Thursday, January 28, 2010

Negative interest rates are coming

Logically it had to happen right? Artificially low interest rates are to stimulate the economy, but you can only hold them at zero for so long before people are already tired of hearing about a "jobless recovery". So how does negative interest rates work? The Federal Reserve in its wisdom will actually charge member banks for holding onto money. This will force them to lend at a time when the public isn't looking to borrow.

Didn't we just go through this? How are the banks going to lend money if no one is lining up for the loans? And how are they going to do it without being accused of predatory lending practices?

You may not know the economic term now, but if you watch the news over the next year you'll becomes familiar with it: Moral Hazard

Oh and one more charming thought...if you're on Social Security or another style of fixed income...you will become poorer this year while simply trying to tread water. This is how your benevolent overlords in Washington watch out for you. They dare not tax you during these economic woes, so instead they rob the value of the money you hold in your purse, wallet, or mattress.

Shame on this government, both Republicans and Democrats. A pox on both of their houses.

4 comments:

lasr said...

Since I have been unemployed since June with no unemployment benefits the last thing I need is for life to cost me more. If they reduce my home loan interest rate to -0- or less we might make it. But I know they would find another way to get the money back.....sigh.
I could use a job.....

lasr said...

of course they would never loan to homeowners at -0- lol....wishful thinking. If banks /loan agencies are being penalized for not lending money..you know they will find a way to pass the cost to them to the consumer..and we will have to expct new rounds of bad loans

Gino said...

maybe i can refinance at negative interest.
this is where they pay me a monthly check,instead.

"OK, i'll take that mortgage off your hands at 4%" LOL

i'd be a like bank, but unregulated.

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