Varoufakis on Negative Interest rates
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Quote:Imagine you are an entrepreneur with money in the bank, or have a bank eager to lend large sums to invest in your business. You spend sleepless nights wondering whether you should invest in a new product – that is, whether you should exploit your access to money to cause an array of others to work on your behalf. In our current Great Deflation, what worries you most is your customers’ future purchasing power and sentiment. Will they be able and willing to buy your new product at high enough prices and quantities?Suppose that, sleep-deprived, you then switch on the radio or TV only to hear that US Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi are considering reducing interest rates further. Will you rejoice at the prospect that your financing costs will fall? Will you be motivated to invest your own money now that it earns lower (perhaps even negative) interest?No and no. Your reaction is most likely to be one of alarm: “Oh, my God! If Janet and Mario are considering another interest-rate cut, they must have good reason to believe that demand will remain low!” So you abandon your investment plan. “Better to borrow money at almost no cost,” you think, “and buy back a few more of my company’s shares, boost their price, earn more on the stock exchange, and bank the profits for the rainy days that are coming.”And, interestingly (Paul mason has been flagging this up to):Quote:Not all central bankers, thankfully, are incapable of responding creatively to the Great Deflation. Andy Haldane, Chief Economist at the Bank of England, has courageously suggested that all money should become digital, which would permit real-time negative interest rates to be imposed on all of us, thus forcing everyone to spend at once.This is the speech Varoufakis links to:
Money's just another commodity, if negative interest rates were in effect I would seek a return on my investment from another commodity preferably one with liquidity rather than property in land and houses.
We already have negative interest, given inflation is below most available interest rates, however liquidity preference means a lot of people would rather hedge with depreciating cash, than risk their shirt on negative equity in houses or in shares.
Sometimes a thread is already in existence and goes unnoticed where it can be added to. http://www.worldsocialism.org/spgb/forum/general-discussion/interest-rates
Young Master Smeet wrote:We already have negative interest, given inflation is below most available interest ratesI think you mean "above" not "below" don't you? All current accounts have been paying negative real interest (where what you get back will buy less), the money in your bank account being in effect (and law) a loan to the bank. What is now new is that we are entering the territory of negative nominal interest too (where you actually get less money back). I've already got some krugerrands under my bed.
I don’t trust bank money either. Or pension funds for that matter I think it will all go belly up very fast soon. So converted £6100 paper money into 10oz of platinum commodities in December. Just to keep me going on eco friendly recycled bottles homemade wine kits etc. They are worth £8700 now. http://www.goldline.co.uk/platinum-bars.page
I thought this article might be of interesthttp://www.businessinsider.com/citi-central-bank-policy-creates-economic-inequality-2016-9
Quote:if debt is so cheap, why aren't companies borrowing, spending, and investing? The answer is deflation. When prices are falling and productivity is low there is no point in investing if you can't make a decent return. So companies in Europe are focusing on cutting costs (which doesn't create jobs or drive wages)…whereas companies in the US are focusing on share buybacks (which help the rich)Negative interests rates distribute money in the economy evenly which decreases financial innequality. Postive interest rates concentrate money in the economy which increases financial innequality
Reasoning. . .
Less people put their money in banks and instead hide the money under their bed. Banks keep money in boxes. The amount of money in circulation decreases becaue it's being kept in boxes.At this point we need to define a new definition of money. Money actively used in circulation. this does not include money in boxes or asset holding. Investment in capital goods such as a new factory or a new TV Continue to depreciate, but their Depreciation is slower in terms of dollar value since the value of money is decreasing. in a non-realistic scenario to explain things with innacurate numbers just to show the principle. . . If you buy a TV for $500 you can sell it used in one year for $495 but if you put the money in the bank it would be worth only $495. So you buy the TV. hmmm. would money be worth more in a year though? the same TV might sell new for $495 a year later? I'm not sure this reasoning is solvable by me. . . next idea. . . The best investment is a loan to someone who will pay for the upkeep for you. Assume that it's always best to invest money in durable goods like a House or TV or Factory because they depreciate slower than the money in a bank does. But if you have a million dollars you can't just buy a million homes and sit on them because they lose value if they aren't lived in and maintained. So what you need as a millionair is a million homes with a million people living in the and paying for their upkeep for free but still owing you a home. The final result is that income gets distributed instead of concentrated. Rich people gradually lose their money and assets at the same percentage rate as poor people. But the real value of all loss for the rich is much higher. So a rich person loses .25% of their savings every year and that's 1000 dollars, while a poor person loses .25% of their savings every year and that's still zero dollars because they never had enough money to save. Consider this as obvious since what happens when we increase the interest rate. With a very high interest rate income innequality increases very quickly because people with the most money make more money faster than people with less money can make more money.As this article suggests:http://www.bbc.co.uk/news/business-37504449Disincentives to save are also bad news for workers: we lose our 'fuck-you money' and ability to self insure.
Quote:More than 16m people in the UK have savings of less than £100, a study by the Money Advice Service (MAS) has found.I think this is also a good index on poverty, since having no savings, no capacity to live beyond your next pay cheque is pretty much the definition of poverty.
Steve-SanFrancisco-UserExperienceResearchSpecialist wrote:Negative interests rates distribute money in the economy evenly which decreases financial innequality. Postive interest rates concentrate money in the economy which increases financial innequality
Reasoning. . .
