Trump suggests Fed Interest Rate goes Negative.

[catfish1957]

In a Tweet, Trump suggests that Federal Reserve drop interest rates to zero or negative.


https://www.barrons.com/articles/trump-ignores-the-downsides-of-negative-interest-rates-51568280604

Tweet snippit....

 Trump tweeted Wednesday: “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term.” The president concludes by calling the Fed “boneheads” for not following other central banks to negative rates.

====================================================================================

Just when I thought I couldn't despise him any further.  He also dropped hints of refinancing US debt. This guy is now becoming dangerous.

[Applewood]

He must know what he's talking about.  He did go to Wharton School.  /sarc

[jmyrlefuller]

He must know what he's talking about.  He did go to Wharton School.  /sarc

But please, let's not replace him on the ticket because "da socialistz will win."

[libertybele]

In a Tweet, Trump suggests that Federal Reserve drop interest rates to zero or negative.


https://www.barrons.com/articles/trump-ignores-the-downsides-of-negative-interest-rates-51568280604

Tweet snippit....

 Trump tweeted Wednesday: “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term.” The president concludes by calling the Fed “boneheads” for not following other central banks to negative rates.

====================================================================================

Just when I thought I couldn't despise him any further.  He also dropped hints of refinancing US debt. This guy is now becoming dangerous.

Refinance debt????  China is the foreign entity that owns appx. $1.8 Trillion of U.S. national debt; the Chinese government or Chinese investors likely own even more U.S. debt purchased through entities in other countries such as Hong Kong, Luxembourg or the Cayman Islands, all of which are havens for tax shelters.

At the end of 2018 about 60% of the national debt was held by domestic investors while the remaining 40% was held by foreign investors. Here’s how the debt held by the public broke down:

    U.S. individuals and households held 17% of the debt (~$2.7 trillion);
    The Federal Reserve held 15% of the debt (~$2.5 trillion);
    U.S. mutual funds held 12% of the debt (~$2 trillion);
    U.S. financial institutions, pension funds, and state & local governments combined to hold roughly 16% of the debt (~$2.7 trillion);
    China and Japan held 14% of the debt between them (~$1.3 trillion & $1 trillion, respectively);
    The next eight largest foreign debt holders collectively held about 12% of the debt (~$1.8 trillion);
    All other nations collectively held about 14% of the debt (~$2.1 trillion).


https://www.marketwatch.com/story/heres-who-owns-a-record-2121-trillion-of-us-debt-2018-08-21

https://www.countable.us/articles/26355-owns-u-s-national-debt

[catfish1957]

Refinance debt????  China is the foreign entity that owns appx. $1.8 Trillion of U.S. national debt; the Chinese government or Chinese investors likely own even more U.S. debt purchased through entities in other countries such as Hong Kong, Luxembourg or the Cayman Islands, all of which are havens for tax shelters.

At the end of 2018 about 60% of the national debt was held by domestic investors while the remaining 40% was held by foreign investors. Here’s how the debt held by the public broke down:

    U.S. individuals and households held 17% of the debt (~$2.7 trillion);
    The Federal Reserve held 15% of the debt (~$2.5 trillion);
    U.S. mutual funds held 12% of the debt (~$2 trillion);
    U.S. financial institutions, pension funds, and state & local governments combined to hold roughly 16% of the debt (~$2.7 trillion);
    China and Japan held 14% of the debt between them (~$1.3 trillion & $1 trillion, respectively);
    The next eight largest foreign debt holders collectively held about 12% of the debt (~$1.8 trillion);
    All other nations collectively held about 14% of the debt (~$2.1 trillion).


https://www.marketwatch.com/story/heres-who-owns-a-record-2121-trillion-of-us-debt-2018-08-21

https://www.countable.us/articles/26355-owns-u-s-national-debt

Dying to hear how Kudlow spins this one......

[Applewood]

Dying to hear how Kudlow spins this one......

We may be told the president was only joking.

[goatprairie]

We may be told the president was only joking.

No, it's another "brilliant" statement from Trump. Because he's a billionaire, and you're not. At least that's what his supporters say. By virtue of him having a lot more money than most people, everything he says is brilliant. Even his real stupid statements. 

