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UK banks given six months to prepare for negative interest rates

theguardian.com

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Re: UK banks given six months to prepare for negative interest rates

#81

Post by imtringued »

I am honestly unimpressed with the general strategy of central banks to imbalance an economy by only putting inflationary pressure on the supply side. You have to work on both the supply side and the demand side. Doing an excessive amount of supply side stimulus does not reduce the need for demand side stimulus.

This is especially important in an economy where a pandemic has forcefully lowered demand for products and thus potential income for workers. American style stimulus checks are a far better idea, especially when they go to people who truly need them.

The UK pretty much hit its 2% inflation target back in 2019. There is an obvious slump because of the combination of Brexit and the pandemic at the same time but low interest rates alone are not going to save the UK.

Re: UK banks given six months to prepare for negative interest rates

#82

Post by websites222 »

mcv wrote: post #74
websites222 wrote: post #26

Earlier quoted context omitted.

Europe yes. US, no. The US is in an amazing position in terms of demography and growth. Aging population, but not immigrant averse like Japan and not an island. The US borders a rising economy with perfect demographics for growth (Mexico). The US is the least involved country in global trade. The US is increasingly disinterested in being the world police, so that capability can be deployed to protect economic interes…

Why Europe yes but US no? Europe is also not immigrant-averse and not an island. It doesn't border on Mexico, but it does border on many other countries. I don't see why Europe would suffer a much different fate from the US. I think the main thing holding the EU back is their love for austerity. They could do a lot more to invest in their economy.

Europe as a going United concern is headed towards a breakup. Germany’s demographics (and patience) will not not hold to support countries like Greece and Italy, which funded pensions instead of spending their bailouts responsibly. France will flourish, like it always does, because it’s more or less self sufficient and is strategically located and internally configured, but other countries like Spain will flounder due to internal conflicts. All of these will lead to a mixed to poor economic condition of slow growth and low to negative interest rates.

Re: UK banks given six months to prepare for negative interest rates

#83

Post by imtringued »

GordonS wrote: post #46
websites222 wrote: post #26

Earlier quoted context omitted.

Europe yes. US, no. The US is in an amazing position in terms of demography and growth. Aging population, but not immigrant averse like Japan and not an island. The US borders a rising economy with perfect demographics for growth (Mexico). The US is the least involved country in global trade. The US is increasingly disinterested in being the world police, so that capability can be deployed to protect economic interes…

> not immigrant averse like Japan and not an island As the past 4 years have demonstrated, there is a very large segment of the US population is very much against immigration, and would happily turn the country into an "island" by building walls around the land borders.

There was an article about this on HN. The perception of polarization is greater than reality. The overlap between republicans and democrats is pretty high. Most of them are only moderately against or in favor of migration.

Re: UK banks given six months to prepare for negative interest rates

#84

Post by ChuckNorris89 »

unicornfinder wrote: post #76
frockington1 wrote: post #50

Earlier quoted context omitted.

Compared to other nations, the US has the least restrictive immigration laws. The US also benefits by bordering Canada with some of the most restrictive immigration laws. If you want to go where there is growth, there's no other option

Surely you jest? The UK, Canada, Australia are all far easier to immigrate into as a skilled worker.

You're right. Though, the tough US immigration laws ensure they only allow in the crem of the crop or the most dedicated illegal immigrants.

Re: UK banks given six months to prepare for negative interest rates

#85

Post by imtringued »

unyttigfjelltol wrote: post #17

If chartered banks charge for ... holding cash ... don't people next create a new industry of unchartered financial institutions to hold money without charging so much? Like, safe deposit? Or insurance? This seems like an ivory tower exercise that has not yet met the messy realities of the world.

Yes, negative interest rates are a jobs program for safe manufacturers.

Re: UK banks given six months to prepare for negative interest rates

#86

Post by imtringued »

LatteLazy wrote: post #53
unyttigfjelltol wrote: post #17

If chartered banks charge for ... holding cash ... don't people next create a new industry of unchartered financial institutions to hold money without charging so much? Like, safe deposit? Or insurance? This seems like an ivory tower exercise that has not yet met the messy realities of the world.

That is exactly my thought. All this can do in practise is reduce mortgage and other loan rates further and punish anyone holding cash. I'm not saying that's a good or bad thing, but I don't think any normal people will be able to borrow a billion pounds and then just live off the negative interest rate...

This is the fundamental problem. 0% interest rates make it easier to start a business, but your startup doesn't get to borrow at 0% because there is the very real risk that your startup will fail. You'll get a nice 8% interest loan at best and no loan at all in most cases.

