Why the push for negative interest rates, Federal Reserve?

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I know it's a private bank, and nothing "Federal" about it. However recently there has been fighting and suggesting going to a Negative interest rate.

I've always wanted a higher interest rate(because I'm a big saver) but the interest is barely meeting depreciation over time.

So as I understand, a negative interest rate means they will charge me 50 cents every quarter to hold my money. How can this work? So many people would pull out of banks and put savings into Gold, Silver, and inside pillows.

How would this stimulate the economy? What will this do to mortgage Lenders?
 
More people would buy more expensive houses. Construction would increase. Construction supplies and materials production would increase. Tax revenue would increase. Trickle-down effects would increase. Of course, all the savings account holders would be screwed.
 
This doesn't sound like a good idea to me.
If it does I would for sure refi my home mortgage currently at 3.5

I think online savings banks would still give a small interest rate to entice people to keep money in their banks.

Chase BOA WF would LOVE to charge people to hold their money... Can get over 2% in online savings right now. Chase savings? 0 if rates dropped by 2% would chase charge 2%? Yikes.
 
There is a confused mix of ideas in the OP's post.

The Fed offering free money along with a loan to the the largest banks only is a true negative interest rate, a simple way of pumping more money into an economy in an effort to get businesses to borrow, invest in R&D, and hire more.

Doing so drives consumer interests rates down so low, and inflation up so high, that one could consider it devaluing your savings to the point that it seems like they're charging you money to have savings.

But, actually charging you to save money is also an idea, but it's not federal stimulous negative interest rate. It's called Socialism.
 
Originally Posted by Snagglefoot
It's just unnatural. To me it's evidence that we're edging towards a depression.




Not even close.


Rates should not be changed in order to give us a cushion when the economy does turn and it will eventually like all things cyclic. When is the million dollar question and right now it's not in the cards.

It's normal for the Fed to raise rates during a good economy, but to a point. Slow and easy is the key. This current Fed Chief has been too quick on the draw to raise.
 
They are just showing you money has a worth. Ask Venezuela.
It is worth a certain amount of goods or services.

Since the (global) economy is not working good, they are just saying - your money will be worth less tomorrow, do something with it today. And they have the power to say that and turn it into reality.
So try and take advantage of the situation, it will be awhile.
Been like this in Europe for years, inflated all sorts of things, luckily, for now, beer is not among them.
 
We had virtually zero interest rate during President Obamas terms. The Fed had raised rates 8 or so times since Trump has been in..many thinking it slowed the economy too much. Rate cuts are on the way..but no way are we near negative interest rates like in some other parts of the world. Paying banks to keep and use your money makes no sense...even the theory that your money will be worth far less down the road is eventually a positive is madness. I believe we are better than that.
 
Interest rates can only sustainably be at the level of inflation, give or take. As the upside of the economy must go to those who take risk.

Interest rates for many, many years were dramatically higher than inflation. For example, when inflation was 2-3%, interest was often 6-7%.

So at some point there has to be a day of reckoning, as risk-free interest rates must equal inflation over the long term.

With inflation slowing down because consumers are overly indebted and can't afford to buy stuff, its only logical that interest rates go negative.

The problem is that negative rates are effectively a trap as most will hoard cash instead. Thus velocity crashes. When velocity crashes, to keep the economy liquid, they have to print a lot of money. So over time, negative rates create positive rates, and significantly positive rates create negative rates.

I think its a good idea to own gold miners these days. As they benefit not only from the likely enhancement in demand for a safe haven asset when debt defaults, but their production costs will drop as well as industrial inputs, labour, etc., become less expensive.

Gold miners are also historically undervalued as a percentage of global investible assets, and the ratio of gold to the market capitalization of gold miners has almost never been more disfavourable to the sector save for a brief period in 2000, and more recently in 2016.
 
Originally Posted by Wolf359
Originally Posted by Snagglefoot
It's just unnatural. To me it's evidence that we're edging towards a depression.


Europe and Japan have have negative interest rates for years. They might be in recession, not depression.

https://www.bloomberg.com/news/arti...ve-rates-and-now-it-can-t-find-a-way-out


Governments love negative interest rates because it equates to a tax. When the Government has to pay less money than it took in, it profits. That, of course, would be when it happen on municipal bonds. In other countries.. hopefully, it never makes it's way here.
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Simple, really.
 
I'm not really sure why people in other countries even put up with negative interest rates. I suppose if it's several million it's kinda hard to keep it at home in a mattress, but if the bank account was offering negative interest rates, I don't know why they don't just move it to a bond fund instead of paying money to the bank for them to hold onto your money.
 
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