2020 Potential Economic Collapse

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Arwen Thebard
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Re: 2020 Potential Economic Collapse

Post by Arwen Thebard » Mon May 18, 2020 7:07 am

"Could be as high as £337B just for this year."
The UK's final cost for this fiasco will likely be in the £Trillions£. IMO we seem to be witnessing a world wide market collapse in real time.

In the words of Backman Turner Overdrive......"You aint seen nothin yet"

https://www.youtube.com/watch?v=4cia_v4vxfE
Arwen The Bard

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hobo
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Re: 2020 Potential Economic Collapse

Post by hobo » Mon May 18, 2020 8:05 am

Great link for 9am. Ready for the day now! :lol:

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peejay
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Re: 2020 Potential Economic Collapse

Post by peejay » Thu May 21, 2020 7:50 am

Negative interest has effectively begun it Seems. https://apple.news/AZM-2pEedT2-3ghdUUKzffg

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Arwen Thebard
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Re: 2020 Potential Economic Collapse

Post by Arwen Thebard » Thu May 21, 2020 12:49 pm

The clear and simple message being that professional investors are willing to accept a guaranteed loss and are foreseeing bad times ahead, at least for the next three years and possibly much longer. OK this offer is only negative -0.003% but even so its likely to be the first of many offers and could eventually lead to stealing savers money direct from their accounts.

Another link to the full story here;
https://uk.finance.yahoo.com/news/uk-se ... NtW76TUE4k
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jansman
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Re: 2020 Potential Economic Collapse

Post by jansman » Thu May 21, 2020 3:30 pm

So. To be clear: Just for a round number,lets assume that the interest rate goes negative,to Minus 1%. If I have a £100 in the bank,instead of them paying me £1 in interest each year ,I pay THEM £1 each year.Thus reducing my £100 to £99. Is that correct?
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Bosworth
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Re: 2020 Potential Economic Collapse

Post by Bosworth » Thu May 21, 2020 10:18 pm

So much to unpack here and so hard to do...

The short answer is: In theory, but not in practice.

The negative rate applies to commercial entities lending between themselves or depositing at central bank institutions. It’s a macro-economic policy designed to nudge commercial banks into shifting money into the real world rather than holding onto it themselves. Our western economy is entirely debt based and the principles of fractional reserve banking require increasing levels of debt in order for the monetary system to survive.

The theory is that by charging institutions to hold cash, the risk assessments they make about lending in the real world, and therefore sustaining the monetary system, are skewed towards lending rather than hoarding.

The counter argument is that negative rates increase a bank’s costs therefore constrain lending. There isn’t clear evidence either way from countries that have gone negative in recent times (Denmark, Japan etc)

Either way, it is unlikely that banks will pass those negative rates onto consumer products ie your savings account. At worst you will likely earn no interest. If folk are charged for the privilege of having a claim on a bank’s assets (money deposited isn’t yours after all) then money will not stay in banks.

If we move to a cashless society such that you have no choice but to hold your money as digits in an institution then that situation may change, but we are a long way from that today.

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peejay
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Re: 2020 Potential Economic Collapse

Post by peejay » Thu May 21, 2020 10:33 pm

Bosworth wrote:
Thu May 21, 2020 10:18 pm

If we move to a cashless society such that you have no choice but to hold your money as digits in an institution then that situation may change, but we are a long way from that today.
I reckon we've lurched significantly closer to that situation this year than anyone expected.

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Arwen Thebard
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Re: 2020 Potential Economic Collapse

Post by Arwen Thebard » Fri May 22, 2020 7:22 am

jansman wrote:
Thu May 21, 2020 3:30 pm
So. To be clear: Just for a round number,lets assume that the interest rate goes negative,to Minus 1%. If I have a £100 in the bank,instead of them paying me £1 in interest each year ,I pay THEM £1 each year.Thus reducing my £100 to £99. Is that correct?
Correct.
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Arwen Thebard
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Re: 2020 Potential Economic Collapse

Post by Arwen Thebard » Fri May 22, 2020 7:29 am

As Boswell states above, it is effectively only applicable to commercial transactions at the moment, but if the banks are being encouraged [forced] to loan out their money, then why not the rest of us? I can see that scenario developing very easily, encouraging people to spend rather than save, penalizing savers is hardly a new concept after all. And as PJ suggests, we are fast moving to a cashless society, so that stash of cash under our mattresses might only have a very limited use by date.

"Either way, it is unlikely that banks will pass those negative rates onto consumer products ie your savings account. At worst you will likely earn no interest."

Until recently I would have completely agreed with you Boswell, but today I am not so sure.
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jansman
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Re: 2020 Potential Economic Collapse

Post by jansman » Fri May 22, 2020 4:20 pm

Arwen Thebard wrote:
Fri May 22, 2020 7:29 am
As Boswell states above, it is effectively only applicable to commercial transactions at the moment, but if the banks are being encouraged [forced] to loan out their money, then why not the rest of us? I can see that scenario developing very easily, encouraging people to spend rather than save, penalizing savers is hardly a new concept after all. And as PJ suggests, we are fast moving to a cashless society, so that stash of cash under our mattresses might only have a very limited use by date.

"Either way, it is unlikely that banks will pass those negative rates onto consumer products ie your savings account. At worst you will likely earn no interest."

Until recently I would have completely agreed with you Boswell, but today I am not so sure.
So,I now understand.Thanks Boswell and Arwen.For someone as simple in his financial matters as me,that would lead me to draw all my cash.There will be others like me,so then you would get a Northern Rock scenario and a bank run. I am getting ( effectively) 0% on savings,and the bank and building society are just a convenient place to safely stash cash.If you can't touch it,it ain't yours! I am also aware of the Argentine ' corrallito' back in 2001,where the government simply shut the banks,and when they did open,they rationed you your own cash. Same happened in Greece.We never thought we would be prevented from free movement in the UK,so I am not confident of the security of my savings.

As for the future of cash: Yes,we are seeing a lot of plastic at work.We are also ( still ) seeing s lot of readies.I filled up my car last week,and there was a notice at the pump about using cards over cash.I checked I could use readies first.No problem! " we need everything we can get mate! " Same at the commercial fishery I visit.Cash ain't dead yet.
In three words I can sum up everything I have learned about life: It goes on.

Robert Frost.

Covid 19: After that level of weirdness ,any situation is certainly possible.

Me.

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