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Finance - Investments Sub-forum: Non-Actuarial Personal Finance/Investing

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  #11  
Old 02-08-2016, 08:31 AM
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Originally Posted by d123454321 View Post
Unlikely US faces that sort of deflation. Every country cited there has negative population demographics. US has 0.5-1% annual population growth expectations, not close to negative. Very hard to have negative GDP + inflation when you had population growth like that. On the other hand Germany is expected to see population declines over next decades. Japan's is severe---they DO have legitimate deflation concerns.
world wide deflation does impact us. german/Japan/Chinese goods become cheaper. Our goods become more expensive worldwide, thus we must have price cuts just to compete.

Negative nominal rates are a very real concern. Note I'm not saying they "will" happen, but the Fed is seriously considering it and that change in tone says a lot.
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  #12  
Old 02-08-2016, 11:17 AM
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http://www.bloomberg.com/news/articl...b-pave-the-way


i
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  #13  
Old 02-08-2016, 11:32 AM
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That map graphic annoys me - why is only Germany highlighted for ECB policy? Shouldn't the entire Euro currency block be highlighted?

And why even use a map to show this information? Most of the area (like China, Russia, and the Middle East) is wasted...
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  #14  
Old 02-08-2016, 02:21 PM
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Something that small, I'd just make a bullet list.

Like Mish did.
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  #15  
Old 02-08-2016, 04:38 PM
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I'm actually sort of bad at geography, this is helpful
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  #16  
Old 02-08-2016, 05:24 PM
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Originally Posted by d123454321 View Post
Unlikely US faces that sort of deflation. Every country cited there has negative population demographics. US has 0.5-1% annual population growth expectations, not close to negative. Very hard to have negative GDP + inflation when you had population growth like that. On the other hand Germany is expected to see population declines over next decades. Japan's is severe---they DO have legitimate deflation concerns.
And we have enough people who want to move here to pretty much set whatever population growth we want.

But to the extent that what happens in the rest of the world impacts us at home, that might not be sufficient.
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Old 02-09-2016, 06:59 AM
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http://www.bloomberg.com/news/articl...-2010-fed-memo

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Fed May Lack Legal Authority for Negative Rates: 2010 Memo

August 2010 memo highlights possible hurdles to negative rates
`Not at all clear' law allows Fed to charge negative rates


The Federal Reserve may not have the legal authority to set negative interest rates in the U.S., according to a 2010 staff memo that was posted late last month on the central bank’s website.

The document, which is dated Aug. 5, 2010, and was publicly released on Jan. 29, suggests the law that authorized the Fed to pay interest on excess reserves, or IOER, may not grant it the authority to charge interest. That could constrain the central bank’s ability to take interest rates below zero, though it might be able to find a work-around.

Speculation has increased that the Fed might consider negative rates in the next economic downturn as concerns of a U.S. slowdown have mounted. This also follows recent moves to cut borrowing costs below zero by central banks in Europe and Japan that show it can be done. The opinion of Fed staff back in 2010 was that this would difficult under U.S. law.

“There are several potentially substantial legal and practical constraints to implementing a negative IOER rate regime, some of which would be binding at any IOER rate below zero, even a rate just slightly below zero,” the authors wrote. “Most notably, it is not at all clear that the Federal Reserve Act permits negative IOER rates, and more staff analysis would be needed to establish the Federal Reserve’s authority in this area.”

The Fed did not immediately respond to a request for comment.
Not that that will stop them

nor that negative interest rates are insane
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Old 02-10-2016, 10:39 AM
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I'm sorry to be selfish (no, I'm not), but I'm thinking about the updates we'll have to make on the NAIC Economic Scenario Generator.

It was bad enough when we didn't anticipate a zero interest rate policy and had to adjust all the code.

Now I have to think whether the model will at all accommodate negative interest rates with simple code changes, or if we have to entirely redo
This is actually a huge concern right now for the people I work with. Everyone is panicking because none of the software supports this level of negative rates.

-Riley
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Old 02-10-2016, 11:23 AM
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This is actually a huge concern right now for the people I work with. Everyone is panicking because none of the software supports this level of negative rates.

-Riley
I would be panicking more if their models (which were developed using assumptions that have only been tested in positive rate environments) did accommodate massively negative rates.

Sometimes an error is the correct output.
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Old 02-10-2016, 11:28 AM
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I would be panicking more if their models (which were developed using assumptions that have only been tested in positive rate environments) did accommodate massively negative rates.

Sometimes an error is the correct output.
Oh, I agree completely. I'm not the one panicking. However, I was assigned to start looking into this problem and how our "models" can be revamped to deal with negative interest rates. At this point I was like.. O_O, yeah, h'okay. Let's take some models that are based on rates not being negative and try to "improve" them. Don't worry, I'll finish that up right away!

-Riley
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