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(Bloomberg)   European stocks dodge blue shell as Super Mario Draghi brings sledgehammer down on deflation by cutting ECB interest rate to -0.1%   (bloomberg.com) divider line 33
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502 clicks; posted to Business » on 05 Jun 2014 at 1:47 PM (15 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



33 Comments   (+0 »)
   
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2014-06-05 10:48:19 AM
www.marketoracle.co.uk
 
2014-06-05 11:32:37 AM
I've dodged them, but I can count how many on on hand over the years.
 
2014-06-05 12:10:30 PM
He's trying to jump off the left side of the Rainbow Road track to take a shortcut, isn't he.
 
2014-06-05 02:11:01 PM
So Putin's Wario and Merkel's the Princess?
 
2014-06-05 02:34:30 PM
Wait, how can the rate be negative? Is the ECB loaning money to banks and then reducing the amt owed instead of adding interest?
 
2014-06-05 02:36:34 PM
This is the exact opposite of what should happen. With rates like that, it's better for banks to borrow and then sit on the money than loan it out at low, low rates. The assumption on their part is that rates must go up at some point, and when they do, if they've already loaned out that money, it won't be earning the interest it could when rates have gone up. This is but one reason the economic recovery has been so slow.
 
2014-06-05 02:44:37 PM

Chalji: Wait, how can the rate be negative? Is the ECB loaning money to banks and then reducing the amt owed instead of adding interest?


Yes.

Go back a few years and you'd see American and British newspapers saying the Euro would collapse, bla. bla. more clueless bla.

---

If you have to pay money to keep money in the bank, you're better of going out and spending it. Ie. trying to get inflation going at a target of a healthy 2%.

Or, you could keep it under the mattress and enjoy that prices are actually falling. I shiat you not, living in Denmark, I've noticed that prices for basic goods are consistantly falling.

/deflation also sucks in the grander scale, but I don't have any saving to make a difference either way. ;)
 
2014-06-05 02:48:25 PM

SurfaceTension: This is the exact opposite of what should happen. With rates like that, it's better for banks to borrow and then sit on the money than loan it out at low, low rates. The assumption on their part is that rates must go up at some point, and when they do, if they've already loaned out that money, it won't be earning the interest it could when rates have gone up. This is but one reason the economic recovery has been so slow.

 So you're smarter than the ECB?
 
2014-06-05 02:51:18 PM

spawn73: Chalji: Wait, how can the rate be negative? Is the ECB loaning money to banks and then reducing the amt owed instead of adding interest?

Yes.

Go back a few years and you'd see American and British newspapers saying the Euro would collapse, bla. bla. more clueless bla.

---

If you have to pay money to keep money in the bank, you're better of going out and spending it. Ie. trying to get inflation going at a target of a healthy 2%.

Or, you could keep it under the mattress and enjoy that prices are actually falling. I shiat you not, living in Denmark, I've noticed that prices for basic goods are consistantly falling.

/deflation also sucks in the grander scale, but I don't have any saving to make a difference either way. ;)


Doesn't deflation HELP your savings? It means your dollar tomorrow buys more than it bought today.
 
2014-06-05 02:53:21 PM

kidgenius: spawn73: Chalji: Wait, how can the rate be negative? Is the ECB loaning money to banks and then reducing the amt owed instead of adding interest?

Yes.

Go back a few years and you'd see American and British newspapers saying the Euro would collapse, bla. bla. more clueless bla.

---

If you have to pay money to keep money in the bank, you're better of going out and spending it. Ie. trying to get inflation going at a target of a healthy 2%.

Or, you could keep it under the mattress and enjoy that prices are actually falling. I shiat you not, living in Denmark, I've noticed that prices for basic goods are consistantly falling.

/deflation also sucks in the grander scale, but I don't have any saving to make a difference either way. ;)

Doesn't deflation HELP your savings? It means your dollar tomorrow buys more than it bought today.


Yea but it also means you have an incentive not to spend your money, because you know you'll get a better deal tomorrow. Writ large, this destroys consumer spending, which further punishes a weak economy.
 