Less people put their money in banks and instead hide the money under their bed. Banks keep money in boxes. The amount of money in circulation decreases becaue it's being kept in boxes.At this point we need to define a new definition of money. Money actively used in circulation. this does not include money in boxes or asset holding. Investment in capital goods such as a new factory or a new TV Continue to depreciate, but their Depreciation is slower in terms of dollar value since the value of money is decreasing. in a non-realistic scenario to explain things with innacurate numbers just to show the principle. . . If you buy a TV for $500 you can sell it used in one year for $495 but if you put the money in the bank it would be worth only $495. So you buy the TV. hmmm. would money be worth more in a year though? the same TV might sell new for $495 a year later? I'm not sure this reasoning is solvable by me. . . next idea. . . The best investment is a loan to someone who will pay for the upkeep for you. Assume that it's always best to invest money in durable goods like a House or TV or Factory because they depreciate slower than the money in a bank does. But if you have a million dollars you can't just buy a million homes and sit on them because they lose value if they aren't lived in and maintained. So what you need as a millionair is a million homes with a million people living in the and paying for their upkeep for free but still owing you a home. The final result is that income gets distributed instead of concentrated. Rich people gradually lose their money and assets at the same percentage rate as poor people. But the real value of all loss for the rich is much higher. So a rich person loses .25% of their savings every year and that's 1000 dollars, while a poor person loses .25% of their savings every year and that's still zero dollars because they never had enough money to save. Consider this as obvious since what happens when we increase the interest rate. With a very high interest rate income innequality increases very quickly because people with the most money make more money faster than people with less money can make more money.All those banking and investment manipulations only benefis the ruling class. Those are measures created by thieves in order to benefit another group of thieves. If we look at the capitalist society from all its corners, we can see that it only satisfies the interest of a minority group.Negative interest is also beneficial for the capitalists, and it is also an indication that this an unstable society, that is in constant crisis. The only solution to all our problems is to overthrow this stupid system. Economists are not from this planet, and they are the gendarme of the ruling class
mcolome1 wrote:All those banking and investment manipulations only benefis the ruling class. Those are measures created by thieves in order to benefit another group of thieves. If we look at the capitalist society from all its corners, we can see that it only satisfies the interest of a minority group.Negative interest is also beneficial for the capitalists, and it is also an indication that this an unstable society, that is in constant crisis. The only solution to all our problems is to overthrow this stupid system. Economists are not from this planet, and they are the gendarme of the ruling classSo in that case it's obvious that a negative interest rates are less bad for the people then high positive interest rates. Ask a businessmas with lots of money weather they want high interest rates or negative interest rates for their money. When they say they want high interest rates, then you can be sure that negative interest rates are the right choice for the people to give them.
Steve-SanFrancisco-UserExperienceResearchSpecialist wrote:mcolome1 wrote:All those banking and investment manipulations only benefits the ruling class. Those are measures created by thieves in order to benefit another group of thieves. If we look at the capitalist society from all its corners, we can see that it only satisfies the interest of a minority group.Negative interest is also beneficial for the capitalists, and it is also an indication that this an unstable society, that is in constant crisis. The only solution to all our problems is to overthrow this stupid system. Economists are not from this planet, and they are the gendarme of the ruling classSo in that case it's obvious that a negative interest rates are less bad for the people then high positive interest rates. Ask a businessman with lots of money weather they want high interest rates or negative interest rates for their money. When they say they want high interest rates, then you can be sure that negative interest rates are the right choice for the people to give them.
What peoples are you talking about ? The concept of peoples is totally wrong, because in every country there are two antagonist interests, the interests of the capitalist class and the interests of the working class. Are you a defender or a speaker of a group of thieves known as capital sits, or are you the defender of the working class ?I can visualize a capitalist defending his or her own interests, but I can not visualize a wage slaves, who depend on a salary, defending his own class enemies. The incentive is for the rich peoples who invest large sum of money in sectors that they are able to produce large profits, and the banking system is a system of parasite, it does not produce any value to the human society, a bacteria is more beneficial than the banking system.You have not touched the main point, and they are that this system is unstable and it is in constant crisis, and those measures are emitted in order to motivate the capitalist to invest more money-capital in sectors that they are able to steal more sweat from the working class, it is a system based on economical exploitation. A Nicky mouse loan to a worker, on a credit card is only used to create more debts on his or her budget, and that is not the main point. The main point is to be able to visualize what the capitalist society really is.Those are measures to create more banking speculations which will not benefits the working peoples, in order to understand that, we must remove from our brain the capitalist ideology, and stop defending our own class enemiesThose measures were also implemented in Japan where there is an enormous crisis of super-production, and poverty, hunger and unployment is spreading thru the whole society, in a country that produces enough wealth to support more than the existence population, we are living under a crisis of super-production, this is not a banking crisis, banks do not produce any value in our societyWhat I can see in all your posts is that you are a defender, and protector of the capitalist class, and you are sublimating their system of exploitation, whoever defend the capitalists is like defending a gangs of thieves. I do not have to ask to any business man because I know what their objective are, their main objective is to produce profits at any cost. This post contradicted what you have said in others posts that this system is benefcial to the poor. What benefits can produce zero interest rate to a guy living on the streets,or a person that is unable to pay his or her rent ?
Negative interest rates impact on pensions (my workplace pensions funds have been hit by the low government returns); they impact on our 'fuck you' money, and make it harder for workers to save, they would increase volatility in the housing market (and other asset markets) as people look to store value in a way that is degraded by charges, this will also impact on renters.Interest is just a price of borrowing, and a share of surplus value: if capitalists aren't making their cut through interest, then different capitalists are taking their slice of the surplus value pot.Essentially, this is just about choosing between different bnches of capitalist.
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