Tag: interest rates

Are Central Banks Losing Control Over Interest Rates?

Are Central Banks Losing Control Over Interest Rates?

This article points to the potential effects of the “debt trap.” Debts have mounted to record highs. The associated financing costs become unsustainable when interest rates are high (or start rising). Record low interest rates have one characteristic in common: they have much more upside potential than downside.

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Can Central Banks Really Keep Interest Rates Down?

Can Central Banks Really Keep Interest Rates Down?

The primary conclusion for any prudent investor should be to not be lulled in by the soothing talks of Ben, Mario and Shinzo. Granted, they may be doing their best, and doing so in good faith. Only you should not rely on their being able to succeed. Ultimately, the interest rates and inflation expectations of financial markets are fickle. They can turn on a dime. And, irrespective of all their good intentions, the good men at the central banks will not be able to control the loss of confidence in the markets.

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Interest Rates From An Austrian Viewpoint

Interest Rates From An Austrian Viewpoint

In this piece we will look at what interest actually is from the viewpoint of the Austrian School of Economics and how the setting (manipulation) of the interest rate by central banks negatively impacts the economy in the long run. In essence, interest is the ratio between the value assigned to specific goods today, to be exact, the goods themselves are irrelevant but rather the underlying want satisfaction, in comparison to the identical goods at a future point in time.

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Continuing Low Interest Rates In The US, Europe Joins The Party

Continuing Low Interest Rates In The US, Europe Joins The Party

ECB President Mario Draghi today cut its benchmark refinancing rate to a record low 0.5%. Based on official inflation rates, holding government bonds in large economies yields a negative return on 2, 5 and 10 years. Based on the unofficial inflation rate, bond holders are literally throwing away their money. So who said that gold is a worthless investment because it does not pay an interest?

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There is no exit plan

| July 12, 2012 | Articles: Insights

There was an interesting note from Agora Financial a few weeks ago raising the following question. If Operation Twist and the previous QE programmes were successful, then why is there a need for more? And if they were not successful, then why are they are there going to be more of them? While the current status of major global currencies is already cause for concern, what’s even more disconcerting is the style of analysis being used by central banks. The crisis began in 2008 and was met with unprecedented amounts of liquidity and easing. Central bankers remain convinced that this is the correct strategy and continue to apply this medicine. […]

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German debt problems

German debt problems

Somewhat counterintuitive action in the precious metals markets yesterday, with gold and silver coming under selling pressure despite news of easing from a trio of major central banks. As expected, the Bank of England announced a further £50 billion of quantitative easing yesterday (the UK’s own “QE3”), which will bring the BoE’s total QE since 2008 to £375bn. Elsewhere, the European Central Bank and the People’s Bank of China cut interest rates. The ECB cut its short-term lending rate to a record low of 0.75% – down from 1.0% – while the PBC announced a 0.31 percentage-point cut in its one-year yuan-lending rate, to 6% (which seems like a crazily […]

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