🔴 Negative Interest Rates Explained (w/ AK)


Every week in 2019 keeps getting crazier. We got inverted yield curves. We got traded wards We got negative interest rate and the negative interest rates in particular They might seem backwards to a lot of people but actually they’ve been around for years The first country to dip their toes in was Sweden back in 2009 right after the great financial crisis when the SP was just coming back up to a thousand and then five years later the ECB Cannonballed into negative interest rates too, and then there was no looking back According to market watch some banks in Denmark are offering a negative 0.5 percent rate on a ten year fixed mortgage So technically if you moved to Denmark you can borrow money to buy a house and then pay back Less than what you owe on and as offensive as that might sound it’s actually true But today I want to talk about what negative interest rates actually are and how they work And also what it means for the economy, I mean is the bank gonna pay you to take out loans? we’re gonna talk about all of that on this week’s episode of real visions, but one thing What’s going on investors 8k here ever since the end of July when the Fed cut interest rates by 25 basis points, the markets have been in chaos The S&P is dropped VIX his spikes and the 2 in 10 curve is inverted So now of course everybody’s talking about interest rates again, and nowadays when you’re talking about interest rates the topic of negative interest rates comes up to last week the Fed reaffirmed that they’re not looking to use negative interest rates in the US but that it is one of the tools in their toolbox that being said negative interest rates border on sacrilege for a lot of American investors Just listen to Peter book vars comments about what the Fed would do earlier this year The feds can achieve a slowdown and what is if I gonna do are they they’re gonna cut rates. That’ll be their initial reaction But where are they gonna take this? Are they gonna do what they’ve done in the past and what the eyes I mentioned the other central banks have done and have trapped Themselves they can repeat the mistakes of every other central bank and just cut back to zero and do QE at some point You know if anything the lesson from I keep talking about the yield curve it was one of the flaws of QE outside of QE 1 which was meant to Literally sort of save the system qe2 qe3 was on paper meant to lower long-term interest rates. Well, that’s a flattening of the yield curve How are you going to encourage lending when you’re flattening a yield curve? Maybe the answer to his question is negative interest rates But okay before you move to Denmark You’ve got to know what a negative interest rate is and why it matters so negative interest rates basically work the same way as positive interest rates, but in Reverse So say I lend you $100 with the annual interest rate of 10% Well a year from now you better show up with a hundred and ten dollars, right? But the interest rate was zero then all I would need is that hundred bucks back? But if the interest rate is negative ten percent, then you only owe me 90 bucks So the difference between a 10 percent zero percent and negative 10 percent interest rate. Is that same 10 bucks? The negative one seems a little more weird, right? Because why would I lend that money to you when I could keep it for myself and have that same amount of money a year? Later without any of the credit risk, so a negative interest rate Would D incentivize me to loan out money? but at the same time it’s gonna Incentivize you to borrow more and in a world where there’s a lot of money flowing around but not many Projects to use it for this might balance the loan Janet Makana he explains more a financial system Is like a reactor a structure that contains? Into reaction between elements so in the financial system the dominant elements are borrowers and lenders lenders Transfer funds to borrowers and then borrowers transfer that back with interest Hopefully sometimes that goes wrong what we’ve seen is within that reactor Central banks have been trying to use extraordinary policies to stimulate Interaction and the way they do that is to reduce the flow of interest From the borrowers back to the lenders and indeed now with negative rates. They’ve reversed the flow completely They’re trying to stimulate outputs such as inflation, and it’s very hard to see and measure How successful that has been central bankers around the world have two main tools that they use to manage the economy Asset purchases and interest rate those two are pretty closely related So you remember the zero lower bound idea where interest rates couldn’t go below zero well that was one of the explanations that the Fed gave for quantitative easing because Rates couldn’t go below zero. They had to create money to buy assets and stimulate the economy But now the european central banks are pointing in laughing because they’ve broken that so-called zero lower bound. So what about the u.s our negative interest rates inevitable here – well in this clip Tony Greer talks about how central banks around the world are paying attention to each other so the US might be next in the FOMC statement Powell actually mentioned things like the brexit and The debt ceiling as reasons for concern and that’s when I want to you know Grab the television screen and go are you kidding me? You know, that kind of thing is outrageous to me So we’re not managing our own economy with our own interest rates or our own currency within our own borders So it seemed like we should be most attentive to what’s going on here That’s not the case anymore so that’s why you’ve got to watch and see what’s going on around the world because it seems like the powers that be or the central banks have done a pretty masterful job at Managing coordinated currency destruction, right? We’re all lowering rates around the world at the same time and it’s everybody in the boat So like most beer isn’t saying that we’re absolutely gonna get these negative interest rates But he’s saying the banks do pay attention to each other for people like Greer book Farr and many others There’s a psychological barrier to accepting negative interest rate But on the heels of recession watch a crisis could be what everyone needs to rethink their position so you might not be getting paid To take out a loan like the people in Denmark but negative interest rates are becoming more plausible in the u.s If you want help tracking the crisis so you could avoid it or if you just want more help Understanding interest rates and negative interest rates, then definitely subscribe to real visual. I’ll talk to you next week

