DoctoRx's  Instablog

  • on Healthcare
Send Message
Over 30 years of investing in individual stocks. Extensive business experience with small to mid-size companies, including as CEO. Many hundreds of blog posts on financial and economic matters since 2008. Focus on value with catalysts for upside price action. Background as a physician and... More
My blog:
  • Negative Interest Rates Threatened For Britain 0 comments
    Feb 27, 2013 8:22 AM

    The BBC reports that negative interest rates could come to the Mother Country:

    Negative interest rates idea floated by Bank's Paul Tucker

    Paul Tucker told MPs he had suggested negative interest rates in an attempt to boost the economy.

    Bank of England deputy governor Paul Tucker has said negative interest rates should be considered.

    A negative interest rate would mean the central bank charges banks to hold their money and could encourage them to lend out more of their funds.

    Speaking to MPs on the Treasury Committee, Mr Tucker said: "This would be an extraordinary thing to do...

    Negative interest rates have a certain logic. It costs money to create a banking system and to insure deposits. Storing anything from furniture to art to gold costs money. We are all free to store our money at home or in an uninsured institution. We can also spend it or invest it in a public or private business. No one has to accept the Bank of England's offer of a negative interest rate, which again is a storage fee, if they can do better elsewhere.

    So, just as prolonged zero interest rates from the Fed were unthinkable but have occurred, the authorities have "tools", as they call it, to bring interest rates even lower. What would the rate on the 5-10 year part of the curve become if short-term rates went negative?

    Just as interest rates went to unthinkable levels in the Volcker era, they at least theoretically could continue to descend to even more unthinkable levels in the world of tomorrow.

Back To DoctoRx's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


More »

Latest Comments

Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.