Ask HN: How to prosper under negative interest rates?

Post by this2shallPass » Tue, Mar 31, 2020, 5:36 PM UTC

mancerayder wrote: post #88

mrfredward wrote: post #24

So the time value of money is more or less zero now and loan rates depend much more on default risk than any opportunity cost in loaning the money. To an economist, the implications of that might be big, but to a regular person, it's really a small shift in possibilities. A savings account at 0% doesn't build wealth, but it didn't really do that 3 months ago at 1.5%. Personal loans at 9% aren't much better than loans…

I just sold a home days before the pandemic hit, and consider myself very lucky. But now I have cash and I'm nervous inflation might start becoming a real problem. I'm also worried that dense American cities are going to have a huge drop in property values, desirability, and an increase in crime. I am seeing this right now, and a lot of sentiment from people with money is to never come back. It's a tough call. Is thi…

Post by solaxun » Tue, Mar 31, 2020, 5:39 PM UTC

qeternity wrote: post #8

You have to look at real rates, not nominal rates. The only markets that have negative nominal rates are battling deflation (which the US is not) or have serious liquidity concerns at the moment. The Fed is unlikely to go negative as they face a very different beast. Here's a quick example. Let's say you're in a deflationary environment: in 1 year, your money actually buys you more than it did last year, let's say fo…

Post by shawnz » Tue, Mar 31, 2020, 5:41 PM UTC

chadash wrote: post #10

I'm not a financial planner or financial services professional of any kind, so take anything I say with a grain of salt. 1) should I stop saving? No. negative interest rates won't go that negative. Even if your bank is earning -1% interest, it still makes sense to be saving. 2) Should I put my savings elsewhere? Probably. ETFs or index funds with wide stock market exposure are a good idea (good examples are SPY, VOO,…

Post by mdorazio » Tue, Mar 31, 2020, 5:43 PM UTC

thorwasdfasdf wrote: post #82

qeternity wrote: post #8

You have to look at real rates, not nominal rates. The only markets that have negative nominal rates are battling deflation (which the US is not) or have serious liquidity concerns at the moment. The Fed is unlikely to go negative as they face a very different beast. Here's a quick example. Let's say you're in a deflationary environment: in 1 year, your money actually buys you more than it did last year, let's say fo…

but we're not having deflation. With fewer and fewer people working, there's less and less supply with even larger demand, now that they're printing money like never before. As a result, we're going to get really really serious inflation of over 2%, 3%, maybe even more than 3%. It doesn't sound like much because we've become innured to it. But, it's really bad. Just think, you earned 100K in 1 year and 1 year later i…

Post by bryanlarsen » Tue, Mar 31, 2020, 5:46 PM UTC

solaxun wrote: post #103

qeternity wrote: post #8

You have to look at real rates, not nominal rates. The only markets that have negative nominal rates are battling deflation (which the US is not) or have serious liquidity concerns at the moment. The Fed is unlikely to go negative as they face a very different beast. Here's a quick example. Let's say you're in a deflationary environment: in 1 year, your money actually buys you more than it did last year, let's say fo…

"So, since you don't want to store that money under your mattress"... I never understood/agreed with this argument. I'd much rather withdraw all my money and keep it in a safe than lock in a loss. I suppose for most people though the minor loss of principal outweighs that inconvenience, but for me, as a matter of principle, I refuse to be paid less than my principal (I didn't mean for that to come out as cheesy as it…