Goldman Sachs: Interest rate of 0% is too high

Discussion in 'Wall St. News' started by talknet, Jan 22, 2009.

  1. talknet


    January 19, 2009-: Can an interest rate of zero be too high? Unfortunately, yes. A new analysis by Goldman Sachs (GS) concludes that the Federal Reserve's cut in the federal funds rate to a record low of zero to 0.25% on Dec. 16 isn't going to be nearly enough to get the economy going again. The report says the Fed would need to reduce the federal funds rate to negative 6% by the end of 2010 to supply the needed amount of monetary stimulus.

    The problem: It's literally impossible to cut interest rates below zero. As a result, "we are entering a world with interest rates that are far too high for the economy's good," Goldman Chief U.S. Economist Jan Hatzius wrote in a Jan. 16 research note.

    More .....
  2. Daal


    The Fed can cut below zero by charging a tax on bank excess reserves. banks would have an incentive to lend out to other banks or consumers at negative rates as a long it would be less than the tax. currency hoarding could be a problem though
  3. lol now that is funny
  4. The nominal rate may be positive, but the real rate is negative.
  5. sabunabu


    Not in a deflationary period.
  6. Goldman is well known for it´s "news timing"...I wouldn´t be surprised if we see a "bear market rally"...especially taking into consideration Buffet´s purchases, I would ask Mr. Hatzius where GS stock would end if his predicitons are "objective"...
  7. talknet


    All this means is that printing money is inevitable with all the consequences that brings. Once the USA and UK does it by the spring or summer the Dollar and Pound will be worth about the same as a baked bean and the country bankrupt.
  8. wavel


    It's not possible to have negative interest rates ? Oh, so it isn't possible to pay people to take out a loan is it not ?

    And here is me thinking that we live in a world of wealth creation. :)
  9. talknet


    Falling giant banks & giant companies" are indicators of approaching massive financial catastrophe which is further loss of $1200 Trillion to the world economy

    Too bad there is $1,400 Trillion of wealth left to evaporate and will probably only be about $200 Trillion at current values left when all is said and done.

    The deflationary credit contraction begins.
  10. wavel


    I like you, your a real funny guy !
    #10     Jan 23, 2009