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That would imply we're getting into a weird deflationary regime where money shrinks under negative interest rates, yet still buys more in the future!

by klipt 7y ago

deleted 7y ago
[deleted]
Areading314 7y ago
kind of the opposite of stagflation deflecitation
imtringued 7y ago
The idea of injecting money into the economy by lowering interest rates works but people usually only get loans for houses or cars. No one buys their groceries with loans so they are ineffective at increasing prices in consumer goods and thereby lowering interest rates does not affect inflation despite the massive cash injection.
- penagwin 7y ago
  > injecting money into the economy by lowering interest rates But there's still interest rates? People still lose money by taking out a loan to buy a car. The reason nobody takes a loan for groceries is because groceries are cheap! There's 0 point in taking a loan for groceries unless you literally have no other money. Meanwhile many people can't afford to buy a car/house with cash, so they're forced to take a loan (and lose money in the long run)
- kgwgk 7y ago
  In principle low rates increase economic activity, production, labor demand, wages and prices (but it’s true that the theory is not working well lately).
- csomar 7y ago
  > No one buys their groceries with loans Many people do. Credit Cards and Credit lines.
  - mcv 7y ago
    Nobody in Europe does. But I wonder if credit cards will follow suit and offer negative rates. Somehow I doubt it, though.
    - dagw 7y ago
      Nobody in Europe does. Bullshit. It's not as popular as in the US, but it's not like credit cards are unheard of here.
      - mcv 7y ago
        They're not unheard of, but most people use them primarily for international online payments, and not for groceries.
      - mujina 7y ago
        At least in Italy, Spain and Germany people mostly use debit cards, and usually not for groceries, but for online purchases.
9nGQluzmnq3M 7y ago
That sounds an awful lot like Japan. https://investors-corner.bnpparibas-am.com/markets-strategy/japanese-inflation-still-awol-shall-we-move-the-goalposts/ https://investors-corner.bnpparibas-am.com/markets-strategy/...

That would imply we're getting into a weird deflationary regime where money shrinks under negative interest rates, yet still buys more in the future!

by klipt 7y ago

That would imply we're getting into a weird deflationary regime where money shrinks under negative interest rates, yet still buys more in the future!

deleted 7y ago

[deleted]

Areading314 7y ago

kind of the opposite of stagflation deflecitation

imtringued 7y ago

The idea of injecting money into the economy by lowering interest rates works but people usually only get loans for houses or cars. No one buys their groceries with loans so they are ineffective at increasing prices in consumer goods and thereby lowering interest rates does not affect inflation despite the massive cash injection.

penagwin 7y ago
> injecting money into the economy by lowering interest rates But there's still interest rates? People still lose money by taking out a loan to buy a car. The reason nobody takes a loan for groceries is because groceries are cheap! There's 0 point in taking a loan for groceries unless you literally have no other money. Meanwhile many people can't afford to buy a car/house with cash, so they're forced to take a loan (and lose money in the long run)
kgwgk 7y ago
In principle low rates increase economic activity, production, labor demand, wages and prices (but it’s true that the theory is not working well lately).
csomar 7y ago
> No one buys their groceries with loans Many people do. Credit Cards and Credit lines.
- mcv 7y ago
  Nobody in Europe does. But I wonder if credit cards will follow suit and offer negative rates. Somehow I doubt it, though.
  - dagw 7y ago
    Nobody in Europe does. Bullshit. It's not as popular as in the US, but it's not like credit cards are unheard of here.
    - mcv 7y ago
      They're not unheard of, but most people use them primarily for international online payments, and not for groceries.
    - mujina 7y ago
      At least in Italy, Spain and Germany people mostly use debit cards, and usually not for groceries, but for online purchases.

9nGQluzmnq3M 7y ago

That sounds an awful lot like Japan. https://investors-corner.bnpparibas-am.com/markets-strategy/japanese-inflation-still-awol-shall-we-move-the-goalposts/ https://investors-corner.bnpparibas-am.com/markets-strategy/...