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Thread: Interest rates and covid

  1. #1
    Member Tussock's Avatar
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    Interest rates and covid

    If people don't care about negative real interest rates, why do they care about a virus?

    Einstein called compounding interest "the most powerful force in the universe".

    Math wise, the growth rate of Covid and the effects of interest on wealth are the same.

    Both have a growth factor.

    Why would anyone panic about the growth of a virus if they don't care about the effect of the exact same growth factor on your ability to feed yourself?

    But but but, if we "just let it run" it will be a catastrophe!!!!

    Are we talking about a virus or an interest rate?
    tetawa, bully and Sarvo like this.

  2. #2
    Resident Curmudgeon Kiwi Sapper's Avatar
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    The sheeple have been dumbed down so much and conditioned to doing nothing but expecting "The Government" to supervise them, take care of them and guide their thoughts and actions that they have become conditioned to allowing the apparatchiks to make all the necessary decisions for them until such time as they are finally herded into the cleansing rooms. You know the ones, those with small hatches in the roof.

    SO they neither care nor know.

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    I'm not absolutely certain of the facts, but I rather fancy it's Shakespeare who says that it's always just when a fellow is feeling particularly braced with things in general that Fate sneaks up behind him with the bit of lead piping.

    It was a confusion of ideas between him and one of the lions he was hunting in Kenya that had caused A. B. Spottsworth to make the obituary column. He thought the lion was dead, and the lion thought it wasn't

  3. #3
    Member Chur Bay's Avatar
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    So what is so wrong with low interest rates? Baaaa.
    Honest question.
    Surely if you have a mortgage it's better than high interest rates?

  4. #4
    DPT
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    Quote Originally Posted by Chur Bay View Post
    So what is so wrong with low interest rates? Baaaa.
    Honest question.
    Surely if you have a mortgage it's better than high interest rates?
    Negative rates, it depends what side of the fence you are on. Great if you have a mortgage. Not good at all if you have savings, you have to pay the bank to hold your money.

  5. #5
    Member Tussock's Avatar
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    Quote Originally Posted by Chur Bay View Post
    So what is so wrong with low interest rates? Baaaa.
    Honest question.
    Surely if you have a mortgage it's better than high interest rates?
    My point is not so much about the pros and cons of high Vs low interest rates. There are winners and losers. Either the borrower or the lender. The govt has mandated that lenders lose and borrowers win. No comment on that.

    My point was more that suddenly everyone is an expert on growth rates. We are all concerned about virus replication rates.

    It's the exact same phenomenon as interest rates.

    Intereat rates set the value of everything. They are a growth rate, so produce curves just like CV19

    No one cares.

  6. #6
    Member Sarvo's Avatar
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    Will those borrowing at these historic Lows - be the ones investing to Banks to lend to their grand kids etc
    I think not
    Society or modern mankind cannot continue on this path
    Its just simple logical fact !!!!

  7. #7
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    Quote Originally Posted by DPT View Post
    Negative rates, it depends what side of the fence you are on. Great if you have a mortgage. Not good at all if you have savings, you have to pay the bank to hold your money.
    I must admit though, I like the idea that the bank pays me interest on money I borrowed from them....Somehow that appeals to me even if it does not seem to make logical sense. Borrow money from bank, pay it back at $500 per week and balance drops by $600 per week as bank pays me.....Can I borrow some more please????

    Thinking along that line of thought, If I miss a payment, the bank pays me less.....but still pays me something. Now that s weird and I am starting to get a headache .....
    Last edited by timattalon; 26-05-2020 at 01:44 PM.

  8. #8
    Member Tussock's Avatar
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    Quote Originally Posted by timattalon View Post
    I must admit though, I like the idea that the bank pays me interest on money I borrowed from them....Somehow that appeals to me even if it does not seem to make logical sense. Borrow money from bank, pay it back at $500 per week and balance drops by $600 per week as bank pays me.....Can I borrow some more please????

    Thinking along that line of thought, If I miss a payment, the bank pays me less.....but still pays me something. Now that s weird and I am starting to get a headache .....
    You have slightly injured yourself but you are on the right track.

