Danish bank announces negative interest rates

Comment by tonytran2015: There are reasons for people to do seemingly silly things (Why do people buy Treasury Bonds with Negative Interests ?).

https://wp.me/p1bsGs-BVL

https://ukgovernmentwatch.wordpress.com/2019/08/23/danish-bank-announces-negative-interest-rates/

https://www.msn.com/en-my/news/world/danish-bank-announces-negative-interest-rates-for-millionaire-saving-accounts/ar-AAGbBog?li=BBr8Mk9

VOODOO ECONOMICS: ‘Corporate Welfare Queens’, Quantitative Easing as Outrageous Corruption – By Valentin Katasonov (Flashback)

Comment by tonytran2015: This had been pointed out at least since 2017. (,posted on 01 Mar, 2017)

https://wp.me/p490pi-855

VOODOO ECONOMICS: ‘Corporate Welfare Queens’, Quantitative Easing as Outrageous Corruption – By Valentin Katasonov (Flashback)

DAS KAPITAL: Why The Dollar Rules The World & Why Its Reign Could End – By Anthony Mueller

https://wp.me/p490pi-cqI

DAS KAPITAL: Why The Dollar Rules The World & Why Its Reign Could End – By Anthony Mueller

Comments by tonytran2015: The US dollars may get de-internationalized soon:

,

Effects of Trade War on US dollars and treasury notes.

Why do people buy Treasury Bonds with Negative Interests ?

Why do people buy Treasury Bonds with Negative Interests ?

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No. 3xx).

People buy US Treasury Bond with negative interest rates when they pay more than USD100 today so that they can be paid USD100 few years later by US government. Why do they do that? Why don’t they just keep the money in their safes?

#negative interest rate, #treasury bonds, #inversion of interest rate,

1. Why do people buy Treasury Bonds with Negative Interests ?

Hologram

1/- Foreigners buy US Treasury Bond at higher than its face value (e.g. paying USD101M to buy a US Treasury Note paying them back USD100M after ten years) when their local laws prohibit possession of US dollars but permit possession of long term US Treasury Notes (as an investment device).

2/- US residents inside USA do that when the cost of safe keeping the money is higher than the loss through Negative Interest rate.

The cost of safe keeping the money at home includes the cost of buying the safe, buying the building to contain the safe, maintenance of the building and hiring of security guards.

Alternatively, depositing the money with a bank may incur account keeping fee, which may be comparable to negative interest rate (Banque National de Paris did have that kind of account keeping fees in the 1960’s) as well as a risk of banks defaulting on cash deposits.

3/- They do it when there is a threat that all their uncommitted fiat money would be confiscated or punitatively slapped with some “taxes on iddling money” or that their deposits would be slapped with a yearly percentage of “government deposit guarantee taxes”.

Confiscation of idling money is often considered too remote a threat but many governments had previously forced their citizens to purchase their (junk grade) Treasory Bonds with uncomitted money.

Taxes on idling money is in the same category as “taxes on vacant bedrooms” in London or taxes on vacant shops by some ever-growing, tax-addicted local governments.

4/- They do it when there is a prospect of high deflation in USA, that means USD100 in the future would probably buy people much more goods than USD100 of today.

2. Prices of Treasury Notes do depend on many other factors beside bubble markets.

With the above first three reasons, it is obvious that a lower interest rate on 10 year Treasury Bond compared to a 2 year interest rate does not necessarily indicate a coming crash of the economy.

If the prices of Treasury Bonds are free from the above two factors, a lower interest rate on 10 year Treasury Bond compared to a 2 year interest rate indicates that the economy is only good for the next two years but it may not remain that good for much longer. Companies would be wise to wind down themselves to get prepared for a next new phase of the economy. However lower interest rate on 10 year Treasury Bond compared to a 2 year interest rate is not a sufficient condition for an economic crash.

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3. Conclusion.

It appears the panic from the current “inversion of yield curve” is only a play staged by investment houses (with little objection by the FRB). If the share markets crash investment houses can make fortunes.

References:

[1]. Negative interest rate is not new, posted December 4 2016,

[2]. Cashless and negative interest go hand in hand, posted December 10, 2016

[3]. Stay calm when they go bankrupt, https://survivaltricks.wordpress.com/2019/07/20/stay-calm-when-they-go-bankrupt/

[4]. Signs pointing to an impending crash for small investors, posted on December 16, 2016

[5]. A satirical guide to signs of an impending crash for small investors posted on January 25, 2017

[6]. Bankers given outrageous incomes by their boards, posted on December 22, 2016

[7]. Avoid-buying-zombie-floats-on-the-stock-exchanges posted on October 20, 2017

[8]. https://www.investopedia.com/articles/economics/08/government-financial-bailout.asp

[9]. https://www.abc.net.au/news/2014-11-10/verrender-bank-bailouts-its-now-taxpayers-who-need-protection/5878418

[10]. Government may be behind bubble markets posted on February 12, 2018

[11]. https://theconservativetreehouse.com/2019/08/14/stunning-day-of-economic-gaslighting-despite-all-positive-data-corporate-media-cheering-for-recession/

[12]. “Zero Has No Meaning” Says Greenspan: We Disagree, So Does Gold — The Wentworth Report

Added after 2019 Aug 23:

[13]. https://www.msn.com/en-my/news/world/danish-bank-announces-negative-interest-rates-for-millionaire-saving-accounts/ar-AAGbBog

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“Zero Has No Meaning” Says Greenspan: We Disagree, So Does Gold — The Wentworth Report

Comment by tonytran2015: Negative interest rate is not new, posted December 4 2016,

 

 

“Zero Has No Meaning” Says Greenspan: We Disagree, So Does Gold, by Mish Shedlock. Former Fed Chair Alan Greenspan sees No Barriers to Prevent Negative Treasury Yields. Former Federal Reserve Chairman Alan Greenspan says he wouldn’t be surprised if U.S. bond yields turn negative. And if they do, it’s not that big of a deal. […]

via “Zero Has No Meaning” Says Greenspan: We Disagree, So Does Gold — The Wentworth Report

Subprime Auto Loans Blow Up, Delinquencies at 2009 Level, Biggest 12-Month Surge Since 2010, by Wolf Richter — STRAIGHT LINE LOGIC

Comment by tonytran2015: A repeat of subprime mortgage crisis. People are still dubbed by “rating agencies” who gave those “securities”  AA, AAA ratings. Who allows the rating agencies to run this kind of shows?

 

Imagine where delinquencies would be if we weren’t in “the best economy ever.” From Wolf Richter at wolfstreet.com: But these are the good times. Automakers are not amused. The auto industry depends on subprime-rated customers that make up over 21% of total auto-loan originations. Without these customers, the wheels would come off the industry. And […]

via Subprime Auto Loans Blow Up, Delinquencies at 2009 Level, Biggest 12-Month Surge Since 2010, by Wolf Richter — STRAIGHT LINE LOGIC