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Negative rates seems weird

mogley98
I've read that negative rate purchases can still make money because if rates go lower than sub zero the guy holding one with a smaller negative return gets a premium. The entire concept just seems as weird as our stock market constantly going up regardless of the economic situation. My guess in some ways is that since their is NO WHERE to get a return on money it is going into the US market because their isn't anywhere else to put it?
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5 comments

Date Votes
  • chiefr
    Remember from College, little is taught this subject and its relative to time value of money and whats up for collateral.  Cant see this ever happening. Borrowers get paid to borrow money to put it simply.
    Governments could afford to do this, banks cant or at least the smaller ones. Who is going to pay the people to borrow and how much? IMHO, Municipal funds and banks would be in deep trouble.
    I seriously doubt Trump would ever allow this to happen on his watch despite the liars in the media telling you he would.
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  • BobJudy
    I'm confused...negative rate "purchases"????
    Do you mean like a mortgage with the negative rate?  Heck, I'd be ALL OVER that!!
    Or did you mean negative rates on an 'investment' or account?
    Or, are you talking about buying something like a stock which is worth less than zero dollar?  No way am I ever doing that!  I don't care what anyone tries to tell me, I'll buy ocean front property in Iowa before that!
    It is where a government sometimes in partnership with financial institutions loan money and only demand a partial payment to retire the loan. It doesn't often get to the consumer. To stimulate the economy the government may loan a bank a dollar and only want 99 cents back. In theory this will let the bank lower its interest rates to the consumer. Of course the government is using your tax dollars to make the loan and to make up the loss on its loan will have to raise your taxes. It is a shell game. In other words - TANSTAAFL. Bob
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  • Don McManus
    Negative rates can and are offered by central banks to stimulate lending.  There is nothing magic about the number 0 when it come to policy.
    A commercial bank could lend at a negative rate provided it was higher than the rate at which it borrowed, though historically when central banks offer negative rates, they are usually not low enough to make a negative rate commercial loan profitable.

    I fired my financial advisor a number of years ago.  When I asked about what happens if a key rate went negative he scoffed and said it could never happen.  At that point I knew he was not the financial advisor for me.




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  • gruntled2
    I'm confused...negative rate "purchases"????
    Do you mean like a mortgage with the negative rate?  Heck, I'd be ALL OVER that!!
    Or did you mean negative rates on an 'investment' or account?
    Or, are you talking about buying something like a stock which is worth less than zero dollar?  No way am I ever doing that!  I don't care what anyone tries to tell me, I'll buy ocean front property in Iowa before that!
    Then you could watch as real estate values PLUNGED.
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  • mogley98
    Yeah I guess as I understand it you would buy a CD and get no return it would actually cost you to own it, the only profit would be that someone might pay you more for it if rates went even lower.
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