Earlier quoted context omitted.
You get it it backwards. Denmark is facing deflation, not inflation. Inflation in Denmark august 2019 - july 2019 was -0.39%. That is, the value of money is increasing.
https://tradingeconomics.com/denmark/inflation-cpi says 0.5% inflation with steady increase in the money supply ( https://tradingeconomics.com/denmark/money-supply-m2 ). Do you have a better source?
Denmark's Jyske Bank lowers its negative rates on deposits
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Re: Denmark's Jyske Bank lowers its negative rates on deposits
#42When people borrow money for a house, they only consider the monthly payments for the mortgage and not the absolute amount of money they are borrowing. This means that low interest rates are the main reason behind surging house prices and is why people have to spend decades paying back loans and being vulnerable to a drop in house prices. It creates too much debt in society and generally makes the economy more fragil…
>When people borrow money for a house, they only consider the monthly payments for the mortgage and not the absolute amount of money they are borrowing. That is how borrowing works. Otherwise the lender would not make a profit. >It creates too much debt in society and generally makes the economy more fragile than it has to be. and yet the post-2009 economic expansion is the longest ever, and this is in spite of all t…
Making an investment asset out of a requirement to survive is capitalist insanity. The housing market crashes every 10-20 years, while most mortgages are 30 years, this means that many people stand to lose their entire "investment", but oh wait, its their home, not their fucking Robinhood account.
Saying that things are going well, therefore we are making good decisions is a terrible argument.
Re: Denmark's Jyske Bank lowers its negative rates on deposits
#43Earlier quoted context omitted.
IMO this is the end game. Scenario 1: If interest rates go up significantly this would bankrupt entire nations such as Italy, France and Greece (again) + runaway deflation. Conclusion: interest rates cannot and will not go up. This would be political suicide. Also deflation is the number 1 enemy of central banks and the economy in general. Scenario 2: Lowering interest rates causes rich people, businesses and governm…
We can add Canada to the list. If Interest rates were to rise just a few percent, it would bankrupt the entire country.
Add Sweden as well, same story here. The national bank (Riksbanken) can not increase interest rates because it would have disastrous consequences for the large majority of over-extended loan takers. The low interest rates in their turn lead to the value of the Swedish currency plummeting. No matter what they do, a 'correction' is unavoidable - either the Swedish crown goes to junk status or the number of foreclosures and bankruptcies will skyrocket, followed by the collapse of the housing market, followed by the collapse of those banks which have to write down all those loans with real-estate backing.
Re: Denmark's Jyske Bank lowers its negative rates on deposits
#44Why does the concept of paying people to borrow money sound eerily familiar.
Re: Denmark's Jyske Bank lowers its negative rates on deposits
#45Soon enough we may find out that too much is invested into the expectation that interest rates will go down indefinitely. When inflation finally strikes, there will be no tools left to fight it. Getting deeply into debt and buying as many assets as you can would then be the right thing to do. Obviously, this is not financial advice.
Isn't the primary tool to fight inflation with an increase in interest rates? And if interest rates are negative doesn't that mean that there is lots of room to adjust them?
It strikes me that the problem is that the tools to fight deflation are inadequate.
How much growth and prosperity has been sacrificed to avoid the threat of inflation that never arose?
Re: Denmark's Jyske Bank lowers its negative rates on deposits
#46Earlier quoted context omitted.
https://tradingeconomics.com/denmark/inflation-cpi says 0.5% inflation with steady increase in the money supply ( https://tradingeconomics.com/denmark/money-supply-m2 ). Do you have a better source?
https://www.inflation.eu/inflation-rates/denmark/current-cpi...
The negatives look to be monthly seasonally-unadjusted. I wouldn't read too much in to them. Annual numbers are still in positive territory. Denmark has had negative rates for more than a year.
Re: Denmark's Jyske Bank lowers its negative rates on deposits
#47Earlier quoted context omitted.
Yes. But the high house prices feed through to higher land prices so the newly built houses will also be more expensive than they otherwise would have been.
In most places, except the obvious exceptions, the government can also create new land for construction.
Absolutely. But not all land is created equal, most people want to live near a big jobs market, meaning near a big city. So the price of this land will inevitably go up.that being said, I am sure there is a lot municipalities could do to make housing more affordable.
Re: Denmark's Jyske Bank lowers its negative rates on deposits
#48It strikes me that with an absurdly low debt-to-gdp ratio of 34% and negative interest rates maybe the Danish government should invest more money in their economy. Maybe leverage the market to build the enormous amount of green infrastructure they and the world needs, the returns don't need to be that high to pay off.
Re: Denmark's Jyske Bank lowers its negative rates on deposits
#49Earlier quoted context omitted.
IMO this is the end game. Scenario 1: If interest rates go up significantly this would bankrupt entire nations such as Italy, France and Greece (again) + runaway deflation. Conclusion: interest rates cannot and will not go up. This would be political suicide. Also deflation is the number 1 enemy of central banks and the economy in general. Scenario 2: Lowering interest rates causes rich people, businesses and governm…
You kind of described Japan’s economy.
The difference with Japan is that while they have a large amount of debt, they also have large amounts of assets. Japan is the world's largest creditor nation : https://en.wikipedia.org/wiki/Net_international_investment_p.... If you look at that list, you will find that US is the most indebted country in the world and that many Western countries tend to be very indebted.
Re: Denmark's Jyske Bank lowers its negative rates on deposits
#50When people borrow money for a house, they only consider the monthly payments for the mortgage and not the absolute amount of money they are borrowing. This means that low interest rates are the main reason behind surging house prices and is why people have to spend decades paying back loans and being vulnerable to a drop in house prices. It creates too much debt in society and generally makes the economy more fragil…
>When people borrow money for a house, they only consider the monthly payments for the mortgage and not the absolute amount of money they are borrowing. That is how borrowing works. Otherwise the lender would not make a profit. >It creates too much debt in society and generally makes the economy more fragile than it has to be. and yet the post-2009 economic expansion is the longest ever, and this is in spite of all t…
> and yet the post-2009 economic expansion is the longest ever, and this is in spite of all the anxieties over tariffs and trade wards and the fed raising rates.
A crisis is not an economic fact that magically happens when some predetermined values for some set of indicators are reached.
A crisis is a mix of two things: 1) a big financial/economic issue that affects an important sector of the economy, 2) widespread panic.
There are already multiple candidates for 1), but what hasn't happened is 2).
Why? That's anybody's guess.
My guess is Trump.
For people to panic, there needs to be sustained media coverage and focus. But now whatever Trump says is more important than anything else for the media.
If you look at the media since Trump became president, the most important issues have been all stuff related to his government, and whenever the media has focused on anything for too long, he's come out with some other thing that the media shifts their attention to.
So we've had lots of small panics, which by now have mostly desensitized the public.
If someone like Trump can continuously interrupt the media, they effectively control it through disruption, and then the media cannot focus for long enough on anything for people to fully panic and cause a full blown crisis.