2014-06-05 02:55:12 PM

spawn73: SurfaceTension: This is the exact opposite of what should happen. With rates like that, it's better for banks to borrow and then sit on the money than loan it out at low, low rates. The assumption on their part is that rates must go up at some point, and when they do, if they've already loaned out that money, it won't be earning the interest it could when rates have gone up. This is but one reason the economic recovery has been so slow.
 So you're smarter than the ECB?


Who isn't? :)

Seriously, they're probably more afraid of inflation than banks hoarding cash.
 
2014-06-05 02:55:19 PM

Chalji: Wait, how can the rate be negative? Is the ECB loaning money to banks and then reducing the amt owed instead of adding interest?


The ECB is a reserve bank - by law, commercial banks have to keep a set portion of their funds with the ECB. (They could loan money to individual banks but I don't think that's relevant to this discussion.) Basically they're saying, instead of paying banks a small interest for their accounts, they're going to charge the bank interest for that money.

The idea is to goad the banks into stepping up their own loans, although supposedly some other countries have tried this and saw virtually no change.
 
2014-06-05 03:10:49 PM

kidgenius: spawn73: Chalji: Wait, how can the rate be negative? Is the ECB loaning money to banks and then reducing the amt owed instead of adding interest?

Yes.

Go back a few years and you'd see American and British newspapers saying the Euro would collapse, bla. bla. more clueless bla.

---

If you have to pay money to keep money in the bank, you're better of going out and spending it. Ie. trying to get inflation going at a target of a healthy 2%.

Or, you could keep it under the mattress and enjoy that prices are actually falling. I shiat you not, living in Denmark, I've noticed that prices for basic goods are consistantly falling.

/deflation also sucks in the grander scale, but I don't have any saving to make a difference either way. ;)

Doesn't deflation HELP your savings? It means your dollar tomorrow buys more than it bought today.


Well yeah, but that's why there's a negative interest rate.

The idea is to spur the consumers into spending their damn money, thus kickstarting the economy.

---

Though in fairness the economy of the EU seems loopsided in a bigger way. Northern Europe is doing splendid, Sourthern Europe is stabilized through austerity. But they still have a massive unemployment rate.

I'm curious if this just wont somehow backfire anyways, for Southern Europe anyways.
 
2014-06-05 03:12:18 PM

SurfaceTension: spawn73: SurfaceTension: This is the exact opposite of what should happen. With rates like that, it's better for banks to borrow and then sit on the money than loan it out at low, low rates. The assumption on their part is that rates must go up at some point, and when they do, if they've already loaned out that money, it won't be earning the interest it could when rates have gone up. This is but one reason the economic recovery has been so slow.
 So you're smarter than the ECB?

Who isn't? :)

Seriously, they're probably more afraid of inflation than banks hoarding cash.


Inflation is the big boggey man.

Though there's a stated goal of a yearly 2% inflation rate. Which is considered healthy. This is obviously not the case now at all.
 
2014-06-05 03:19:52 PM
I guess a weak parallel could be made to the Bitcoin. No one wants to spend their damn Bitcoins, because its an inherently deflationary currency.

So, there's a very small actual Bitcoin market.


The same could be feared of the Euro, if the deflation takes hold. It doesn't make sense to spend your Euro, because it'll be worth more tommorow.

The ECB is trying to force people to spend their Euros, and banks to lend out their money. Because with a negative interest rate, you'll now loose money by just letting it sit. As in, the ECB will litterally take a % of it.
 
2014-06-05 04:07:10 PM

spawn73: SurfaceTension: spawn73: SurfaceTension: This is the exact opposite of what should happen. With rates like that, it's better for banks to borrow and then sit on the money than loan it out at low, low rates. The assumption on their part is that rates must go up at some point, and when they do, if they've already loaned out that money, it won't be earning the interest it could when rates have gone up. This is but one reason the economic recovery has been so slow.
 So you're smarter than the ECB?

Who isn't? :)

Seriously, they're probably more afraid of inflation than banks hoarding cash.

Inflation is the big boggey man.

Though there's a stated goal of a yearly 2% inflation rate. Which is considered healthy. This is obviously not the case now at all.