28 thoughts on “🔴 Negative Interest Rates Explained (w/ AK)”

  1. Won't negative interest rates quickly bankrupt the central banks? This seems like a planned collapse for even more bailout money until all governments are insolvent.

  2. I've listened to report after report of overseas banks issuing negative interest rates on bonds and loans. I think i figured out why.

    Imagine you get a house for $100k with a negative 1% loan over 30 years you would pay back $70k. So how will the bank make money ? That is the question. Well imagine that $100k home has it's value cut in half. Now you are paying $70k for a house worth $50k. If you don't pay it back and the bank forecloses then it becomes a paid for asset on their books that you paid for. 

    I think the banks know what is coming. My thoughts were a mild recession with a 20% market correction that might last a year. If the math I just laid out is right then we would need a 50% correction and a five+ year depression for the banks to fully benefit

  3. Great overview AK. You're all over the place now!… Buy gold silver and bitcoin and HODL at least as a hedge and to hold for insurance long term

  4. Recession is a natural rebalancing, now here comes dr fed Frankenstein to artificially stimulate the economy so when it does crash all safety valves will have been expended.

  5. Great video for laymen like me, thanks for sharing. Signed up to RV, am slowly understanding more about what is going on, so thanks again 👍

  6. Isn't this guy from jaspreet Singh's minority report? Hmmmm something isn't right here. Are these financial channels under an umbrella? Wtf? I literally just saw a video with this same guy on a different channel telling ngf everyone to buy and hold stocks and real estate, the opposite of what is here. Is real vision a subsidiary of MSM?

  7. Horrible editing of this video….it felt like i needed to take big breaths as there are no pauses between sentences and so lost focus

  8. Time to get my money out of the banking system before the government and banks make it impossible to withdraw cash…

  9. Recession is a natural process of rebalancing and flushing away the excesses. Real Vision is using this to scare people and drive subscription. Every day there is one more thing they find wrong to drive home fear and why you should subscribe. It’s really a shame.

  10. NIRP is deflationary, which is what central planners actually want. They've been suppressing typical wage inflation through outsourcing and insourcing to prevent the usual cycle of wage push inflation and rising rates that are ensuing. Wealthy people are leveraged too, they don't care about low growth scares, they're just preserving their leveraged wealth at this point.

  11. "There's a psychological barrier to accepting negative interest rates". NO, It's not psychological. It's just fucking logical. Why lend when you get back less?? You didn't explain that in the video which is why most people are probably watching the video.

    I don't care how much "money is flowing around the system" or "how desperate people are to borrow". If you're a lender and you literally MAKE MONEY by keeping it in your pocket vs lending, you will never lend.

    The REAL reason this works is that the EU has certain laws regarding banks and institutional investors where they HAVE TO BY LAW purchase a certain amount of negative yielding bonds. That's why they do it, they literally have a gun to their head.

  12. the people farmers sure are being cuck sockers. they see low monetary velocity, so they lower interest rates for the banks/real estate. how about lowering credit card rates??? maybe that would increase monetary velocity???

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