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Sweden Cuts Rates Deeper Into Negative Territory, Says May Go Further

Erod

Erod

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Sweden Cuts Rates Deeper Into Negative Territory, Says May Go Further - Bloomberg Business

Sweden’s central bank lowered its key interest rate even further below zero and said it’s prepared to use its full toolbox of measures as it battles to revive inflation and keep the krona from appreciating.
The repo rate was reduced to minus 0.50 percent from minus 0.35 percent, the Stockholm-based bank said. A cut was predicted by 10 of the 18 analysts surveyed by Bloomberg, though only three had anticipated this magnitude. The bank said government bond purchases will continue as planned for the first six months of 2016 and that it “will reinvest maturities and coupons from the government bond portfolio until further notice.”



“Uncertainty regarding global developments is still high, with low inflation and several central banks pursuing more expansionary monetary policy,” the Riksbank said. “Swedish monetary policy must relate to this. Otherwise the krona exchange rate is at risk of strengthening at a faster rate than in the forecast, which would make it harder to push up inflation and stabilize it around 2 percent.”
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So how does a negative rate work? Does the bank pay you to borrow money from them? LOL

Bernie Sanders is going to pee himself. This is his Utopian dream in reality.
 
Erod said:
Sweden Cuts Rates Deeper Into Negative Territory, Says May Go Further - Bloomberg Business



So how does a negative rate work? Does the bank pay you to borrow money from them? LOL

Bernie Sanders is going to pee himself. This is his Utopian dream in reality.
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This is just a really cool way to artificially devalue the Krona which will inflate prices domestically for the Swedes and artificially put more money into their local economy. It's also similar to how the US monetized our federal debt, except Sweden is monetizing their domestic banks debt to the national government's central bank. Like I said, a pretty cool idea, but it's crazy. We threaten sanctions against China when they take similar actions to artificially depress the value of the Yuan.
 
Erod said:
So how does a negative rate work? Does the bank pay you to borrow money from them?
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No, they charge banks to deposit money with them.

The policy only necessarially effects commercial banks' deposits in the central bank.

Central banks set minimum reserve requirements, which require commercial banks to hold deposits at the central bank equivalent to at least a specified percentage of their liabilities.

If the central bank is holding the reserves at a negative rate the banks are losing money.

The alternative is for the commercial banks to lend money (an asset to the banks) rather than hold it as a deposit (a liability).

They can either lend the money at a reduced rate (the negative prime +n) and make some money or pay the central bank to hold it for them and lose some money.

In theory it encourages banks to lend money rather than horde it which, in turn, theoretically stimulates the economy.
 
soot said:
No, they charge banks to deposit money with them.

The policy only necessarially effects commercial banks' deposits in the central (depository) bank.

Central banks set minimum reserve requirements, which require commercial banks to hold deposits at the central bank equivalent to at least a specified percentage of their liabilities.

If the central bank is holding the reserves at a negative rate the banks are losing money.

The alternative is for the commercial banks to lend money (an asset to the banks) rather than hold it as a deposit (a liability).

They can either lend the money at a reduced rate (the negative prime +n) and make some money or pay the central bank to hold it for them and lose some money.

In theory it encourages banks to lend money rather than horde it which, in turn, theoretically stimulates the economy.
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Sounds like the start of their own subprime mortgage crisis.

Nothing like loaning money with a gun pointed at your head.
 
Beaudreaux said:
This is just a really cool way to artificially devalue the Krona which will inflate prices domestically for the Swedes and artificially put more money into their local economy. It's also similar to how the US monetized our federal debt, except Sweden is monetizing their domestic banks debt to the national government's central bank. Like I said, a pretty cool idea, but it's crazy. We threaten sanctions against China when they take similar actions to artificially depress the value of the Yuan.
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Well the reason we sanction China is that the Yuan is actually important to world commerce, unlike the Swedish krona. They are also doing it on a much larger scale and in a more malicious manner.
 
It's the progressive way of spurring on economic growth via punishing savers.
 
Erod said:
Sounds like the start of their own subprime mortgage crisis.

Nothing like loaning money with a gun pointed at your head.
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err no..... can not be compared at all to the subprime mortgage crisis, because no one was forcing Washington Mutual and all the private loaning companies to loan money out...
 
Fenton said:
It's the progressive way of spurring on economic growth via punishing savers.
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Horse****. Savers have had 0% interest for over a decade. It is "punishing" the banks and telling them not to hoard cash that could be loaned out.
 
