Negative Interest Rates Implications - deflationary and inflationary

Quote from morganist:

I am therefore sceptical that even if China buys US debt whether it will lead to an increase in consumption as a result of the lack of lending and reduction of consumer consumption that risk creates. Thus why would they buy a bad product to reach a target (increase demand in their goods) if it no longer does that? In short why buy US debt to increase demand for your goods if buying US debt no longer increases demand for your goods?

Do you see what I am saying now? The old principle concepts of macroeconomics have changed due to the fundamental dynamics of banking no longer working.
More...

It makes sense. Yes. And, I don't mean to disagree with your thinking. I believe you have a great point. However, I know that if I was China.. and was holding so much American debt.. needed to try to increase demand for my products.. my currency was pegged.. and I didn't want to end up in a war with the U.S...

I would buy the U.S. Buy more. Who needs war when you can just buy them out like that.

This sounds extreme I know. But the situation is extreme. The other alternative.. as someone implied.. ChinAmerica

By the way.. all this is very hard for me to say because I dread the thought..

I am American. :)

I'd love to hear what you have to say. You seem very knowledgeable in Economics.
 
Quote from 4PurposeLiving:

It makes sense. Yes. And, I don't mean to disagree with your thinking. I believe you have a great point. However, I know that if I was China.. and was holding so much American debt.. needed to try to increase demand for my products because my currency was pegged.. and I didn't want to end up in a war with the U.S...

I would buy the U.S. Buy more. Who needs war when you can just buy them out like that.

This sounds extreme I know. But the situation is extreme. The other alternative.. as someone implied.. ChinAmerica

By the way.. all this is very hard for me to say because I dread the thought..

I am American. :)
More...

China is paying for the current American wars. So I can't see them paying for a war against them. Also they would not risk going nuclear over economics. China is nuclear. The most likely scenario is that there is a wealth shift to China. It is better to be alive and poor.

In any event. It wasn't you I was aiming that at. This thread got very aggressive. People insulted me and criticised my professional competance.
 
Quote from 4PurposeLiving:

It makes sense. Yes. And, I don't mean to disagree with your thinking. I believe you have a great point. However, I know that if I was China.. and was holding so much American debt.. needed to try to increase demand for my products.. my currency was pegged.. and I didn't want to end up in a war with the U.S...

I would buy the U.S. Buy more. Who needs war when you can just buy them out like that.

This sounds extreme I know. But the situation is extreme. The other alternative.. as someone implied.. ChinAmerica

By the way.. all this is very hard for me to say because I dread the thought..

I am American. :)

I'd love to hear what you have to say. You seem very knowledgeable in Economics.
More...

I actually have a solution.
 
Quote from morganist:
Actually it is a lot worse than that. The high level of debt changes the fundamental dynamics of finance and macroeconomics.
More...
No, it doesn't, but there's no point arguing about it...
 
Quote from Martinghoul:

No, it doesn't, but there's no point arguing about it...
More...

I think your wrong. It has been documented that the banks are not lending to the level they should. This is directly through risk. Even if the rate due to risk does not affect the bank rates. The risk due to the decline in credit derivatives demand does.

In any event the rates offered to borrowers are much higher than the base rate. This will discourage the level of borrowing. You cannot tell me that the rates of borrowing have not dropped it has been documented that small busiesses and potential home buyers are not in the market. This is simple fact.

Even the short term mortgage demand was supported by the reduction in stamp duty. It created an illusion that the mortgage market and lending level was better than it was. So even the figures that you are saying support your argument, that lending is buoyant, are artificially supported by a government stimulus or intervention depending on how you look at it.

I don't argue with you because I want to be stubborn. I am stubborn because there is some technical reason why I have different view from you.

I often don't go into the complexities because it is long winded and I can't be bothered with an argument. The current economic schools of thought are not the be all and end all and there are other fundamental problems. I have explained to you previously that regardless of any other argument the fact the banking system is based on initial investment which has to be repaid creates a problem when money supply contracts. All of the system is based on this principle and that makes all of the 'known' understandings in a volitile position.

Face it Marty the world is changing.
 
Quote from morganist:

I actually have a solution.
More...


Are you able to sketch the solution?

I wonder because was rorking on negative rates and I end up on this topic in the forum.
What new reality will bring negative rates accross the board (CHF, USD, EUR, ...)?
 
You must log in or register to reply here.
Back
Top