Great Economy and Negative Rates

[nevergaveitathought]

Originally Posted by CaptainMidnight

LOL ... actually, I always thought COG seemed a decent sort, and was pretty funny at times. But, oh man, could he get exercised when anyone pointed out the sheer ridiculousness of the claims made by that little cult that went around for a few years touting a plan called the "Fair Tax."


Now, getting back to commentary on the actual thread title (which did, after all, make reference to the specter of negative interest rates):


Did anyone happen to read Ken Rogoff's 2016 book The Curse of Cash?

He argues that getting rid of large bills would benefit the economy in a variety of ways. For instance, criminals would supposedly have a more difficult time conducting illegal transactions. (Although I fail to see how it would be that much more difficult to simply tote larger suitcases full of 10s and 20s, rather than smaller bags carrying Benjamins.)


But, being the Harvard professor of public policy that he is, what he's really interested in above all else is being able to maintain enough policy space within which to impose negative rates, if so desired, on individuals and smaller savers.


Because all indications are that this idea has worked so well everywhere else.


For instance, sales of small safes shot through the roof in Japan several years ago when middle- and upper-middle-class savers didn't feel like having even a very small percentage of their hard-earned savings confiscated by the state or by the financial system. So they withdrew large amounts of cash and stuffed it under the proverbial mattress.



In Europe, according to many reports, households responded to the imposition of negative deposit rates by saving more, not less, although the intent was to stimulate consumption and thereby the economy. In fact, all indications are that the policy produced a set of results opposite of those intended.


Besides, although the Europeans and much of the rest of the world seem to want to go almost totally "cashless," who wants to do that here?


For instance, what if you know a young woman struggling with her budget -- and being a kind, generous sort, you want to help her out a bit? Do you want it to be extremely difficult for you to offer your assistance without leaving a "paper trail?"


(Not me!)



.

didn't read that book but I think I got the idea

investment and reinvestment in the economy is what is sought

as for smaller bills, they did that once upon a time already, now $100's are too large?

I have always been for helping people, and especially girls

they do have what, the green dot? but then again that can be traced given enough effort

[adav8s28]

Originally Posted by lustylad

No, he's not.

The economy DID pick up nicely - GDP growth rose from 1.6% in 2016 to 2.4% in 2017 and 2.9% in 2018.

and deflecting.

Why did you leave out Trump's third year number of 2.3? The fourth quarter Trump did 2.1. Let's see what happens in the election year 2020? If Trump stays on the current path he may not make 2.0. Wall street was profitable when Trump came into office, not so for Obama. The big corporate tax cuts he was suppose to hit at least 3% growth and has not done that yet. The deficit however, has gone back to 1 Trillion.

[lustylad]

Originally Posted by adav8s28

Why did you leave out Trump's third year number of 2.3? The fourth quarter Trump did 2.1. Let's see what happens in the election year 2020? If Trump stays on the current path he may not make 2.0.

There you go again! Always looking for the fly in the ointment. You're a real fucking Debbie Downer, aintcha?

I suppose you're hoping the percentages of Americans who are currently happy with the economy (68%) and satisfied with their personal lives (90%) start to go south too!

[lustylad]

Originally Posted by CaptainMidnight

Now, getting back to commentary on the actual thread title (which did, after all, make reference to the specter of negative interest rates):

Did anyone happen to read Ken Rogoff's 2016 book The Curse of Cash?

He argues that getting rid of large bills would benefit the economy in a variety of ways. For instance, criminals would supposedly have a more difficult time conducting illegal transactions. (Although I fail to see how it would be that much more difficult to simply tote larger suitcases full of 10s and 20s, rather than smaller bags carrying Benjamins.)

But, being the Harvard professor of public policy that he is, what he's really interested in above all else is being able to maintain enough policy space within which to impose negative rates, if so desired, on individuals and smaller savers.

Because all indications are that this idea has worked so well everywhere else.

For instance, sales of small safes shot through the roof in Japan several years ago when middle- and upper-middle-class savers didn't feel like having even a very small percentage of their hard-earned savings confiscated by the state or by the financial system. So they withdrew large amounts of cash and stuffed it under the proverbial mattress.

In Europe, according to many reports, households responded to the imposition of negative deposit rates by saving more, not less, although the intent was to stimulate consumption and thereby the economy. In fact, all indications are that the policy produced a set of results opposite of those intended.

Besides, although the Europeans and much of the rest of the world seem to want to go almost totally "cashless," who wants to do that here?

For instance, what if you know a young woman struggling with her budget -- and being a kind, generous sort, you want to help her out a bit? Do you want it to be extremely difficult for you to offer your assistance without leaving a "paper trail?"

