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Bank of Japan, in a Surprise, Adopts Negative Interest Rate

nytimes.com

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Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#21

Post by dilemma »

dnautics wrote: post #13
adrianN wrote: post #2

Can someone explain to me why both cheap oil and expensive oil seem to be bad for the economy? Back when oil was >$100 per barrel everybody seemed to blame the weak economy on expensive oil. Now somehow very cheap oil is also a bad thing.

"cheap" is "bad" because it encourages "hoarding". Instead, those that run the economy would much rather put you on a treadmill of devaluation, which forces you to keep working harder (better unemployment figures!) and consume. Basically short shrift the working class of the value of their income - it's a backdoor paycut for workers[0]. It also forces the middle class into investing directly or indirectly (through pe…

That inflation means decreased real wages is elementary and doesn't need a source support the statement. It completely misses the point, however.

What is needed to have a strong, growing economy with increasing prosperity for more than the one percent isn't high or low inflation, but stable price levels that makes it possible to plan for the long term and make investments into productivity and efficiency. When witch doctors in the Fed, ECB and BoJ arbitrarily manipulate interest rates and thereby inflation, they promote speculation over investment and move wealth to the 0.01%.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#22

Post by jevgeni »

narrator wrote: post #18

This is going to be great for the U.S economy: http://useconomy.about.com/od/glossary/g/yen_carry_trade.htm > Definition: The yen carry trade is when investors borrow yen at a low interest rate. They exchange it for U.S. dollars or any currency in a country that pays a high interest rate on its bonds. They receive a low-risk profit when they receive high interest on the money invested, but pay low interest on the mon…

This is not that clear cut.

Dollar will appreciate against the yen. This will be advantageous to imports from Japan and disadvantageous to U.S. exports.

I can't speculate on the intensity though.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#23

Post by unknown_apostle »

adrianN wrote: post #2

Can someone explain to me why both cheap oil and expensive oil seem to be bad for the economy? Back when oil was >$100 per barrel everybody seemed to blame the weak economy on expensive oil. Now somehow very cheap oil is also a bad thing.

The idea is that cheap oil would be caused by a worsening economy with less demand for it.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#24

Post by raverbashing »

wrong_variable wrote: post #3

I do not understand this. Japan imports almost all of its oil and commodities. Shouldn't low price of oil and commodities result in a massive surplus for a country that sells high value added goods ? Buy iron for cheap and sell robots for a high price. Now the argument many people will make is that the people who are buying the high-value added goods won't have money anymore - but the argument can be made in the oppo…

> Citing "low price of oil" as a reason for economic woes just seems like bad science - I though economists were better than this ?

Yes it is, no they aren't

Especially "specialists" commenting in the press.

The problem with Japan is the complete stagnation of their economy. China makes it cheaper, internal consumption is decreasing.

Trying to "create inflation" is pretty much as effective as trying to defibrilate a dead corpse.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#26

Post by richardwhiuk »

adrianN wrote: post #2

Can someone explain to me why both cheap oil and expensive oil seem to be bad for the economy? Back when oil was >$100 per barrel everybody seemed to blame the weak economy on expensive oil. Now somehow very cheap oil is also a bad thing.

Expensive oil is bad for the economy because it's expensive to produce things.

Cheap oil is bad news for the economy, because it's an indicator in a fall in production, if the reason it's cheap isn't because of new fields, but because of lower demand.

Even if it is due to new sources (e.g. fracking) the perception that it's an indicator of global production may be sufficient to override any realistic benefits.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#27

Post by jevgeni »

adrianN wrote: post #2

Can someone explain to me why both cheap oil and expensive oil seem to be bad for the economy? Back when oil was >$100 per barrel everybody seemed to blame the weak economy on expensive oil. Now somehow very cheap oil is also a bad thing.

Oil price is a symptom of some other underlying problem.

During $100+ oil the problem was that supply couldn't satisfy the market (mostly due to Chinese growth and demand for energy). This raked the price up not just for the Chinese, but for everybody. Which was bad if your factory needs oil to produce your widgets: higher production cost leads to either thinner margins (and hence less future investments) or higher prices (and hence lower demand and ultimately - thinner margins).

So ok, the oil companies invested in expanding capacities, built refiners, oil rigs, etc. to satisfy demand. But now the world doesn't need as much of it as it used to. Well, shit. That means you still have to pay off loans for your new and shiny oil rigs, but you can't sell as much oil as quickly. What does that mean? Thinner margins.

Ad nausem.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#28

Post by richardwhiuk »

jetskindo wrote: post #12

> a sign of the continuing global trouble from plummeting low oil prices Gas is one of those things I have no control over. If it's expensive I have to pay, if it's cheap I have to pay. I'm dependent, and in a city like Los Angeles the alternative is impossible. They raised the price of public transport to a point where it is not even convenient. So when I go to the gas station and it's cheap I'm happy. I fill it up…

If it's cheap because demand is low, and you work in an industry which is susceptible to world demand, then a low oil price might mean your industry might be about to enter a downturn. So while you might be happy about the cheap oil, you might worry about your job prospects.

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#29

Post by jevgeni »

Patient0 wrote: post #25

This was news.... 3 days ago. I don't understand how it's rocketing up the HN front page only now.

On FT or Bloomberg, yeah. HN has more important things to do, like arguing if one can call a variable "iGiveHead" in a FOSS project[1]...

____

[1] - https://news.ycombinator.com/item?id=11018019

Re: Bank of Japan, in a Surprise, Adopts Negative Interest Rate

#30

Post by narrator »

jevgeni wrote: post #22
narrator wrote: post #18

This is going to be great for the U.S economy: http://useconomy.about.com/od/glossary/g/yen_carry_trade.htm > Definition: The yen carry trade is when investors borrow yen at a low interest rate. They exchange it for U.S. dollars or any currency in a country that pays a high interest rate on its bonds. They receive a low-risk profit when they receive high interest on the money invested, but pay low interest on the mon…

This is not that clear cut. Dollar will appreciate against the yen. This will be advantageous to imports from Japan and disadvantageous to U.S. exports. I can't speculate on the intensity though.

Those yen loans will buy our bonds though. This will increase credit availability. The whole system runs on credit availability. The housing bubble should have made that clear.
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