Inflation is much higher than 2%.

www.shadowstats.com
 
2014-06-05 04:16:59 PM

spawn73: The same could be feared of the Euro, if the deflation takes hold. It doesn't make sense to spend your Euro, because it'll be worth more tommorow.


Yeah, this unfounded line again.
 
2014-06-05 04:20:30 PM

mcreadyblue: spawn73: SurfaceTension: spawn73: SurfaceTension: This is the exact opposite of what should happen. With rates like that, it's better for banks to borrow and then sit on the money than loan it out at low, low rates. The assumption on their part is that rates must go up at some point, and when they do, if they've already loaned out that money, it won't be earning the interest it could when rates have gone up. This is but one reason the economic recovery has been so slow.
 So you're smarter than the ECB?

Who isn't? :)

Seriously, they're probably more afraid of inflation than banks hoarding cash.

Inflation is the big boggey man.

Though there's a stated goal of a yearly 2% inflation rate. Which is considered healthy. This is obviously not the case now at all.

Inflation is much higher than 2%.

[www.shadowstats.com image 300x192]


http://www.ecb.europa.eu/stats/prices/hicp/html/inflation.en.html

No its not.
 
2014-06-05 04:22:46 PM

MugzyBrown: spawn73: The same could be feared of the Euro, if the deflation takes hold. It doesn't make sense to spend your Euro, because it'll be worth more tommorow.

Yeah, this unfounded line again.


http://en.wikipedia.org/wiki/John_Maynard_Keynes

The stupid... It burns.
 
2014-06-05 04:23:38 PM

mcreadyblue: spawn73: SurfaceTension: spawn73: SurfaceTension: This is the exact opposite of what should happen. With rates like that, it's better for banks to borrow and then sit on the money than loan it out at low, low rates. The assumption on their part is that rates must go up at some point, and when they do, if they've already loaned out that money, it won't be earning the interest it could when rates have gone up. This is but one reason the economic recovery has been so slow.
 So you're smarter than the ECB?

Who isn't? :)

Seriously, they're probably more afraid of inflation than banks hoarding cash.

Inflation is the big boggey man.

Though there's a stated goal of a yearly 2% inflation rate. Which is considered healthy. This is obviously not the case now at all.

Inflation is much higher than 2%.

[www.shadowstats.com image 300x192]


Two problems:
1. The article is about the Euro and your graph is about inflation in the US.
2. ShadowStats is shiat.
 
2014-06-05 04:26:13 PM

mcreadyblue: Inflation is much higher than 2%.


Do you believe shadow stats or do you believe there was a housing bubble?  Because if we we take shadow stats at face value, housing prices have dropped 60% in real terms since 1980.

4.bp.blogspot.com
 
2014-06-05 04:46:54 PM

OptionC: mcreadyblue: Inflation is much higher than 2%.

Do you believe shadow stats or do you believe there was a housing bubble?  Because if we we take shadow stats at face value, housing prices have dropped 60% in real terms since 1980.


House prices are never used in the consumer price index.

I thought everyone was aware of that.
 
2014-06-05 04:53:27 PM

llortcM_yllort: mcreadyblue: spawn73: SurfaceTension: spawn73: SurfaceTension: This is the exact opposite of what should happen. With rates like that, it's better for banks to borrow and then sit on the money than loan it out at low, low rates. The assumption on their part is that rates must go up at some point, and when they do, if they've already loaned out that money, it won't be earning the interest it could when rates have gone up. This is but one reason the economic recovery has been so slow.
 So you're smarter than the ECB?

Who isn't? :)

Seriously, they're probably more afraid of inflation than banks hoarding cash.

Inflation is the big boggey man.

Though there's a stated goal of a yearly 2% inflation rate. Which is considered healthy. This is obviously not the case now at all.

Inflation is much higher than 2%.

[www.shadowstats.com image 300x192]

Two problems:
1. The article is about the Euro and your graph is about inflation in the US.
2. ShadowStats is shiat.


And negative interest rates makes more sense??
 
2014-06-05 04:57:01 PM

mcreadyblue: OptionC: mcreadyblue: Inflation is much higher than 2%.

