Will our civilization survive Central Banks historically low interest rates?
With Central Banks forcing interest rates below O%, will our financial system survive?
European banks are actually charging customers to store their savings in the banking system.
The only reason for this is to get citizens NOT to save, but to go into debt by purchasing needed and unneeded items.
This is the first time in the history of mankind and money, where this has occurred.
Can you see any positive outcome from this unprecedent policy from the banks?
(All Central Banks are private banks, not controlled by any government. This is true within the U.S. and most countries)
I think that our civilization has a better chance of surviving than, perhaps, any other. Folks will choose to put money under the mattress at some point, and I suspect it is going on en mass now, and/or Europeans are buying gold.
Negative interest is a relatively new concept which depends on folks trusting the banks to guard their money in a trustless world. If the socialist economies cannot expand enough to take care of all the new entrants, the system will collapse. At that point, only the civilization with the "country" with the strongest economy will survive.
Though there will be huge market collapses, Americans have the greatest chance of survival because of our culture, rich resources, and affinity for freedom. I would say it is about a 50-50 proposition. If not for the USA, the odds would be so bad in favor of nobody surviving, that you would probably rather bet on Hillary Clinton and Donald Trump falling in love.
We're in a deflationary situation (high real unemployment and underemployment, declining wages due to immigration and outsourcing of work).
The banks are printing money to prevent deflation, but the debt it creates sucks money out of the system which is why all the quantitative easing hasn't caused much inflation.
We will survive, but it requires either a massive recovery with high economic growth like the 1980s under Reagan or repudiation of debt a la Iceland's example. We will not see recovery under Clinton - her policies are more of what hasn't worked for eight years under Obama.
Yes, the conundrum facing Central Banks - pumping trillions of fiat money into the system with no inflation.
And you are correct about the debt.
Iceland's actions are great!
Jailed bankers and did not bail them out.
Thanks for your answer!
Actually, I don't think it is a conundrum. Cash is hard to get for most people. You can pump trillions of fiat dollars into the system if the whole world wants U.S. dollars. We are one of the few stable governments paying a positive interest rate.
It is the other way round in India. Here the Banks are paying 9% interest on saving. This rate has varied from 8% to 12 % in the last two decades. But now the Government is bringing it down, as the lending rate remains 1-2 % above the saving rate. They say it is good for economy. I just wanted to share the information, as I am naive in economic matters.
Thanks for leaving a comment Sanjay.
I think the higher interest rates has to do with the risk of banking in India. (Whether actual or perceived, I don't know)
That would be interesting to investigate!
I am certain the central bank of India has done that to attract investment to continue its efforts to modernize India and provide for popular programs. In order to attract money, it must offer a return. It is normal for savings to be 1 - 2% lower.
From what I could find, the reason for the higher rates is due to inflation in India - in the eyes of your Central Bank.
The U.S. and Europe are suffering from deflation - in the eyes of the Central Banks.
The rates on Indian bonds are still relatively high.
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