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View Full Version : Goldman Sachs say US interest rates must hit minus 6%



David Guyatt
01-19-2009, 02:58 PM
Latest research out today suggests that the Fed rate needs to go to -6% by end of 2010 to correctly absorb the downturn in the economy.

As we know, the Fed rate is bounded by 0% so this suggests that ZIRP (zero-interest rate policy) will not sufficiently help the economy (by 6%!). This means that additional stimulus packages must continue to soften the downturn.

Further comments from GS: they predict that ZIRP will be here for approx 5 years. Their forecasting measure suggests the forecast rate will reach positive again in approx. 5 years. This measure is based on forecasted unemployment rates and inflation forecasts.

http://i256.photobucket.com/albums/hh169/Shoestring99/image001.jpg

Negative interest is very unusual but not unheard of. In the late 1970's Switzerland ran a negative interest rate system to deter foreign investors owning Swiss Francs.

Mark Stapleton
01-19-2009, 07:24 PM
Negative interest rates, eh.

Now that's my kind of loan. I think it's about time I called the bank. :smokin:

Jan Klimkowski
01-19-2009, 08:02 PM
Um, does a negative interest rate mean I pay interest to the bank for saving my money with them?

That'd be rilly rilly cool... :thrasher:

I'm sure that smooth talking reincarnation of the man who went to war to free the slaves, aka Wall Street Obama, will be able to sell that one to the sheeple....




Whaddya mean Lincoln didn't go to war to free the slaves????

Peter Lemkin
01-19-2009, 08:24 PM
Wow...someone's been drinking something good....fine whiskey, for sure...or a funny smelling cig...

What the '****' is negative interest? Zero interest [as we now are at on some arcane rates] is surreal enough...

Do tell...!!!!!:dancing2::dancing2::dancing2:

Mark Stapleton
01-20-2009, 01:02 AM
Wow...someone's been drinking something good....fine whiskey, for sure...or a funny smelling cig...

What the '****' is negative interest? Zero interest [as we now are at on some arcane rates] is surreal enough...

Do tell...!!!!!:dancing2::dancing2::dancing2:

It means that the bank pays me a generous 6% and all I have to do to earn it is borrow their money. It's the financial equivalent of faster than light speed. A parallel universe, even.

I knew if I waited long enough, things would break my way.

I'm holding out for 10% though. I think I'm worth it.

Magda Hassan
01-20-2009, 01:06 AM
Negative interest is very unusual but not unheard of. In the late 1970's Switzerland ran a negative interest rate system to deter foreign investors owning Swiss Francs.

I remember that time. Many financial geniuses here advised people to take out loans in Swiss francs and a bit later when the Australian dollar was floated and promptly plummeted to become the Pacific Peso there was a huge wave of bankruptcies as primary producers lost their farms and others lost their businesses. Nice one. Then interest rates went up in leaps and bounds and people couldn't afford to buy a house here any more.

Jack White
01-20-2009, 03:58 AM
I googled NEGATIVE INTEREST and here is a quick summary as I understand it.

It is a scheme whereby a LENDER lures BORROWERS to borrow money
by PAYING THEM TO BORROW. Then, to pay off the loan, the borrowers
must PAY A HIGHER RATE AT DUE DATE than they received when they
were lured into the scheme. Thus IN THE END, the LENDER MAKES A PROFIT.

An illustration was given where financial whiz Warren Buffet used the
scheme to PAY INVESTORS to invest in his company...but in the end
the investors received less on their investment than if they had not
borrowed...and Buffet pocketed the difference.

That is how I understood it. You get money right now, but you have to
pay back more in the future. Am I wrong?

Jack