4 ms·

What evidence/knowledge/premonitions are you basing this claim on?

malchow 11y ago
One of the dot plots from a FOMC member released today -- they are anonymous, so we do not know which one -- specifically forecast (i.e., advocated for) negative real interest rates. EDIT: Here it is: http://fm.cnbc.com/applications/cnbc.com/resources/files/2015/09/17/Screen%20Shot%202015-09-17%20at%202.03.10%20PM.png http://fm.cnbc.com/applications/cnbc.com/resources/files/201... And here is this past June's dot plot: http://fm.cnbc.com/applications/cnbc.com/resources/files/2015/09/17/june-dot-plot.jpg http://fm.cnbc.com/applications/cnbc.com/resources/files/201...
- toomuchtodo 11y ago
  Savings rate in the US is already close to zero. Unlike other countries/fiscal unions where savings rates are higher, I'm not sure negative rates would do any good in the US (other than causing businesses with large cash positions to move them to other currencies). With that in mind, I can't think of a safe currency to move to outside of dollars. Strange times.
fweespeech 11y ago
I'm assuming just the general business cycle which averages a recession every 6 years or so. Plus negative interest rates being the only tool available to the Fed during a new recession. http://www.investopedia.com/terms/b/businesscycle.asp http://www.investopedia.com/terms/b/businesscycle.asp
- Nicholas_C 11y ago
  >I'm assuming just the general business cycle which averages a recession every 6 years or so. That's a rather large assumption IMHO. Prior conditions do not necessarily hold true in the future. We went ten years from 1991 to 2001 without a recession. We are due for a recession the same way Yellowstone is due for an eruption. >Plus negative interest rates being the only tool available to the Fed during a new recession. This does worry me.
- dragonwriter 11y ago
  > I'm assuming just the general business cycle which averages a recession every 6 years or so. That may be an average, but its hardly consistent. The period (peak to peak) between recessions for the last 10 cycles has been: 81 months 128 months 100 months 18 months 74 months 47 months 116 months 32 months 49 months 56 months > Plus negative interest rates being the only tool available to the Fed during a new recession. OTOH, arguably, the reason that the Feds been forced to be so extreme with monetary policy that that might be the case is that the government has pretty much neglected fiscal policy responses. Which is, generally, not a positive thing, but it does mean that, as exhausted as the monetary policy options might be, the fiscal policy arsenal is well-stocked and untouched.
carsongross 11y ago
I was just putting the obvious together: recession incoming (probably already here) interest rates at zero, QE obviously ineffective, only thing left that the fed can do is negative rates. But it was confirmed as a possibility a few hours later when the FMOC comments came out: http://www.zerohedge.com/news/2015-09-17/fomc-stunner-one-fomc-member-forecasts-negative-025-bps-interest-rate-2015-and-2016 http://www.zerohedge.com/news/2015-09-17/fomc-stunner-one-fo... It won't work, of course, but what else are they supposed to do?

One of the dot plots from a FOMC member released today -- they are anonymous, so we do not know which one -- specifically forecast (i.e., advocated for) negative real interest rates. EDIT: Here it is: http://fm.cnbc.com/applications/cnbc.com/resources/files/2015/09/17/Screen%20Shot%202015-09-17%20at%202.03.10%20PM.png http://fm.cnbc.com/applications/cnbc.com/resources/files/201... And here is this past June's dot plot: http://fm.cnbc.com/applications/cnbc.com/resources/files/2015/09/17/june-dot-plot.jpg http://fm.cnbc.com/applications/cnbc.com/resources/files/201...

toomuchtodo 11y ago
Savings rate in the US is already close to zero. Unlike other countries/fiscal unions where savings rates are higher, I'm not sure negative rates would do any good in the US (other than causing businesses with large cash positions to move them to other currencies). With that in mind, I can't think of a safe currency to move to outside of dollars. Strange times.

fweespeech 11y ago

I'm assuming just the general business cycle which averages a recession every 6 years or so. Plus negative interest rates being the only tool available to the Fed during a new recession. http://www.investopedia.com/terms/b/businesscycle.asp http://www.investopedia.com/terms/b/businesscycle.asp

Nicholas_C 11y ago
>I'm assuming just the general business cycle which averages a recession every 6 years or so. That's a rather large assumption IMHO. Prior conditions do not necessarily hold true in the future. We went ten years from 1991 to 2001 without a recession. We are due for a recession the same way Yellowstone is due for an eruption. >Plus negative interest rates being the only tool available to the Fed during a new recession. This does worry me.
dragonwriter 11y ago
> I'm assuming just the general business cycle which averages a recession every 6 years or so. That may be an average, but its hardly consistent. The period (peak to peak) between recessions for the last 10 cycles has been: 81 months 128 months 100 months 18 months 74 months 47 months 116 months 32 months 49 months 56 months > Plus negative interest rates being the only tool available to the Fed during a new recession. OTOH, arguably, the reason that the Feds been forced to be so extreme with monetary policy that that might be the case is that the government has pretty much neglected fiscal policy responses. Which is, generally, not a positive thing, but it does mean that, as exhausted as the monetary policy options might be, the fiscal policy arsenal is well-stocked and untouched.

carsongross 11y ago

I was just putting the obvious together: recession incoming (probably already here) interest rates at zero, QE obviously ineffective, only thing left that the fed can do is negative rates. But it was confirmed as a possibility a few hours later when the FMOC comments came out: http://www.zerohedge.com/news/2015-09-17/fomc-stunner-one-fomc-member-forecasts-negative-025-bps-interest-rate-2015-and-2016 http://www.zerohedge.com/news/2015-09-17/fomc-stunner-one-fo... It won't work, of course, but what else are they supposed to do?