    You don't borrow it from the bank exclusively. You borrow it from someone who has their savings at the bank.

    But you pretty much nailed it. You worked out you could get free money.

    So basically you can get free money and be an idiot with it, because it's free money. Free money and money you earned have different value, most would agree. True for both governments, business and individuals.

    Anyone who tries to hold New Zealand dollars as savings has to pay you, business and the government, to be an idiot with their savings.
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  9. #9
    DPT
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    Quote Originally Posted by timattalon View Post
    I must admit though, I like the idea that the bank pays me interest on money I borrowed from them....Somehow that appeals to me even if it does not seem to make logical sense. Borrow money from bank, pay it back at $500 per week and balance drops by $600 per week as bank pays me.....Can I borrow some more please????

    Thinking along that line of thought, If I miss a payment, the bank pays me less.....but still pays me something. Now that s weird and I am starting to get a headache .....
    Wouldn't that be great.

  10. #10
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    Quote Originally Posted by Tussock View Post
    My point is not so much about the pros and cons of high Vs low interest rates. There are winners and losers. Either the borrower or the lender. The govt has mandated that lenders lose and borrowers win. No comment on that.

    My point was more that suddenly everyone is an expert on growth rates. We are all concerned about virus replication rates.

    It's the exact same phenomenon as interest rates.

    Intereat rates set the value of everything. They are a growth rate, so produce curves just like CV19

    No one cares.
    Actually, lots of people care about this. Probably not many on this site, but that is most definitely not to say no one cares.

    In fact, I just got out of a 4 hour board meeting and this very topic took up at least 25% of it.

    Its a boon for a lot of people.

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    On a somewhat related note (Not completely though),

    Can one get a loan for farmland in New Zealand and what are the land use rules? Can a pastoral land be turned into cropping or vice versa? A forestry land into something else?

    Asking just for knowledge.

    -Inder

  12. #12
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    NZ Reserve Bank is currently doing Quantitative Easing for the first time, I've struggled to fully understand this. I think the experts aren't even too sure how this will pan out but basically looks like we have, or are increasing our money supply by 30%, free money.... sounds nice.

    Despite the low interest rates we currently have and whilst its intent is to stimulate economy it could also increase inflation and asset prices, and then also interest rates.
    Looks like we could go "back to the future" and we are in the 80's again!

    It could cause more problems than it is trying to solve.

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    Quote Originally Posted by Inder View Post
    On a somewhat related note (Not completely though),

    Can one get a loan for farmland in New Zealand and what are the land use rules? Can a pastoral land be turned into cropping or vice versa? A forestry land into something else?

    Asking just for knowledge.

    -Inder
    Yup able to get loans for farmland with differing amounts of equity required but generally you can get up to 60% from the bank.
    Being completely de regulated land use change is an option for land owners as long as they comply with regional plans and our resource management act. It's getting harder to intensify now with nutrient loss regulations and other environmental hurdles that have to be ticked off though it's still possible in most areas.

    Sent from my SM-G930P using Tapatalk
    Inder likes this.

  14. #14
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    We are taking the same road as Zimbabwe:
    -A great leader that does not want to get off her throne.
    -printing money so that the population think the country is rich when it actually emporishes itself.
    -land redistribution to a part of the population that will not generate income from its use and will let it perish
    ...etc not yet but in a near future we could have that .

    The only three ways that this government could afford to finance that recently voted crazy budget are:
    - either printing money
    - borrowing from abroad
    - raising taxes
    Or a mix of the three.
    In every case that makes the country pourer, instead of limiting the crazy spending and living frugally .
    The fact that the MPs did not want to take a 20% pay cut shows where they stand.

    And remember, for every employee of the government sitting in an office there are a couples of farmers getting up early every morning to do the hard work pay their wages. It is a simplified image and the ratio might not be quite right but that is somewhat how it works.
    Brian, tetawa, mikee and 3 others like this.

  15. #15
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    Yes well Mugabe came from same political side of the spectrum, you do have to wonder making everyone "equally poor" then relying on govt is possibly an intended outcome or they are just that thick?

    There will of course be "special groups" of animals in the "farm", as Orwell predicted.

 

 

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