[InHeavenThereIsNoBeer]

Refinance debt????  China is the foreign entity that owns appx. $1.8 Trillion of U.S. national debt; the Chinese government or Chinese investors likely own even more U.S. debt purchased through entities in other countries such as Hong Kong, Luxembourg or the Cayman Islands, all of which are havens for tax shelters.

At the end of 2018 about 60% of the national debt was held by domestic investors while the remaining 40% was held by foreign investors. Here’s how the debt held by the public broke down:

    U.S. individuals and households held 17% of the debt (~$2.7 trillion);
    The Federal Reserve held 15% of the debt (~$2.5 trillion);
    U.S. mutual funds held 12% of the debt (~$2 trillion);
    U.S. financial institutions, pension funds, and state & local governments combined to hold roughly 16% of the debt (~$2.7 trillion);
    China and Japan held 14% of the debt between them (~$1.3 trillion & $1 trillion, respectively);
    The next eight largest foreign debt holders collectively held about 12% of the debt (~$1.8 trillion);
    All other nations collectively held about 14% of the debt (~$2.1 trillion).


https://www.marketwatch.com/story/heres-who-owns-a-record-2121-trillion-of-us-debt-2018-08-21

https://www.countable.us/articles/26355-owns-u-s-national-debt

We refinance our debt quite regularly, once in less than a month at a minimum.

[catfish1957]

We refinance our debt quite regularly, once in less than a month at a minimum.

Short terms like T Bills??  Yes.  But, OTOH, I think we all know that the Treasury sets quarterly auctions for say, as an example 30 year bonds.

What we are all aghast about ....  is Trump attempting to wipe the entire slate clean, and reissue  at near zero or negative rates?  I think you know what the implications of that might be, especially on existing obligations.  (Pensions, Fixed Income instruments, etc.)

[verga]

Serious question, How do you have negative interest rate? Would they pay me to take out a loan?

[catfish1957]

Serious question, How do you have negative interest rate? Would they pay me to take out a loan?

That would only apply to savings rates, since there has always been a typical 2-6% spread between savings rates and say real estate loans.  (Bascially the margin that financial institutions make their money).

Theoretically, loans would go  to historically low value rates.  BUT...  realize that few or no sane people are going to get bonds, CD's, annuities, etc. at negative rates.  Most all that money would be destined for Gold, Silver, real estate, or matresses. With that it mind, the capital base to issue these lucrative loans is going to shrivel up too, so the ability to get a loan will be a lot tougher for a lot of people.

The real ponzi scheme underway is the discussions now around issuing a government 50 year T-bond.  This again probably to lure some to expect at least something in income for their money.  Alarming to say the least.

I'll just say that I be damned if I ever give any financial institution money  for an instrument bearing a negative rate on principal.

[verga]

That would only apply to savings rates, since there has always been a typical 2-6% spread between savings rates and say real estate loans.  (Bascially the margin that financial institutions make their money).

Theoretically, loans would go  to historically low value rates.  BUT...  realize that few or no sane people are going to get bonds, CD's, annuities, etc. at negative rates.  Most all that money would be destined for Gold, Silver, real estate, or matresses. With that it mind, the capital base to issue these lucrative loans is going to shrivel up too, so the ability to get a loan will be a lot tougher for a lot of people.

The real ponzi scheme underway is the discussions now around issuing a government 50 year T-bond.  This again probably to lure some to expect at least something in income for their money.  Alarming to say the least.

I'll just say that I be damned if I ever give any financial institution money  for an instrument bearing a negative rate on principal.

Thank you for the clarification

[InHeavenThereIsNoBeer]

Serious question, How do you have negative interest rate? Would they pay me to take out a loan?

Not you.  You don't think people like us are supposed to benefit?

The Fed doesn't directly set interest rates in the open market.  Banks are required to keep a certain amount of their capital in reserve, including some at the Fed.  At the end of every day, if a bank doesn't have enough in reserve, it has to take out an overnight loan to cover the difference.  This is (one of) the rates that is set by the Fed.  To make as much money as they can, banks want to keep just enough in reserve to avoid the penalty, with the rest out as loans making interest.  By making the penalty higher, banks tend to be more cautious, so they charge more for making loans to customers (and are willing to pay more interest on savings accounts so they have more money to play with).  By making the penalty lower, banks are willing to make loans at lower rates.  This is how the Fed tries to drive the economy.

