OK, so I agree with you. If banks were really wholesale lending money at negative interest. I think that they're not and this just makes for a good story. Ms. Christiansen seems to be an anomaly and they even point out that "Even Ms Christiansen will still pay the bank each month due to the fees on her loan." I know a bunch of investors who would borrow an infinite amount of money in Denmark if they got paid by the bank to do so, including myself, so clearly this isn't a condition that could persist since commercial lending rates are a function of supply and demand. BTW, thanks for the nice reference, it made it very clear what we were talking about.
Credit cards are still 14 to 25% in ZIRP . 14% with excellent credit. Unlilely to chamge woth ZIRP. But, if we get a credit for a mortgage i guess banks would have to be subsidized by the government or fed.
Do you think gold would also be banned under NIRP? How about foreign bonds for countries without NIRP? Maybe they'd be classified as NIRP 'havens' and targeted? I can definitely see why a government would like a cash ban.
Gold is tricky, as I think that is such a totemic asset there would be outcry, even though most people only own a few ounces max in the form of jewelrrey. It's much easier to ban overseas holdings or bank accounts, since most people don't have them or care about them. But this would be pointless since they'd have to operate exemptions for companies doing international trade; an easy loophole to get through. Effectively these are forms of capital controls. We don't like capital controls in developed countries, especially the anglo saxon ones. This is pure politics, not economics. GAT
You can't borrow infinite money, because you're still responsible for the debt payment. It's not like you get paid, net, to borrow. It's just that lending is no longer profitable (not that it is at low rates anyway once fees are processed, etc).
While Janet pontificates about employment and inflation and such, I suspect they're watching the below numbers more than they let on.
GAT, Thanks for input. I tried to grasp it myself and here is how I see this: Current inflation in US is 0.7% => in one year, from 1000$ cash I hold now, I'll be able to buy goods for current 930$ cost. Inflation in Japan is 0.19%+0.25% ( 2-yr JGB negative yield) => my net loss is 0.44% or I get back $956 in one year, what is definitely better. Correct me if I'm wrong. Cheers.
Exactly. It assumes there is demand for loans. In a prolonged period of balance sheet contraction there is extremely low demand for new debt, no matter how low the interest rates.