative effect and cause people to be further spooked about the future.

    Philip Lowe's logic is better. It's best to not go negative (which risk causing instabilities) and instead just get government to spend on important projects that will increase future prosperity. But sadly we have ScoMo and the monkeys that surround him.
     
  4. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Yes, there's still a few of his key players that aren't up to speed as of yet. Maybe Bandt and his Greens might make the Libs get a wriggle on, or even a few labor backbenchers. A quick look at their economic policy platform and it's still heading in a better way than Labor, and the Greens though eg lower taxes (though they're still obsessed with "corporate tax avoidance" like the other parties). They haven't updated their policy platform since Feb 2020.

    Haha, have you also noticed that the statements by Lowe after each Board Meeting are becoming just cut and pastes of the previous month's announcements? :p
     
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  5. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    The cash rate is expected to drop.

    And the RBNZ and BOE have said they'll join the subzero club, and we're not talking turf champions here. That will leave the US, the Canucks and Oz as the only major economies with a +ve overnight cash rate.

    From Betashares, the 3 reasons that CBs go subzero on us, 1 fear of deflation, 2 manipulate the currency and quite interestingly:

    https://www.betashares.com.au/insig...6S3Z5RTRTT0pqV205d2h3bXRpampxb1lMZzVldkEifQ==

    I first heard this idea over a year ago on Real Vision, the idea that there is too much savings. And I was scratching my head to understand. But I think that it relates to a lack of sound investment opportunities in the market.
     
  6. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Quoting myself, :eek:

    In his latest speech Lowe said that they're not going to cut-and paste from previous minutes any more.

    snip

    https://rba.gov.au/speeches/2020/sp-gov-2020-10-15.html

    LMAO.
     
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  7. BuggedOut

    BuggedOut Well-Known Member Silver Stacker

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    Tic Toc shiney. Are you ready to concede yet?
     
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  8. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I'm preparing myself. :p
     
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  9. BuggedOut

    BuggedOut Well-Known Member Silver Stacker

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    Give yourself some time to bake up a nice humble pie ;)
     
  10. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Steady on, we haven’t got there yet. And in fairness I think if we do go there (and it seems more likely than before but it’s still not certain), that it’s taken far longer than those saying it would happen would have believed originally.

    So I remain content that my position that the RBA’s forward guidance remains a better indicator of the potential for -ve rates than the “well everyone else is doing it” argument of others.
     
  11. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    @BuggedOut, I know I've got nothing better to do with my life, well I do I just keep putting it off. ;)

    I went through one of the previous threads where a few of us locked horns, in particular this post from 6/3/20 with me and @STKR :

    https://www.silverstackers.com/foru...ate-cut-down-to-0-5.95006/page-4#post-1128309

    That indication I mention in that thread may be just around the corner, but it's not there yet:

    https://rba.gov.au/monetary-policy/rba-board-minutes/2020/2020-10-06.html
     
  12. BuggedOut

    BuggedOut Well-Known Member Silver Stacker

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    Oh, there are some real chestnuts in that thread for sure. If we're grabbing quotes, how about these ones :-

    You haven't turned out to be wrong YET so I guess I just need to be content with the fact you are no longer calling us morons.

    If I can take a turn at being a bit brutal, I think you've been naive this whole time to have been believing the RBA forward guidance :)
     
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  13. leo25

    leo25 Well-Known Member Silver Stacker

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    When the doom and gloom people talk about negative rates, they normally mean banks charge you money for having deposits in the bank.

    Ill give my 100% guarantee that banks will not charge a negative interest rate on deposits and you will never be able to borrow money at a negative rate. Lock it in Eddie :)
     
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  14. spannermonkey

    spannermonkey Well-Known Member Silver Stacker

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    YEAH 100000000000000%
     
  15. BuggedOut

    BuggedOut Well-Known Member Silver Stacker

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    I never trust anyone who tries to give a 100% guarantee on something that is totally outside of their control :)

    I could see banks here trying to charge a negative rate on deposits if our cash rate goes negative. They are already doing it in Germany.

    https://uk.news.yahoo.com/negative-...-banks-that-handle-their-money-210154187.html

     
  16. spannermonkey

    spannermonkey Well-Known Member Silver Stacker

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    YEAH 100000000000000%
     
  17. spannermonkey

    spannermonkey Well-Known Member Silver Stacker

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    I'm going to look into starting a bank & charge customers/suckers to keep their $ in my safe .
    I don't have to do anything with the deposits .
    Just charge them for holding their cash :eek:
    Sounds like a plan
     
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  18. leo25

    leo25 Well-Known Member Silver Stacker

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    Can i tempt you with a 110% guarantee :p
     
  19. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Of course I believe the RBA's forward guidance, it's good up until the next meeting when they may change their mind, but we're going to get a bit of a warning now because they're adopting a policy of giving a speech a couple of weeks after each meeting.

    And I've laid out my reasons why I put more faith in what the RBA print than what is printed/podcasted by an author on some alternative media site that finds it impossible to come to grasp with the nature of our modern monetary system ie morons and the people who believe them ie morons. :p

    You can call it naive to follow their forward guidance, I think it's actually the intelligent thing to do.
     
  20. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    You mean like The Reserve Vault in Brisbane? :p
     

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