Do you believe shadow stats or do you believe there was a housing bubble?  Because if we we take shadow stats at face value, housing prices have dropped 60% in real terms since 1980.

House prices are never used in the consumer price index.

I thought everyone was aware of that.


The point is that the housing prices skyrocketed during the bubble before crashing down to Earth.  If house prices always decreased relative to inflation, than you can't say house prices skyrocketed which means you can't say the bubble happened.

The most damning point against ShadowStats is that their adjusted inflation number is the number calculated by the CPI-U plus three points.  Notice how the official CPI-U and the ShadowStats calculation follow the EXACT same pattern?

Either way, your data is for the wrong country.
 
2014-06-05 05:20:46 PM

spawn73: Because with a negative interest rate, you'll now loose lose money by just letting it sit.


Pet peeve.
 
2014-06-05 05:47:05 PM
The problem is: the banks already had cheap money, and so far that didn't motivate them to boost lending. So throwing more cheap money at them isn't going to work any better. The credit default rates in Southern Europe are just so high that the banks there are not really motivated to take the risk.
 
2014-06-05 08:32:55 PM

llortcM_yllort: mcreadyblue: OptionC: mcreadyblue: Inflation is much higher than 2%.

Do you believe shadow stats or do you believe there was a housing bubble?  Because if we we take shadow stats at face value, housing prices have dropped 60% in real terms since 1980.

House prices are never used in the consumer price index.

I thought everyone was aware of that.

The point is that the housing prices skyrocketed during the bubble before crashing down to Earth.  If house prices always decreased relative to inflation, than you can't say house prices skyrocketed which means you can't say the bubble happened.

The most damning point against ShadowStats is that their adjusted inflation number is the number calculated by the CPI-U plus three points.  Notice how the official CPI-U and the ShadowStats calculation follow the EXACT same pattern?

Either way, your data is for the wrong country.




Owners' Equivalent Rent is used in CPI calculations instead of housing prices. This is a made up number which has little bearing to reality.
 
2014-06-05 08:37:25 PM

Klopfer: The problem is: the banks already had cheap money, and so far that didn't motivate them to boost lending. So throwing more cheap money at them isn't going to work any better. The credit default rates in Southern Europe are just so high that the banks there are not really motivated to take the risk.



The high unemployment rates will never allow banks to loan money.

dattaman.com
 
2014-06-05 09:40:41 PM

TedCruz'sCrazyDad: llortcM_yllort: mcreadyblue: OptionC: mcreadyblue: Inflation is much higher than 2%.

Do you believe shadow stats or do you believe there was a housing bubble?  Because if we we take shadow stats at face value, housing prices have dropped 60% in real terms since 1980.

House prices are never used in the consumer price index.

I thought everyone was aware of that.

The point is that the housing prices skyrocketed during the bubble before crashing down to Earth.  If house prices always decreased relative to inflation, than you can't say house prices skyrocketed which means you can't say the bubble happened.

The most damning point against ShadowStats is that their adjusted inflation number is the number calculated by the CPI-U plus three points.  Notice how the official CPI-U and the ShadowStats calculation follow the EXACT same pattern?

Either way, your data is for the wrong country.

Owners' Equivalent Rent is used in CPI calculations instead of housing prices. This is a made up number which has little bearing to reality.


Again, my point is that it doesn't matter if it is used in CPI or not.  If the inflation adjusted housing prices were identical to what was shown in the graph, a housing bubble could not have occurred.  Since a bubble did occur, ShadowStats is suspect.

Either way, ShadowStats' methodology of "add 3 points to the inflation rate" seems suspect.
 
2014-06-05 10:46:48 PM

llortcM_yllort: TedCruz'sCrazyDad: llortcM_yllort: mcreadyblue: OptionC: mcreadyblue: Inflation is much higher than 2%.

Do you believe shadow stats or do you believe there was a housing bubble?  Because if we we take shadow stats at face value, housing prices have dropped 60% in real terms since 1980.

House prices are never used in the consumer price index.

I thought everyone was aware of that.

The point is that the housing prices skyrocketed during the bubble before crashing down to Earth.  If house prices always decreased relative to inflation, than you can't say house prices skyrocketed which means you can't say the bubble happened.

