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Thread: Could US rates go negative?

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    Could US rates go negative?

    In this episode of the Keiser Report, Max and Stacy ask whether or not US rates could go negative. In Denmark, where households carry the highest debt to income ratio in the OECD, even mortgage rates have gone negative! In the second half, Max talks to Karl Denninger of Market-Ticker.org about negative yields, long duration bonds, and what the future looks like with both in hand.........................https://www.rt.com/shows/keiser-repo...denmark-bonds/

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    No. At least not yet. Read the article. The rest is my opinion.

    Bonds won't go negative in the US. Why? Because as one of the few remaining bond markets not giving negative interest rates institutions and people in those places will be buying T-Bills.

    Banks in the US will not go negative. Americans would withdraw their cash, crashing the banks.

    Mortgages? I have only this week heard of that. That would be good for anyone in the position to buy or refinance. I suspect that is not something banks are doing of their own free will, by rather by government dictate, probably to offset the negative interest rates in accounts and bonds.
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    Quote Originally Posted by PJL View Post
    In this episode of the Keiser Report, Max and Stacy ask whether or not US rates could go negative. In Denmark, where households carry the highest debt to income ratio in the OECD, even mortgage rates have gone negative! In the second half, Max talks to Karl Denninger of Market-Ticker.org about negative yields, long duration bonds, and what the future looks like with both in hand.........................https://www.rt.com/shows/keiser-repo...denmark-bonds/
    I doubt it. If it does the probabilities are that it would be bu a very fractional amount. In reality there is little difference in a CD of .50 and one of -.50. Both are automatic losers against inflation. BTW a bit if inflation is a positive for investments etc. For Unit (capital) based asset classes such as stocks a bit of inflation is mostly a positive. Of course dilution of a currency via >>> of units decreases buying power. The perfect landing is between the loss of purchasing power and the benefit of increased units in the facilitation of equities etc. The texbook definition of inflation is " a like or greater number of units pursuing a like or lesser amount of product inflates said product". The inverse is true for deflation.
    Last edited by Cotton1; 08-17-2019 at 01:27 PM.

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    Quote Originally Posted by Peter1469 View Post
    No. At least not yet. Read the article. The rest is my opinion.

    Bonds won't go negative in the US. Why? Because as one of the few remaining bond markets not giving negative interest rates institutions and people in those places will be buying T-Bills.

    Banks in the US will not go negative. Americans would withdraw their cash, crashing the banks.

    Mortgages? I have only this week heard of that. That would be good for anyone in the position to buy or refinance. I suspect that is not something banks are doing of their own free will, by rather by government dictate, probably to offset the negative interest rates in accounts and bonds.
    Good morning , Peter. I mostly agree with you. Reason being is a matter you frequently allude to so it is likely close to your heart. The US debt and >>> amount thereof creates a ->>> demand on bonds. A >> number of bonds pressures the price if said bonds. Bonds are inverse regarding yield /price so the decrease in price = increase in yield. 100% of the time, by design. The current debt /GDP is about 106%. To draw a reference point the debt/GDP was about 60% when O-blamer took office. Lenders get extremely nervous around 75% -78% and economists regard 90% as the " point of no return" aka " tipping point". In laymens terms the " tipping point is a place in which citizens cannot typically be taxed enough to cover not only cost of money but to reduce outstanding principal. IMO, the depletion of the US debt would be terribly problematic to the economy. The transfer of private into retire of public debt would be at a cost stifling to the economy. In addition , not all debt is bad debt. Even in the event that it was the time value of money is in play as ie: debt / service of etc paid 10 years from now is paid back in diluted /inflated units therefore reducing the impact. An exame is say 20 years ago a house payment was say $600. Now $600 is not the same as twas then.

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    Quote Originally Posted by Cotton1 View Post
    Good morning , Peter. I mostly agree with you. Reason being is a matter you frequently allude to so it is likely close to your heart. The US debt and >>> amount thereof creates a ->>> demand on bonds. A >> number of bonds pressures the price if said bonds. Bonds are inverse regarding yield /price so the decrease in price = increase in yield. 100% of the time, by design. The current debt /GDP is about 106%. To draw a reference point the debt/GDP was about 60% when O-blamer took office. Lenders get extremely nervous around 75% -78% and economists regard 90% as the " point of no return" aka " tipping point". In laymens terms the " tipping point is a place in which citizens cannot typically be taxed enough to cover not only cost of money but to reduce outstanding principal. IMO, the depletion of the US debt would be terribly problematic to the economy. The transfer of private into retire of public debt would be at a cost stifling to the economy. In addition , not all debt is bad debt. Even in the event that it was the time value of money is in play as ie: debt / service of etc paid 10 years from now is paid back in diluted /inflated units therefore reducing the impact. An exame is say 20 years ago a house payment was say $600. Now $600 is not the same as twas then.
    I have never advocated paying down the debt, only stopping deficit spending.
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    Quote Originally Posted by Peter1469 View Post
    I have never advocated paying down the debt, only stopping deficit spending.
    I knew you hadn't. I am glad you pointed that out. I was just now rereading my post and I was thinking " I hope Peter does not take this as me being presumptious as to his opinions.". I certainly didn't mean it in that manner . Twas a simple case of me running out of talent before I ran out of words.

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    Rt ftl.
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