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Thread: European Central Bank adopts negative interest rates

  1. #31
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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by Rainman05 View Post
    Unfortunately, somebody didn't read the article.

    And ofc, I mean you.



    The money is for the most part, directed. You can't use that money for stuff that isn't in the contract. So as I said in post #20, I, the ECB, lend you, the bank, X sum of money but you have to use that money to either loan it to start-ups or small companies with very low interest rates. that's an example.

    The reason this is being done is because the euro is so strong that the inflation rate is lower by a lot, by 1.5%, than it was expected. And that means you have to raise inflation to the standard that was estimated and indeed, the one that is desirable. The USA's inflation rate is 2% or higher and it is desirable for it to be at that level.
    Hmmmm.... so in order to show that these aren't risky loans you argue that they are making required to make small business loans at low interest rates... aka risky loans.

    Also the negative interest on money banks deposit with ECB means that they will be less likely to keep sufficient money to cover loans since the policy all but forces investment.

    Pro-Tip: They aren't loaning money due to risk.
    Give a man a fish and he eats for a day. Teach a man to fish and he stops voting for the Free Fish party.

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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by Rainman05 View Post
    I didn't ask you that question, I asked the other guy, Fenton. You still fail to reply to the comment I addressed you.

    Comment #24.


    Do reply genius. Come on.

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    You have no clue what you're talking about. It's laughable if it isn't so sad.
    I've addressed the problems with this economic model/idea several times already, and all you said was that I wasn't competent and that it would work...

    Do you not see the problem here?

  3. #33
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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by Rainman05 View Post
    Why?
    Go on, daze me with your unmatched insight. I'm sure it's more insightful than that of Mr.Nick.

    EDIT: Also, Europe doesn't have subprimes. European banks however did buy toxic US subprimes like all the US banks did and that was a big mistake.
    No, Subprime backed SECURITIES were distributed throughout the worlds Capital markets wrapped up and hidden away in CDO tranches like Time Bombs.

    And Europe DEFINITELY did have a subprime market.

    Spain, Italy AND Ireland had their own little Sub-Prime experiments.

    They all failed miserably.

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    Re: European Central Bank adopts negative interest rates

    I would love to know how this idea works beyond flooding the market with Eruos that aren't backed by anything???

    Why the hell would I keep my money in a back in which my money only isn't backed but is being handed out like cheap mints at a ****ty hotel???

    Not to mention the whole paying the bank to hold my money like they're doing me a favor.

    This is seriously the most bizarre economic ideas I have ever heard - what are we going to call it "Robinomics."

    I've never even heard of such a bizarre economic concept or theory.

  5. #35
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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by Rainman05 View Post
    No, it's not to you, it's to banks.
    You will still get the same interest you did on your savings account.

    By offering negative interest rates to bank you are encouraging banks to offer loans at low rates.

    So when I, the ECB, give you, the bank, a loan at NO INTEREST, I'm giving you a chance to make money on my terms. So I'll give you 10mil euros with no interest means that 10 years from now, you'll still have to pay me back just the 10mil euros. You can do nothing with that money and you'd lose or win nothing over those 10 years. Ofc, I, the ECB, tell you to loan those 10mil euros at low interest to people who wanna... I don't know, buy cars. It's basically a stimulus to the car industry. So I tell you to loan all that 10mil euros at 1% interest to people who wanna buy cars. At the end of the day, you make money and when you have to pay me back, you'll have earned something. Better than earning nothing because when you try and give loans to people who wanna buy cars are 5% interest, they don't take them. In reality, it's a stimulus to the car industry, a subsidy basically and a way to make some of my banker friends richer.

    But when I give you negative interests, I, the ECB, will tell you : take 10mil euros, loan it the way I tell you to loan it (say, for start-up businesses and the interest at 0.5%) and I'll pay you a 0.1% of the value of the loan for 5 years. So you'll be making money from the 0.5% interest that you get from people who wanna do start-ups and the 0.1% from me and 10 years from now when you give me back the 10mil euros, you'll have made a bunch of money.