(Not me!)

This reminds me of what happened a few years ago when Cyprus suffered a banking crisis. Plenty of Russian and Middle Eastern oligarchs, sheikhs, assorted crooks et alia were using Cyprus banks to launder their offshore money. As part of the island's bank rescue plan, all those large depositors were forced to take a 48% haircut on their accounts. Ouch! That's what I call a negative interest rate! It was called a "bail-in" rather than a bailout.

So where do you park/stash your ill-gotten gains if you're worth billions? Way too much to convert it all into plain old legal tender banknotes. Bearer bonds? Cyprus was supposed to be beyond the greedy clutches of tax collectors and lawsuits. But fiat money can always be cancelled... by fiat! Of course, this was before cryptocurrencies burst onto the scene.

[lustylad]

Originally Posted by adav8s28

The gov did want to relax lending rules a little bit so that people who did not have 700 credit score or 20% down payment could still purchase a home. The government did not tell local lenders to make loans to people who were unemployed or underemployed. It did not tell the local lenders to stop doing credit checks and income verification checks. The local lenders were under pressure from Wall street banks to write mortgages. The local lender knew that they were not keeping the high risk loans they were writing. They knew that a wall street bank would buy the risky mortgage as soon as it was written. The banks were in bed with Moody's and Standard and Poors. The banks knew they were going to get a gift Triple AAA rating on all of their mortgage back securities. In return for the gift AAA rating, the bank would give the ratings company more business. A classic i scratch your back and you scratch mine. The AAA rating was the key. Investors don't buy things that are rated triple "CCC". Throw that in with everything else, the banks being deregulated with the Gram Act which was authored by Republican Phil Gram. Slick Willie Clinton signed off on it, but it was the republicans who wanted to deregulate the banks.

Jeez, where do I even start?

1. Wall Street did not "pressure" lenders to make mortgage loans. Wall Street merely called on banks and brokers offering to buy up loans they had originated under program guidelines. Wall Street didn't buy loans that failed to meet their guidelines. Bank underwriting standards for income and LTVs were relaxed but no loans were made without a credit check.

2. Not all MBS were rated AAA. Individual tranches of loans carried ratings running the gamut from AAA to C-. The rating agencies are in the business of evaluating risk and selling their judgment. Yes, they make mistakes but they wouldn't knowingly and deliberately tarnish their reputations for a few bucks. Have you ever read a Moody's or S&P rating opinion?

3. You show your ignorance when you say "investors don't buy things that are rated CCC". Ever hear of "high yield securities" aka junk bonds? They wouldn't exist if there were no investors. A steep price discount/high yield can usually lure investors who are not risk averse. Hedge funds and institutional investors not limited to "investment grade" securities are active participants in this market.

4. The name of the legislation was the Gramm-Bliley-Leach Act. Why would any POTUS sign it if he thought it wasn't a good idea? If we had kept Glass Steagall on the books, J.P. Morgan wouldn't have been allowed to buy out Bear Stearns and BoA couldn't have acquired Merrill Lynch. Without the help of such deep-pocketed commercial banks, the government would have been overwhelmed and the financial crisis would have been longer and deeper.

[WTF]

Originally Posted by lustylad

2. Not all MBS were rated AAA. Individual tranches of loans carried ratings running the gamut from AAA to C-. The rating agencies are in the business of evaluating risk and selling their judgment. Yes, they make mistakes but they wouldn't knowingly and deliberately tarnish their reputations for a few bucks. Have you ever read a Moody's or S&P rating opinion?

.

Whaaaaaaaaaaaaaaat
https://moneymorning.com/2008/12/18/...ting-agencies/
A 10-month “examination” by the SEC, concluded in July, uncovered, believe it or not, “poor disclosure practices and procedures guiding the analysis of mortgage-related debt and insufficient attention paid to managing conflicts of interest.” Brilliant!
According to the report, which included as exhibits several e-mail exchanges between analysts at unnamed ratings firms, there was an obvious degree of knowledge and complicity in playing the ratings game. In one exchange, an analyst said that their ratings model didn’t capture “half” of the deal’s risk but that “it could be structured by cows and we would rate it.” And in another even more famous exchange dated Dec. 15, 2006, a manager wrote that the firms continued to create an “even bigger monster – the CDO market. Let’s hope we are all wealthy and retired by the time this house of cards falters.”
Have any heads rolled? No.

