ECB cutting rates…Implications?

[spdrun]

^^ Here’s hoping it is. (if it isn’t right now) *clink*

[an]

[quote=livinincali][quote=AN][quote=spdrun]Why wait for another bubble before things crash down?[/quote]
So I can sell all of my houses at insane prices and rent, while waiting for the crash.[/quote]

Do you think you’ll know where the top of the bubble is and when it’s going to crash? What if the top of this current bubble is in the next 3-6 months?[/quote]
If you noticed, I never said anything about top. What I said is insane prices. If it never get to insane price, then I have no problem keeping what I have and buying more when it crash. What we have today IMHO is not insane prices. I wouldn’t sell at today’s price. I also never said I would know when it would crash. But I know when a price is insane when I see them. Today, in some areas, we’re still 30-40% below peak 2005 nominal price (not even talking about inflation adjusted).

Between 1926 and 1996, the annual average rate of return on Real Estate was 11.1%. So, insane to me would be 2005 price + 3-11% annual increase. I’d even take 2004 price + 3-11% annual increase. For example, that would put those McMansions in Eastlake at $1.2M-$2.3M. Today, they’re going for $650-700k.

[paramount]

The feds could move to fight deflation in a similar way.

[spdrun]

Fortunately, the era of the B.S. Bernanke Fed seems to be over for now, and movement is in opposite direction. Current jobs report looks good enough for further cuts to QE.

[Jazzman]

Implications? Not much. I’ve never understood how you can force a bank to lend if it doesn’t want to. They always seem to find a way to do what they want. They’ll probably pass on the cost of parking cash at the central banks onto customers. After it’s realized it is having little effect, the ECB will embark on a bond buying spree. The Euro might lose ground a little.

[paramount]

If the US Fed goes negative, does that mean we get charged to deposit money?

[FlyerInHi]

I listened to a bbc interview with Alan blinder. He said something about the equilibrium being slightly negative right now.

[Jazzman]

[quote=paramount]If the US Fed goes negative, does that mean we get charged to deposit money?[/quote]

The Fed can only influence short term rates. So I guess the answer is, yes. But isn’t that happening anyway? Inflation hovers around 2%, and rates on savings say, 0.02%. So real net interest would equal -1.94% over one year.

[paramount]

[quote=Jazzman]

The Fed can only influence short term rates. So I guess the answer is, yes. But isn’t that happening anyway? Inflation hovers around 2%, and rates on savings say, 0.02%. So real net interest would equal -1.94% over one year.[/quote]

And that’s what confuses me…I’m not exactly sure about EU economic stats right now, but the EU is the largest economy in the world IIRC.

Assuming the EU was doing some level of QE – what does that say about the state of the EU economy?

I don’t think even Japan did NIR (negative interest rates).

[scaredyclassic]

[quote=paramount][quote=Jazzman]

The Fed can only influence short term rates. So I guess the answer is, yes. But isn’t that happening anyway? Inflation hovers around 2%, and rates on savings say, 0.02%. So real net interest would equal -1.94% over one year.[/quote]

And that’s what confuses me…I’m not exactly sure about EU economic stats right now, but the EU is the largest economy in the world IIRC.

Assuming the EU was doing some level of QE – what does that say about the state of the EU economy?

I don’t think even Japan did NIR (negative interest rates).[/quote]

instead of steadily eroding savings, wouldn’t it be more effective to have it be done randomly and in larger chunks/ Anyone who leaves cash in the bank for over 6 months, say, can randomly have a 2% chunk sliced away, say up to 3x a year. it’s done randomly by a computer. the money goes toward military operations to ensure dominance of the currency. this way, people will go out and spend it all..

[livinincali]

[quote=scaredyclassic]
instead of steadily eroding savings, wouldn’t it be more effective to have it be done randomly and in larger chunks/ Anyone who leaves cash in the bank for over 6 months, say, can randomly have a 2% chunk sliced away, say up to 3x a year. it’s done randomly by a computer. the money goes toward military operations to ensure dominance of the currency. this way, people will go out and spend it all..[/quote]

That would produce one hell of a bank run. With reserve lending every bank in America would be bankrupt in that scenario. Perhaps that is a good thing.

[scaredyclassic]

[quote=livinincali][quote=scaredyclassic]
instead of steadily eroding savings, wouldn’t it be more effective to have it be done randomly and in larger chunks/ Anyone who leaves cash in the bank for over 6 months, say, can randomly have a 2% chunk sliced away, say up to 3x a year. it’s done randomly by a computer. the money goes toward military operations to ensure dominance of the currency. this way, people will go out and spend it all..[/quote]

That would produce one hell of a bank run. With reserve lending every bank in America would be bankrupt in that scenario. Perhaps that is a good thing.[/quote]

even if it wre just once a year, people wouldnt tolerate it. they prefer to boil to death slowly and uniformly, rather than get hacked it brutally and quickly…

[The-Shoveler]

Delete wrong thread

[Coronita]

[quote=scaredyclassic][quote=livinincali][quote=scaredyclassic]
instead of steadily eroding savings, wouldn’t it be more effective to have it be done randomly and in larger chunks/ Anyone who leaves cash in the bank for over 6 months, say, can randomly have a 2% chunk sliced away, say up to 3x a year. it’s done randomly by a computer. the money goes toward military operations to ensure dominance of the currency. this way, people will go out and spend it all..[/quote]

That would produce one hell of a bank run. With reserve lending every bank in America would be bankrupt in that scenario. Perhaps that is a good thing.[/quote]

even if it wre just once a year, people wouldnt tolerate it. they prefer to boil to death slowly and uniformly, rather than get hacked it brutally and quickly…[/quote]

Well, I think the solution is simple. Americans love to gamble. So make the game have odds…..

That is.

If you deposit money for a full year in a bank account, you have a 10:1 odd of winning the grand prize of getting a surprise 10% increase that year… The remaining 9 people will lose 2%….
With 10 people playing one person would win 10%, 9 people would lose a total of 2% each, and there would be plenty of money left over for the government to finance it’s war problem ,drug problem, etc…

[Jazzman]

[quote=paramount][quote=Jazzman]

The Fed can only influence short term rates. So I guess the answer is, yes. But isn’t that happening anyway? Inflation hovers around 2%, and rates on savings say, 0.02%. So real net interest would equal -1.94% over one year.[/quote]

And that’s what confuses me…I’m not exactly sure about EU economic stats right now, but the EU is the largest economy in the world IIRC.

Assuming the EU was doing some level of QE – what does that say about the state of the EU economy?

I don’t think even Japan did NIR (negative interest rates).[/quote]
I guess it says the economy is doing really poorly. There’s been quite a lot of focus on the political backlash recently. There is an awful lot of anti European Union feeling amongst member nations, which has something to do with immigration as well as the economy. The social problems seem to get magnified when people suffer economically. Using something like monetary easing is not only counter to the Union’s beliefs, but is also very complex to implement because there is no full political union. Both Sweden and Denmark tried negative rates, but with little effect. The Euro has weakened to 1.35 which is a positive, and a strengthening dollar will help their cause. In the mean time, the anti Union movement will probably pick up a pace.

[Author]

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