With negative rates, the Fed would be effectively subsidizing banks for making loans.  This should lower rates, but the banks aren't going to lose money on loans.  It may be free money they're playing with, but it's still money.

If all that seems to make a tiny bit of sense, let me ruin it for you.  The idea of lower rates is that companies will invest in growth and consumers will buy more on credit.  But over the last ten years or so of historically low rates, that's not what happened.  Companies didn't invest in new machines/buildings/productivity, they borrowed money to buy back their own stock.  And companies that should have gone bankrupt years ago continue to burn cheaply borrowed cash.  Combine that with ETFs which drive investments into "all" stocks as a whole, including the complete crap ones, and you get the massive bubble we have today.  Thanks, Fed.  Again.

[Absalom]

No, it's another "brilliant" statement from Trump. Because he's a billionaire, and you're not. At least that's what his supporters say. By virtue of him having a lot more money than most people, everything he says is brilliant. Even his real stupid statements. 

-----------------------------------
In this life we all know those who wore out their welcome
w/us, some immediately, some later, yet all over time.
Trump is the very essence of such a person, as polling data confirm.
 

[jafo2010]

I am a Trump supporter.  And I tune out most of what he says, because half of it is said, I believe in large part, to CONTROL the IDIOT MEDIA.  And he has his hand on their button 24-7.  He has completely dominated the news because of this fact.

So, he says many things that sound down right stupid knowing full well they will do nothing but report on him nonstop, while his Democommie counterparts struggle to get any visibility in the news.

Judge him by what he does, and not by all the nonsense that spills from his pie hole.  He is more tolerable that way.

Those that hate him literally count his lies.  When Obama was POTUS, everyone I know basically said if his lips are moving, he is lying.  We grinned and bore the idiocy of the Obama Administration for eight painful years, largely in silence.

So, yes he appears crazy to the Trump haters, and he loves every moment he gets them jazzed.  And if you think he gives two shakes what the idiot/corrupt media think, you are gravely mistaken.

And considering I spent part of my career in media, I love every moment he snubs them.  They are nothing but arrogant egotistical *sses.  I tolerated so many years of these so called journalists and their high and mighty mindset.  Mind you, not all, but the majority.  So, I fully support his caustic demeanor toward them, they have earned it!!!!

[Applewood]

@jafo2010

Judge him by what he does, and not by all the nonsense that spills from his pie hole.  He is more tolerable that way.

You know, maybe I could tolerate his shenanigans if he would really do something like maybe keep his campaign promises.  But he hasn't.   While he is wasting his time on BS, we are being overrun by illegals,  we still have most of Obamacare, tax reform was little more than a tweak, etc. etc. etc.  And don't give me the excuse that he has to wait for congress to give him a bill to sign.  As president, as the supposedly successful businessman, the art of the deal guy, he  should have been getting congress together to tackle these issues and make things happen.  He even had Republican majorities in congress.  Should have been easy.  But no.  He spent much of his early presidency bad mouthing his own party.  While he is off on his never ending campaign tours, golfing and tweeting BS, many of the major issues he campaigned on were largely forgotten.  And he wants a second term?  Where was he during the first term?

Sorry, but his BS got old for me very quickly.   I had hopes Trump would be better than I expected and maybe really get things done.  But he has turned out to be another do nothing goof off.   Trump is a reality tv president.  It's time his show was canceled.

[Snarknado]

Serious question, How do you have negative interest rate? Would they pay me to take out a loan?

The nominal rate is never negative. Yields can be negative if, for example, zero % bonds are auctioned and investors are willing to pay more than the bond's redemption value. That's what Germany did recently, though they only sold half of what they wanted. Even with a positive nominal rate, investors, either at initial auction or on the open market,  could be willing to bid the price up to a point that makes the yield negative. The primary reason to do so is perceived safety compared to bonds with small positive yields, along with the possibility that in an economic downturn the bonds could trade at even higher prices.

Beyond this, when you also factor in inflation, real interest rates are even more negative than they appear on paper.