[Texas Contrarian]

Originally Posted by lustylad

This reminds me of what happened a few years ago when Cyprus suffered a banking crisis. Plenty of Russian and Middle Eastern oligarchs, sheikhs, assorted crooks et alia were using Cyprus banks to launder their offshore money. As part of the island's bank rescue plan, all those large depositors were forced to take a 48% haircut on their accounts. Ouch! That's what I call a negative interest rate! It was called a "bail-in" rather than a bailout.

So where do you park/stash your ill-gotten gains if you're worth billions? Way too much to convert it all into plain old legal tender banknotes. Bearer bonds? Cyprus was supposed to be beyond the greedy clutches of tax collectors and lawsuits. But fiat money can always be cancelled... by fiat! Of course, this was before cryptocurrencies burst onto the scene.

Yes! Now that was a haircut in the same sense that what some of North America's indigenous peoples did to early white frontier settlers two or three centuries ago was describable as "a haircut!"


Some years ago, like others operating on various small islands, Cypriot bankers got the idea that turning the place into a tax haven and money-laundering clearinghouse could be a quite lucrative idea. (But, like Ponzi schemes, that idea tends to look a lot better before something starts to go off the rails.)


Cypriot banks, newly flush with shitloads of liquidity, needed to find places to loan it. Since the southern part of Cyprus is ethnically Greek, and that's the language spoken there, making large loans to the Greek government and Greek businesses seemed like the easiest and most expeditious path. (Oops!)


So, where does a Russian billionaire or extravagantly wealthy petro-sheik stash his riches?


In recent years, authorities have made it increasingly difficult to "park" big money in ultra-high end residential real estate in New York and other cities. Formerly, some Russian oligarchs and other super-wealthy types liked to do that, owning anonymously through trusts, LLCs, or other entities. There's also the fear that the increasing level of difficulty involved in doing this on the sly will tank the market for some of the highest-end trophy assets.


One recent report indicated that there may even be something of a mega-mansion "glut" in the L.A. area, despite Bezos's recent $165-million purchase.


There's actually a Bel-Air giga-mansion known as "The One" that sports a $500-million asking price! (Good luck with that.)


.

[adav8s28]

Originally Posted by lustylad

2. Not all MBS were rated AAA. Individual tranches of loans carried ratings running the gamut from AAA to C-. The rating agencies are in the business of evaluating risk and selling their judgment. Yes, they make mistakes but they wouldn't knowingly and deliberately tarnish their reputations for a few bucks. Have you ever read a Moody's or S&P rating opinion?

1. Refinances were done WITHOUT credit checks. Fact Jack.

2. The rating houses were not as innocent as you think. Moody's agreed to pay the government 864 million in fines in 2017. Standard and Poors agreed to pay the government 1.3 Billion in fines in 2015 for their role in the 2008 financial crisis,giving inflated ratings to risky securities. Lustylad, you are out of touch with reality. The banks and the rating houses were RUNNING a SCAM! Here is the proof.

https://www.theguardian.com/business...nancial-crisis

[WTF]

Originally Posted by lustylad

This reminds me of what happened a few years ago when Cyprus suffered a banking crisis. Plenty of Russian and Middle Eastern oligarchs, sheikhs, assorted crooks et alia were using Cyprus banks to launder their offshore money. As part of the island's bank rescue plan, all those large depositors were forced to take a 48% haircut on their accounts. Ouch! That's what I call a negative interest rate! It was called a "bail-in" rather than a bailout.

So where do you park/stash your ill-gotten gains if you're worth billions? Way too much to convert it all into plain old legal tender banknotes. Bearer bonds? Cyprus was supposed to be beyond the greedy clutches of tax collectors and lawsuits. But fiat money can always be cancelled... by fiat! Of course, this was before cryptocurrencies burst onto the scene.

Well now you might understand why the Russians wanted to meet with Trump about lifting baby adoptions in Russia....

Though I doubt you will get my point.

Or CM's.

[Chung Tran]

Lusty keeps avoiding the Trump growth rate.. keeps changing the subject.

CNN had a mini-debate on this exact subject last night.. who had a better economic record, Obama or Trump?

Trump's "guy" said what Lusty says.. consumer confidence is high, ipso facto reason to say Trump has been strong for the economy.

Obama's "defender" gave concrete numbers that show Trump's growth rate has piggy-backed Obama's, basically the same numbers.

no only that, Carter, Clinton, Reagan, etc., all had MORE jobs created during their first few years, than Trump has.

[WTF]

Originally Posted by Chung Tran

Lusty keeps avoiding the Trump growth rate.. keeps changing the subject.

CNN had a mini-debate on this exact subject last night.. who had a better economic record, Obama or Trump?

Trump's "guy" said what Lusty says.. consumer confidence is high, ipso facto reason to say Trump has been strong for the economy.

