Coming to a bank near you? -.25% interest rates

[MostlyHarmless]

Originally Posted by Pector55

Logical? NO! Deflation is logical in itself. Interest rate manipulation via the fed and IMF is illogical and the cause of our current problems despite all the dumbasses who lay it solely at the feet of GWB.

Not blaming W for it. The financial crisis was caused by an outstanding, lobbyist driven, bipartisan supported effort to completely deregulate the market, remove all oversight and make holding any managers accountable entirely impossible.

Don't get me wrong, I too am for smaller government and free market. The problem is that people wrongly think that free enterprise equals the government looking the other way. That isn't so. Especially in the financial market, where people play roulette with other peoples money.

The mortgage and following financial crisis was based on ignoring risks. They sold mortgages with a high risk of defaulting, then refinanced by packaging them into "securities" without actually accounting for the risk at all. They did EVERYTHING wrong that the Basel II Accord tried to prevent (the United States did not subscribe to the 2004 Basel II Accord).

High risk lending yields high profits ... until something goes wrong and mortgages default, the houses don't sell for the appraised values and the bank turns out to not hold enough capital reserves to cover the losses. One needs to understand that banks don't really have much money. They take the money from investors, turn it around and lend it out on the other side. If you are an investor and your bank takes your money to finance a high risk mortgage, they are effectively gambling with your money. That is why the higher the risk, the more of the banks OWN capital needs to be involved (that's the capital attributed to shareholders, the people who actually own the bank). The average investor has no chance to check the books of the banks in order to make sure that the bank isn't gambling with his money. So in a sense, oversight of the financial world, making sure that risk management is taken serious and follows certain standards set forth, is a form of consumer protection. And that is IMHO the job of the government.

It does not mean that the government can or should dictate what banks do. But there has to be a limit as to how much a bank can gamble with other peoples money and there needs to be an agency that makes sure that the banks follow those guidelines.


Jan

[adymond]

Originally Posted by Morel42

The Swedish have had insane monitary policies for years.. Their tax schemes, and the fact that by law they have to keep inflation at a maximum rate of 2% a year, meanwhile not converting over the Euro which their own currency has lost 20% of it's value.. AND that they have an overall 51% tax burden from Federal tax, the avg worker takes home 40% of his/her paycheck..

It's basically the worse example of extreme socialistic ideals and micromanaging of an economy.. Just as a totall unregulated free market with no oversight will cause an economy to collapse, an economy in a stranglehold will fail just as badly.

While history is filled with examples of governmental control of an economy leading to failure, I have never once seen an example of a true free market economy leading to economic collapse.

[Guns4Fun]

Originally Posted by adymond

While history is filled with examples of governmental control of an economy leading to failure, I have never once seen an example of a true free market economy leading to economic collapse.

Oh, im not sure about that.

We are kinda in an economic collapse now. We let bankers give money out willy nilly and than had people lie about the AAA rating and we are kinda messed up now. Not total collapse but pretty darn close.

I'm all for a free market - however, there needs to be some regulation. Greed will always come into play and sometimes in a bad way.

[andrewjs18]

Originally Posted by dc dalton

Just when you thought a central bank couldn't come up with a dumber ideas to combat this economic mess Sweden's central bank, Riksbank has dropped their deposit interest rate to -.25%. Yup you read that right, they are now charging people to deposit money into their accounts.

It may sound totally off the wall but this is how worried central banks are and as nuts as it may be to think it could happen here it could:

http://globaleconomicanalysis.blogsp...gative-25.html

and remember people were buying treasuries at a 'small loss' only 9 months ago because they thought it was the safest place to put their money.

now I know why a lot of old folks don't even use banks.........

wow

[FNG19]

Originally Posted by Guns4Fun

We are kinda in an economic collapse now. We let bankers give money out willy nilly and than had people lie about the AAA rating and we are kinda messed up now. Not total collapse but pretty darn close.

With all due respect, we are not in an economic collapse. The economy is doing exactly what it's supposed to do: Like the human body regurgitating toxins from the stomach, the economy is regurgitating the rotting meat of faulty information and the curdled milk of poor decisions. The situation is severe, definitely, but I would submit to you that if the economy weren't doing this, we'd be in far, far worse shape. The fact that the economy is doing this is a good sign, as it shows the corrective mechanisms are working properly.

And speaking of rotting meat of faulty information, let's lay to rest the misconception that this was the fault of bankers giving out bad money. For every bit of bad money out there, there was some fool who signed a contract they couldn't live up to. Our current challenges are the result of either symbiotic stupidity or cooperative fraud, depending on how generous you care to be.

[adymond]

Originally Posted by FNG19

With all due respect, we are not in an economic collapse. The economy is doing exactly what it's supposed to do: Like the human body regurgitating toxins from the stomach, the economy is regurgitating the rotting meat of faulty information and the curdled milk of poor decisions. The situation is severe, definitely, but I would submit to you that if the economy weren't doing this, we'd be in far, far worse shape. The fact that the economy is doing this is a good sign, as it shows the corrective mechanisms are working properly.

And speaking of rotting meat of faulty information, let's lay to rest the misconception that this was the fault of bankers giving out bad money. For every bit of bad money out there, there was some fool who signed a contract they couldn't live up to. Our current challenges are the result of either symbiotic stupidity or cooperative fraud, depending on how generous you care to be.

Additionally we are not a true free market economy. The very fact that we have shit like the CRA is part of the regulatory problem. You have people regulating those who are smarter than they are. You have pollitical interests lobbying for favorable regulations which in turn end up being weapons against their competition. You get exceptions and loopholes that can be exploited by those who have curried favor from those in power. There can be no governmental regulation that does not play favorites. By regulating the economy government has a hand in selecting the winners and loosers.

[Chuck1981]

And lets not forget along with all these other problems of having the Government involved heavilly in the economy.......Would so many of these banks and CEOs have done such idiotic things, if they knew Uncle Suga wouldn't just come along and bail their asses out?

Point being, I think the Banking system (namely the Fed) and the Government need a complete overhaul, not "the market".

[FNG19]

Originally Posted by Chuck1981

Would so many of these banks and CEOs have done such idiotic things, if they knew Uncle Suga wouldn't just come along and bail their asses out?

You bring up an excellent point. The term for this is Moral Hazard, and implies that people shielded from risk make different decisions than people who are exposed to it. Moral Hazard is one of the reasons many people objected to the bailouts, though many, many other reasons played into it as well.

[imperialism2024]

Originally Posted by Guns4Fun

That's funny. So, what are they going to do when people start keeping thier money in their matress? There wont be much money in circulation and banks wont be able to lend money because they dont have any.

Yeah, great idea. Next will be that you may only ever have a certian amount of cash on hand and they will limit how much you can take out a day / week / month / year.

Actually, the existance of and the consequent abuse of asset forfeiture laws have started to impose an informal limit on the amount of cash one can keep on hand. Try to transport too much cash, and you suddenly become a suspected drug dealer, and your money is put on trial... or seized for "evidence" indefinitely.

http://en.wikipedia.org/wiki/Asset_f...nd_controversy

Do some Googling, but make sure to duct tape your head ahead of time.

[goofin]

Banks and credit unions already limit you at atm's. mine lets me take 400 bucks a day out.