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Thread: European Central Bank adopts negative interest rates

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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by Rainman05 View Post
    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.
    Why would he want inflation to be 2%? What is the benefit and to whom?

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    Re: European Central Bank adopts negative interest rates

    Printing money only works if the money goes into circulation. Most firms are hoarding cash because they simply have nothing they can do with it. Funny how, even as permabulls are ranting about meteorology, you have central banks literally going, "Look! I'll pay you to take my money!" The desperation speaks volumes more than any set of statistics.
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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by cholla View Post
    Why would he want inflation to be 2%? What is the benefit and to whom?
    Because that's considered a good amount to keep up with the growth of the economy.

    If you don't have inflation and the economy grows, the value of the currency goes up, and that's what happened to the euro.
    The 2% target inflation is an amount considered to be a good to keep up with the economic development of a country so that the value stays the same. So you want the inflation to match growth but that's not what happened.
    From 2012 to now, the euro grew from 1.2 to 1.4 against the dollar. A 15% increase. This is because the euro was so strong and so popular and everyone bought it.

    The benefit of having a stable currency is to everyone.
    If the currency devalues rapidly, it favors the speculators who will dump the euros on the market the moment they see it goes down.
    If the currency increases rapidly, it favors the rich who have a lot of euros in the bank. But because costs go up, the middle class is screwed.

    So a stable currency that is valued at the right amount is favorable to the middle class and everyone. And to have that, you need inflation to counter growth which would make a currency stronger. You wanna keep it the same levels.

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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by Rainman05 View Post
    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.
    If they're trying to stimulate the economy, then they're going about it all wrong.

    Supply-side economics may have helped boost the US out of the 70's stagflation, during the 80's with Reagan's tax cuts, but this is a different animal they're facing today. The trickle-down approach to economic policy doesn't work because that's not were the money problem exists, it's at the lower levels.

    From 1996 to 2006 the banks and lenders were giving away unsecured, easy credit that grew the economy from the bottom up. That in turn made the top wealthier than ever before and made everyone happy, till the defaults began. We grew the global economy at an unsustainable pace and now are trying to figure some magic way of regaining that momentum.

    We have all this gov't and private debt left over as a result and skyrocketing budgets, because of the addiction to spending and a large unemployed workforce. And by creating disposable products, with designed obsolescence, it's a materialistic existence that's steadily losing value to profiteers.
    Einstein, "science without religion is lame, religion without science is blind."

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    Re: European Central Bank adopts negative interest rates

    Its what happens when the EU adopts the Keynesian economic outlook that claims spending is everything. What morons.

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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by grip View Post
    If they're trying to stimulate the economy, then they're going about it all wrong.

    Supply-side economics may have helped boost the US out of the 70's stagflation, during the 80's with Reagan's tax cuts, but this is a different animal they're facing today. The trickle-down approach to economic policy doesn't work because that's not were the money problem exists, it's at the lower levels.

    From 1996 to 2006 the banks and lenders were giving away unsecured, easy credit that grew the economy from the bottom up. That in turn made the top wealthier than ever before and made everyone happy, till the defaults began. We grew the global economy at an unsustainable pace and now are trying to figure some magic way of regaining that momentum.

    We have all this gov't and private debt left over as a result and skyrocketing budgets, because of the addiction to spending and a large unemployed workforce. And by creating disposable products, with designed obsolescence, it's a materialistic existence that's steadily losing value to profiteers.
    Supply side does work.

    It works fine, just look at Texas's economy.

    Fiscal and monetary stimulus ? That doesn't work.

    This push to try and force people to spend wont work either.

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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by Fenton View Post
    Supply side does work.

    It works fine, just look at Texas's economy.

    Fiscal and monetary stimulus ? That doesn't work.

    This push to try and force people to spend wont work either.
    Supply side works in Texas, not just because of the low taxes drawing manufacturers but because of the new oil/gas boom from fracking, like the economy in ND. That's a limited area and if all states lowered taxes equally and had offshore and shale reserves, Texas would lose it's appeal.

    I do agree with the bolded above that trying to force, trick or manipulate people into spending what they don't have is failing.
    Einstein, "science without religion is lame, religion without science is blind."

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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by Mr.Nick View Post
    The entire problem starts and ends with the Euro. That was one of the worst economic ideas ever.
    I don't know I think sub prime mortgage lending is right up there.
    ‘This is not peace, it is an armistice for 20 years.’ (Ferdinand Foch. After the Treaty of Versailles, 1919).

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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by grip View Post
    Supply side works in Texas, not just because of the low taxes drawing manufacturers but because of the new oil/gas boom from fracking, like the economy in ND. That's a limited area and if all states lowered taxes equally and had offshore and shale reserves, Texas would lose it's appeal.

    I do agree with the bolded above that trying to force, trick or manipulate people into spending what they don't have is failing.
    Again, the oil and gas industry accounts for only 10 percent of Texas's GDP.

    So its incorrect to attribute Texas's economic success to oil and gas.

    Companies aren't relocating here because of oil.

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    Re: European Central Bank adopts negative interest rates

    Quote Originally Posted by Fenton View Post
    Again, the oil and gas industry accounts for only 10 percent of Texas's GDP.

    So its incorrect to attribute Texas's economic success to oil and gas.

    Companies aren't relocating here because of oil.
    You didn't address my comment about what happens if ALL states drop their taxes equally? There's no boom for anyone.
    Einstein, "science without religion is lame, religion without science is blind."

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