    Now ofc, I, the ECB, in order to give you the 0.1% of the total value in negative interest, I have to print out money. Which means deflation. which means the euro goes down in value. Because the euro is a strong currency and has just 0.5% inflation as opposed to say, the dollar which has a 2% inflation rate .
    Current US Inflation Rates: 2004-2014 | US Inflation Calculator
    I will effectively make the euro less valuable in contrast to other currencies. Which is both good and very, very bad. It's going to be a kick in the nuts to heavily indebted countries that owe debt to non-EU countries. Why non-EU countries? Because as it's been seen, with countries like Greece and Portugal, it's been something called "restructuring of debt" in the EU which basically was an adjusting of the debt levels of the EU to not be ****ed by rate of the euro.

    So what the ECB is trying to do get the euro at a 0.7% inflation rate. Which again, it's good and bad. Most countries agree on a 1.5-2.5% inflation rate to be optimal.
    You don't understand what negative interest rates mean? It means you pay them to hold and use your money, period.
    Einstein, "science without religion is lame, religion without science is blind."

  6. #36
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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by Fenton View Post
    No, Subprime backed SECURITIES were distributed throughout the worlds Capital markets wrapped up and hidden away in CDO tranches like Time Bombs.
    Yes, but it was all based on the private unregulated sub-prime market in the US. When housing prices started to collapse, these were the first mortgages to go under, and they were lopped with relatively good stuff and figuring out the actual worth of this crap was and is near impossible. It was a massive ponzi scheme. This is what caused the crisis.

    And Europe DEFINITELY did have a subprime market.
    No. Do you know what sub-prime means?

    Spain, Italy AND Ireland had their own little Sub-Prime experiments.
    Again no. Sub-prime is pretty much illegal and always has been. Giving mortgages to people who could not in the short, middle or long run be able to pay for them is illegal and always has been.
    PeteEU

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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by PeteEU View Post
    Yes, but it was all based on the private unregulated sub-prime market in the US. When housing prices started to collapse, these were the first mortgages to go under, and they were lopped with relatively good stuff and figuring out the actual worth of this crap was and is near impossible. It was a massive ponzi scheme. This is what caused the crisis.



    No. Do you know what sub-prime means?



    Again no. Sub-prime is pretty much illegal and always has been. Giving mortgages to people who could not in the short, middle or long run be able to pay for them is illegal and always has been.
    It wasn't " illegal " when Clinton via executive orders forced lenders to lower their lending standards.

    In fact lenders who refused to lower their standarsa were subjected to DOJ action.

    And " Sub-Prime " means below prime.

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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by grip View Post
    You don't understand what negative interest rates mean? It means you pay them to hold and use your money, period.
    That's exactly what I said in so many words only I was trying to explain what that meant. And it meant inflation. I give you 10mil euros to use to give loans and because I also have to pay you interest on the money I lent you, what do I do, as the ECB? I print out euros and do inflation. So that's the whole point of the exercise, to increase inflation from 0.5 which is now, to 0.7 because last year Draghi, the ECB director, believed the inflation rate would be at 2% but instead, it's waaay lower.

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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by jmotivator View Post
    Hmmmm.... so in order to show that these aren't risky loans you argue that they are making required to make small business loans at low interest rates... aka risky loans.

    Also the negative interest on money banks deposit with ECB means that they will be less likely to keep sufficient money to cover loans since the policy all but forces investment.

    Pro-Tip: They aren't loaning money due to risk.
    It's not about giving risky loans, it's about giving loans and extending a credit line to companies and start-ups.

    The problem in the USA is that banks loan too much money too easily. In most European countries, especially after 2009, the thing is just the opposite. You have to fight tooth and nail to get a loan for small businesses, regardless of how risky or not they are. Which is why a lot of businesses that got started were started at least partially with state grants.

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    Re: European Central Bank adopts negative interest rates

    Does this not essentially force the banks to become brokers?

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