That risk doesn't exist for large companies but they don't have to invest their dollars domestically or even productively. They can spend them anywhere outside the US or just dump them into acquisitions and other stock market shenanigans.

Re: UK banks given six months to prepare for negative interest rates

#87

Post by me_me_me »

websites222 wrote: post #82
mcv wrote: post #74

Earlier quoted context omitted.

Why Europe yes but US no? Europe is also not immigrant-averse and not an island. It doesn't border on Mexico, but it does border on many other countries. I don't see why Europe would suffer a much different fate from the US. I think the main thing holding the EU back is their love for austerity. They could do a lot more to invest in their economy.

Europe as a going United concern is headed towards a breakup. Germany’s demographics (and patience) will not not hold to support countries like Greece and Italy, which funded pensions instead of spending their bailouts responsibly. France will flourish, like it always does, because it’s more or less self sufficient and is strategically located and internally configured, but other countries like Spain will flounder du…

Maybe if you are writing a political thriller.

EU as a concept is still highly supported amongst adults and young adults. And if anything Brexit strengthened that, since UK is a now a clown that everyone laughs at with all the issues they are going through.

A lot of young people migrate between EU countries and just that is the biggest visible positive that all working adults recognise. Its something people would not want to lose willy-nilly. Something realllly serious would have to happen for EU to fail catastrophically.

Re: UK banks given six months to prepare for negative interest rates

#88

Post by imtringued »

RobertoG wrote: post #44
JohnJamesRambo wrote: post #8

Earlier quoted context omitted.

It’s a negative interest rate for banks to keep their money with a central bank. It is supposed to discourage banks from hoarding money and stimulate the economy by giving out more loans. Like all things economic there are debates about if it works or not. https://www.cnbc.com/2020/06/12/do-negative-interest-rates-w...

It's obvious that it doesn't work. In order banks be able to lend money it's necessary the existence of business and households that want to spend money instead of saving. What we are seeing, is the result of using the wrong tool, monetary policy instead of fiscal policy, because ideological reasons.

>What we are seeing, is the result of using the wrong tool, monetary policy instead of fiscal policy, because ideological reasons.

Yeah this is pretty much it. Businesses do benefit from lower interest rates but beyond a certain point they have zero trouble financing the investments they want to make. After that you have to figure out how to convince people to spend money and if people don't have money to begin with you have to give it to them somehow (most likely candidate is government spending).

Re: UK banks given six months to prepare for negative interest rates

#89

Post by imtringued »

grey-area wrote: post #41
u678u wrote: post #21

Earlier quoted context omitted.

> I'd immediately request MAXINT. Would you really though. They're trying to avoid deflation, if/when that happens the value of property and shares falls each year. What would you do with your loan if all assets fall in value each year?

They're trying to avoid retail deflation. That is not usually related to asset deflation. Asset inflation has been raging for at least a decade, maybe 2, inflating stock assets, housing and commodities, bitcoin and anything else which promises some return to unseen levels, since they started QE and dropped the low risk rate of return to 0. Retail inflation which they're trying to control is pretty much unaffected by…

Basically the problem is that governments and central banks are following policies that are generally used to stave off inflation. If you have massive inflation what you should invest into is domestic production capacity. Excess production causes prices to fall.

If you want to reliably drive inflation then you must do the opposite. Put dollars into people's hands. Consumer demand must outpace domestic production capacity. Most cases of (hyper)inflation are basically episodes of excessive government spending without the necessary investment in production capacity to back that spending up.

Re: UK banks given six months to prepare for negative interest rates

#90

Post by websites222 »

me_me_me wrote: post #87
websites222 wrote: post #82

Earlier quoted context omitted.

Europe as a going United concern is headed towards a breakup. Germany’s demographics (and patience) will not not hold to support countries like Greece and Italy, which funded pensions instead of spending their bailouts responsibly. France will flourish, like it always does, because it’s more or less self sufficient and is strategically located and internally configured, but other countries like Spain will flounder du…

Maybe if you are writing a political thriller. EU as a concept is still highly supported amongst adults and young adults. And if anything Brexit strengthened that, since UK is a now a clown that everyone laughs at with all the issues they are going through. A lot of young people migrate between EU countries and just that is the biggest visible positive that all working adults recognise. Its something people would not…

Nationalism is on the rise. We are 7 decades removed from the horrors of conflict on the continent. Everyone who remembers that is dying.

The EU is a globalization project in an era where globalization is on the decline. It was held together by US warships and will fall apart as they recede, a vacuum filled by local, competing powers. Europe will not be immune to it, since it is after all composed of many cultures and many economies with competing aims.

It’s not a matter of what people want, it’s a matter of economic realities that will impugn any high-minded desire for unity and collaboration.

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