Beaudreaux said:
This is just a really cool way to artificially devalue the Krona which will inflate prices domestically for the Swedes and artificially put more money into their local economy. It's also similar to how the US monetized our federal debt, except Sweden is monetizing their domestic banks debt to the national government's central bank. Like I said, a pretty cool idea, but it's crazy. We threaten sanctions against China when they take similar actions to artificially depress the value of the Yuan.
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The Swiss did it to stop so much money streaming into the country driving up the currency and down competitiveness.
 
PeteEU said:
Horse****. Savers have had 0% interest for over a decade. It is "punishing" the banks and telling them not to hoard cash that could be loaned out.
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Lol !!!

The Govt forcing banks to loan because their progressive economic strategies have tanked the economy.

Banks will loan when there's a demand for consumer credit.
 
Fenton said:
Lol !!!

The Govt forcing banks to loan because their progressive economic strategies have tanked the economy.

Banks will loan when there's a demand for consumer credit.
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Okay show us the law that forced private banks to loan money to people who could not afford it and put these bad loans in financial instruments that ultimately caused the financial crisis.
 
soot said:
No, they charge banks to deposit money with them.

The policy only necessarially effects commercial banks' deposits in the central bank.

Central banks set minimum reserve requirements, which require commercial banks to hold deposits at the central bank equivalent to at least a specified percentage of their liabilities.

If the central bank is holding the reserves at a negative rate the banks are losing money.

The alternative is for the commercial banks to lend money (an asset to the banks) rather than hold it as a deposit (a liability).

They can either lend the money at a reduced rate (the negative prime +n) and make some money or pay the central bank to hold it for them and lose some money.

In theory it encourages banks to lend money rather than horde it which, in turn, theoretically stimulates the economy.
Click to expand...

With what they hope results in inflation
 
PeteEU said:
Okay show us the law that forced private banks to loan money to people who could not afford it and put these bad loans in financial instruments that ultimately caused the financial crisis.
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Forbes Welcome

CRA ratings was part of their credit rating and lending rates with the Fed not to mention ANY expansion or merger. If they didn't loan the way the Fed wanted, they would pay more for Fed loans and be less competitive.

Takeaway quote:
All this overlooks a crucial fact: There has been no free market in housing or finance. Government has long exercised massive control over the housing and financial markets–including its creation of Fannie Mae and Freddie Mac (which have now amassed $5 trillion in liabilities)–leading to many of the problems being blamed on the free market today.
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OpportunityCost said:
Forbes Welcome

CRA ratings was part of their credit rating and lending rates with the Fed not to mention ANY expansion or merger. If they didn't loan the way the Fed wanted, they would pay more for Fed loans and be less competitive.

Takeaway quote:
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Fannie and Freddie were not the cause of the crisis.. so try again.

Private sector loans, not Fannie or Freddie, triggered crisis | McClatchy DC

Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.
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and

During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.
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So try again... the GOP talking points on the crisis are mostly lies and diversion away from the true culprits of the financial crisis.. the private American banks.

But this is off topic.. what the Swedes are doing is in no way similar to what the private banking sector did to start the crisis in the first place.
 
PeteEU said:
Fannie and Freddie were not the cause of the crisis.. so try again.

Private sector loans, not Fannie or Freddie, triggered crisis | McClatchy DC



and



So try again... the GOP talking points on the crisis are mostly lies and diversion away from the true culprits of the financial crisis.. the private American banks.

But this is off topic.. what the Swedes are doing is in no way similar to what the private banking sector did to start the crisis in the first place.
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You failed to grasp the requested material, please quit letting your bias interfere with your comprehension. Re-read the article and try to understand how the entire process broke down. All of the players contributed.

As for the Swedes, I agree, but it didn't work for Japan when they tried it. So, I'm skeptical.
 
PeteEU said:
Fannie and Freddie were not the cause of the crisis.. so try again.

Private sector loans, not Fannie or Freddie, triggered crisis | McClatchy DC



and



So try again... the GOP talking points on the crisis are mostly lies and diversion away from the true culprits of the financial crisis.. the private American banks.

But this is off topic.. what the Swedes are doing is in no way similar to what the private banking sector did to start the crisis in the first place.
Click to expand...

First off, Subprime started LONG before 2004. Homeownership rates under Bush's entire Presidency only went up 1%.

They shot up 5% under Clinton.

And that McClatckey article is a bit dated.

In 2011 the SEC exposed hundreds of BILLIONS of dollars in worthless debt ommited from Fannie and Freddies SEC quartely filings from 2004-2008.

It also exposed Fannies close partnership with CountryWide Financial that started in the late 90's.

In 2000 Fannie Mae bragged about giving special access to one of the Nations largest originators of Subprime loans ( CountryWide ) and by 2004 Fannie was purchasing 40% of CountryWides nodoc loans

You obviously have no idea what you're talking about.
 
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