Indaswamp wrote: SpinnerMan wrote: Indaswamp wrote: SpinnerMan wrote:
It seems that it can in fact go below zero. They have a policy of not going below zero. The simply choose to set that as a limit.
the federal funds rate might have been had the zero lower bound not been binding on policy.
Who ever created the policy can change it. It's my policy not to waterswat unless I change my mind and waterswat.
Policies are just that. Nothing more.
Do some research into what happens if/when that happens spinnerman.....
Didn't say it was a good thing. Just saying it is not something that cannot happen.However nothing more dramatic happens with a quarter point move from 0% to -0.25% relative to 0.25% to 0% or 0.5% to 0.25%.
No, there, you are 100% dead wrong. People do not invest to loose money. The treasury market would crash.
The Japanese did as I showed in the earlier link.
They are not investing. They are storing money and that costs money and doesn't pay money. Every safety deposit box in the world has an effective negative interest rate.
At these low interest rates. It's not about making money. It's about minimizing losses. This is why are economy is still limping along. They are more scared about losing the wealth that they have than they are about trying to create new wealth by risking what they have.
Nobody wants to admit they can't help, especially when they are the societal elites at the Fed, so instead of lowering interest rates further and pushing them into negative territory and admitting the economy is where it is, they hold them very low and then start printing money and using it to finance government spending or buy stuff with it. They will never admit they can't do a damn thing to help. The irony is the more they try to help, the more people do the exact opposite of what they want them to do. They are adding to the fear.
For instance, corporate profits - you do not need to invest new money to make more profits. You can stop new investment and cut costs and what happens to profits?
When the future looks bright, foregoing near-term profits to grow your business makes sense. When the future looks dim, foregoing near-term profits looks foolish.
There are always more than one way to look at most of these numbers. Only one of them is the right way. You have to look at all of them from every angle and then the simplest explanation that fits all the puzzle pieces is probably the right way. Everybody can find a few puzzle pieces that look like they fit the way they wan them to fit.
The worst possible way to present most of this information if you are serious about trying to understand it is on a linear as your links always do. This should be a giant red flag that they are either not very competent or they are salesmen.
Stupid people can cause problems, but it usually takes brilliant people to create a real catastrophe. Thomas Sowell