The most damning point against ShadowStats is that their adjusted inflation number is the number calculated by the CPI-U plus three points.  Notice how the official CPI-U and the ShadowStats calculation follow the EXACT same pattern?

Either way, your data is for the wrong country.

Owners' Equivalent Rent is used in CPI calculations instead of housing prices. This is a made up number which has little bearing to reality.

Again, my point is that it doesn't matter if it is used in CPI or not.  If the inflation adjusted housing prices were identical to what was shown in the graph, a housing bubble could not have occurred.  Since a bubble did occur, ShadowStats is suspect.

Either way, ShadowStats' methodology of "add 3 points to the inflation rate" seems suspect.




I don't think you understand the difference between CPI and inflation.
 
2014-06-05 11:48:00 PM

TedCruz'sCrazyDad: llortcM_yllort: TedCruz'sCrazyDad: llortcM_yllort: mcreadyblue: OptionC: mcreadyblue: Inflation is much higher than 2%.

Do you believe shadow stats or do you believe there was a housing bubble?  Because if we we take shadow stats at face value, housing prices have dropped 60% in real terms since 1980.

House prices are never used in the consumer price index.

I thought everyone was aware of that.

The point is that the housing prices skyrocketed during the bubble before crashing down to Earth.  If house prices always decreased relative to inflation, than you can't say house prices skyrocketed which means you can't say the bubble happened.

The most damning point against ShadowStats is that their adjusted inflation number is the number calculated by the CPI-U plus three points.  Notice how the official CPI-U and the ShadowStats calculation follow the EXACT same pattern?

Either way, your data is for the wrong country.

Owners' Equivalent Rent is used in CPI calculations instead of housing prices. This is a made up number which has little bearing to reality.

Again, my point is that it doesn't matter if it is used in CPI or not.  If the inflation adjusted housing prices were identical to what was shown in the graph, a housing bubble could not have occurred.  Since a bubble did occur, ShadowStats is suspect.

Either way, ShadowStats' methodology of "add 3 points to the inflation rate" seems suspect.

I don't think you understand the difference between CPI and inflation.


Well, you have lived up to your handle.  Here's your sign.
 
2014-06-05 11:56:40 PM

TedCruz'sCrazyDad: llortcM_yllort: TedCruz'sCrazyDad: llortcM_yllort: mcreadyblue: OptionC: mcreadyblue: Inflation is much higher than 2%.

Do you believe shadow stats or do you believe there was a housing bubble?  Because if we we take shadow stats at face value, housing prices have dropped 60% in real terms since 1980.

House prices are never used in the consumer price index.

I thought everyone was aware of that.

The point is that the housing prices skyrocketed during the bubble before crashing down to Earth.  If house prices always decreased relative to inflation, than you can't say house prices skyrocketed which means you can't say the bubble happened.

The most damning point against ShadowStats is that their adjusted inflation number is the number calculated by the CPI-U plus three points.  Notice how the official CPI-U and the ShadowStats calculation follow the EXACT same pattern?

Either way, your data is for the wrong country.

Owners' Equivalent Rent is used in CPI calculations instead of housing prices. This is a made up number which has little bearing to reality.

Again, my point is that it doesn't matter if it is used in CPI or not.  If the inflation adjusted housing prices were identical to what was shown in the graph, a housing bubble could not have occurred.  Since a bubble did occur, ShadowStats is suspect.

Either way, ShadowStats' methodology of "add 3 points to the inflation rate" seems suspect.

I don't think you understand the difference between CPI and inflation.


CPI is a measure of inflation, is it not?
 
2014-06-06 12:13:12 PM

TedCruz'sCrazyDad: Klopfer: The problem is: the banks already had cheap money, and so far that didn't motivate them to boost lending. So throwing more cheap money at them isn't going to work any better. The credit default rates in Southern Europe are just so high that the banks there are not really motivated to take the risk.


The high unemployment rates will never allow banks to loan money.

[dattaman.com image 850x616]


And yet the Spanish and Italian 10yr bond yields are almost cheaper than the U.S 10YR bonds. Either that's really good or really really bad.
 
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