(BoE) deputy governor has mooted the idea of 'negative' interest rates

[mertle]

Now is this serious good idea or a bad move if we did this. Switzerand and denmark done this.

http://www.cfoworld.co.uk/news/gover...nterest-rates/

Would it solve problems encourage the investment.

Did find how it works risks it possesses.

http://economics.about.com/cs/intere...o_interest.htm

Problem is the dangers it can bring

http://blogs.wsj.com/eurocrisis/2012...nterest-rates/

Ultimately, these property price rises tend to trigger construction booms and a self-reinforcing credit cycle of rising prices, more building and more debt to build yet more houses. This is what happened in Spain and Ireland in the decade before the credit crunch.

So we likely get excelaration of inflation and new property boom on debt. Could cause big issue in few years ala spanish property.

Like housing/land values will shoot through the roof. Seriesly think UK can ill afford that to happen.

Would love to know what happens those banks/building societies unable pay the BOE could it trigger another banking crisis.

I am in two minds on the idea one yes create jobs in construction but seems going to come with alot baggage.

Seems stupid to me. You're basically being encouraged to go out and spend or convert your cash into something that can hold it's value.

[rogerdraig]

its about what interest the banks get for thier money saved with central bank it should encorage them to lend it and make money rather than just putting it in safe place and making money for doing nothing this would mean they would loose money if they did nothing with it

[mertle]

Originally Posted by Damien

Seems stupid to me. You're basically being encouraged to go out and spend or convert your cash into something that can hold it's value.

good point worry its dangers are the future.

I starting to wonder anybody got clue what to do from osbourne BOE. Its almost lets try this see what happens.

Just hope canadian mountie got better fiscal grasp.

Back going to the crisis 2008 argument austerity or not to rescue it. I said the world should teamed up to do trials help those nations where it failed. You also would had some nations who would been able to support others by non austerity measures. It was unique situation felt needed unique way dealing with it.

It may work but that second link scares me what could happen.

Although news US becoming strong again might be good news. It may drag other nations out of the mess with exports. Save this sorry government backside.

---------- Post added at 18:55 ---------- Previous post was at 18:46 ----------

Originally Posted by rogerdraig

its about what interest the banks get for thier money saved with central bank it should encorage them to lend it and make money rather than just putting it in safe place and making money for doing nothing this would mean they would loose money if they did nothing with it

yep read this but seems alot risks come with this move. Too me sounds a all in poker hand move. If it fails it bricks you if it works it bites you later. One which tend play if sure you got winning hand.

Some things was reading such increases land/property values fear its already overpriced. Inflation increases this could be worry to low incomes. Although wages may increase to compensate good thing. Other creates jobs development boom.

Has it worked in denmark and switzerland. My worry it seems very rare something tend to avoid.

Don't worry, the Bank of England will never allow negative interest rates.

Could the Bank of England really be prepared to cut interest rates until they were negative, as the deputy governor Paul Tucker has suggested? To be clear, that means depositors would have to pay to place their money with the central bank. And the answer to the question is "no".

First, in case savers were worried, there would be no prospect of banks themselves moving to negative interest rates. Depositors would withdraw their cash and stick it under the mattress, where it would earn a better income, causing such enormous funding problems for the lenders that it would never even be a consideration.

Crazy idea.A lot of pensioners are already suffering with the low interest rates on their savings.Do this and even more of them will be keeping their money at home.

[mertle]

Originally Posted by Chris

Don't worry, the Bank of England will never allow negative interest rates.

Thanks chris never new this side things could happen.

Now I know why its rare its toxic to do.

Glad its not on the plans. Now we come to Tucker surely what ever was he thinking. Astonished he even mooted idea, surely would known the dangers. Glad he not becoming BOE governer maybe seriously should shipped out the way. Would not let nutter near the governer position. If this the sort only ideas he got god help the new governer.