Obama's "defender" gave concrete numbers that show Trump's growth rate has piggy-backed Obama's, basically the same numbers.

no only that, Carter, Clinton, Reagan, etc., all had MORE jobs created during their first few years, than Trump has.

Don't confuse lustylaffer with the facts....he goes on 'feel'

[BlisswithKriss]

Originally Posted by Chung Tran

he and Trump both know that a rather small increase in rates will blast this economy.

If you go back in history you will find that an increase in interest rates can decimate the stock markets. It happed in 2000 when Greenspan did that and what happened to the Nasdaq.....it collapsed like a rock. And took years to recover.
That was the end of the Dot.com bubble.
And we’ve got a massive bubble forming now. I love it when Trump brags about the economy. I see it as this bozo riding on the shirt tails of the Obama recovery and what amounts to the 11 yr success of his economic policies. From when the DOW collapsed from 6500. And the Fed had to pump billions into the failing economy thanks to the clueless Republicans,
What has Trump done besides create chaos and mayhem. Give the rich a fat tax cut. And that’s it.... I don’t know about you but I’m sure as hell never going to support a 6 time bankrupt who couldn’t even make a cash cow like a casino, a going concern. And can’t even get a loan from any US bank. But the Russians have him by the balls on that topic...$$$$ no wonder he doesn’t want his tax returns exposed. I bet he’s up to his neck in a money laundering scheme. But that’s Trump for you.

[The_Waco_Kid]

Originally Posted by BlisswithKriss

If you go back in history you will find that an increase in interest rates can decimate the stock markets. It happed in 2000 when Greenspan did that and what happened to the Nasdaq.....it collapsed like a rock. And took years to recover.
That was the end of the Dot.com bubble.
And we’ve got a massive bubble forming now. I love it when Trump brags about the economy. I see it as this bozo riding on the shirt tails of the Obama recovery and what amounts to the 11 yr success of his economic policies. From when the DOW collapsed from 6500. And the Fed had to pump billions into the failing economy thanks to the clueless Republicans,
What has Trump done besides create chaos and mayhem. Give the rich a fat tax cut. And that’s it.... I don’t know about you but I’m sure as hell never going to support a 6 time bankrupt who couldn’t even make a cash cow like a casino, a going concern. And can’t even get a loan from any US bank. But the Russians have him by the balls on that topic...$$$$ no wonder he doesn’t want his tax returns exposed. I bet he’s up to his neck in a money laundering scheme. But that’s Trump for you.

if it's the Obama recovery .. won't it be the Obama crash too?

see how that works, sparky?


BAHAHAHAAAA

[adav8s28]

Originally Posted by WTF

Whaaaaaaaaaaaaaaat
https://moneymorning.com/2008/12/18/...ting-agencies/
A 10-month “examination” by the SEC, concluded in July, uncovered, believe it or not, “poor disclosure practices and procedures guiding the analysis of mortgage-related debt and insufficient attention paid to managing conflicts of interest.” Brilliant!
According to the report, which included as exhibits several e-mail exchanges between analysts at unnamed ratings firms, there was an obvious degree of knowledge and complicity in playing the ratings game. In one exchange, an analyst said that their ratings model didn’t capture “half” of the deal’s risk but that “it could be structured by cows and we would rate it.” And in another even more famous exchange dated Dec. 15, 2006, a manager wrote that the firms continued to create an “even bigger monster – the CDO market. Let’s hope we are all wealthy and retired by the time this house of cards falters.”
Have any heads rolled? No.

+1

More proof that the banks and ratings firms were running a SCAM. No one went to jail. However, Moody's and Standard and Poors paid Billions of dollars in fines to the government for giving securities a gift "AAA" rating.
See post #113.

[lustylad]

Originally Posted by Chung Tran

Lusty keeps avoiding the Trump growth rate... keeps changing the subject.

Huh? Are we even reading the same thread? I've talked about GDP growth rates in most of my posts here.

When it comes to not paying attention, you're as bad as wtf. He claims I won't address the deficit - when I've already pounded both of you over the head with data and graphs on that very topic.

Speaking of avoiding topics, when are you going to explain to wtf and adav8 why 1) deficits don't matter and 2) we should only use first-term data when comparing obama v. trump economic records?

Now don't change the subject, chungy!

Originally Posted by Chung Tran

I'm the guy who says deficits don't matter...

Originally Posted by Chung Tran

Obama's economic record was stronger for his first 4 years, than Trump's has been.

Originally Posted by Chung Tran

Obama's first 4 years were more economically powerful than Trump's...