Are Low Interest Rates Good?

Tyler Durden's picture




 

In a perfectly succinct follow-up to Last Friday's Santelli-Kaminsky CNBC-aberration discussion of the now status quo financial repression (low interest rate / QE environment), this two-and-a-half minute clip asks and answers the seemingly simple question of whether low interest rates are good. Borrowing and saving are really about whether to consume more now or later (or more later and less now) and we agree with Professor Antony Davies that these decisions are best left to individuals - and not the nanny-state/Fed. Each person's judgment of what is best for them is replaced by the Federal reserve's judgment and the free market interest has become a thing of the past (for now). Lower rates don't mean more spending; they mean more spending now and less in the future.

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Sun, 06/03/2012 - 21:32 | 2490495 Dear Infinity
Dear Infinity's picture

Good for them -- not us.

Sun, 06/03/2012 - 22:11 | 2490585 BankRiot
BankRiot's picture

Tyler,

Have you heard any rumors of JP Morgan cancelling employee vacations this summer in order to prepare for a financial collapse this summer?

thanks!

-Bankriot

http://www.examiner.com/article/market-rumor-pimco-and-jp-morgan-halt-vacations-to-prepare-for-economic-crash

Sun, 06/03/2012 - 22:19 | 2490605 X.inf.capt
X.inf.capt's picture

OH hell

this just gets better and better...

WTF......bitchez!

Sun, 06/03/2012 - 23:03 | 2490685 I think I need ...
I think I need to buy a gun's picture

someone on twitter said pimco did

Sun, 06/03/2012 - 22:41 | 2490643 Max Fischer
Max Fischer's picture

 

 

No.  It was encouraged that employees not travel to Europe for vacation, due to possible violence and uncertainty with the valuation of the Euro. Employees are still able to block out vacation time, and travel wherever they please. Additionally, some meetings scheduled in Europe are being re-scheduled for NYC. 

MF

Sun, 06/03/2012 - 22:56 | 2490670 Harlequin001
Harlequin001's picture

Do you work for JP Morgan?

Mon, 06/04/2012 - 06:29 | 2491027 neidermeyer
neidermeyer's picture

I'd be happier to hear that all executive level banksters had their passports suspended in anticipation of charges ... or that the O had decided to balance the budget by having the IRS go after past due amounts and penalties on failed REMIC's....

Sun, 06/03/2012 - 22:41 | 2490644 JackT
JackT's picture

Nice find. Anyone else hearing this?

Sun, 06/03/2012 - 23:35 | 2490737 lolmao500
lolmao500's picture

I wouldn't mind 0% interest rates if the goddamn FED gave 0% interest money to EVERYONE not just their buddies at the big banks...

Sun, 06/03/2012 - 22:50 | 2490655 AlaricBalth
AlaricBalth's picture

No, however I did hear at a derivative conference that the financial collapse was cancelled this summer in order for the JPM employees to enjoy their summer vacations in the Hamptons.

Don't you know that the TBTF banks control world financial events, not vice versa.

Sun, 06/03/2012 - 22:58 | 2490673 Harlequin001
Harlequin001's picture

Haven't they deferred the collapse until Wednesday?

Mon, 06/04/2012 - 00:17 | 2490815 Trimmed Hedge
Trimmed Hedge's picture

"Have you heard any rumors of JP Morgan cancelling employee vacations this summer in order to prepare for a financial collapse this summer?"

 

Ah, yes.. the well-timed "leak"... Like clockwork.

A little more downward pressure as the big boyz finish gobbling up 'em shares -- u know, right before QE3 is announced....

Sun, 06/03/2012 - 23:04 | 2490496 cdude
cdude's picture

Good for whom? Perspective makes all the difference.

Sun, 06/03/2012 - 21:33 | 2490497 bugs_
bugs_'s picture

Is free gas good?

Sun, 06/03/2012 - 22:03 | 2490561 Long-John-Silver
Long-John-Silver's picture

Only is you ate free beans.

Sun, 06/03/2012 - 21:34 | 2490500 tu-ne-cede-malis
tu-ne-cede-malis's picture

If the quality of these LearnLiberty videos (and many, many others) isn't an indicator of Higher Education's future irrelevance, then I don't know what is.

Sun, 06/03/2012 - 21:48 | 2490530 Taint Boil
Taint Boil's picture

 

 

Good point.

Sun, 06/03/2012 - 21:35 | 2490503 you enjoy myself
you enjoy myself's picture

"they mean more spending now and less in the future"

well, yeah, but that's a feature and not a bug when you're a politcal actor that only thinks in 1-4 year horizons.  IBGYBG.  Ben just wants to make it to 2014, Obama and Congress only gives a crap about making it to this November.


Sun, 06/03/2012 - 21:36 | 2490506 buttmilk
buttmilk's picture

Can i get more now and later.

Sun, 06/03/2012 - 21:59 | 2490548 Cursive
Cursive's picture

@buttmilk

It works until we hit a brick wall or fall off a cliff.  1950 to 2000 was pretty incredible, especially if you medicated yourself through the 1970's.

Sun, 06/03/2012 - 21:38 | 2490513 Sabibaby
Sabibaby's picture

I don't understand why we can't spend more now and spend more later?

 

WTF this guy is obviously a jerk!

Sun, 06/03/2012 - 22:33 | 2490630 Matt
Matt's picture

That would require more jobs, more pay for working (and not just nominally, but on a more absolute scale) AND higher savings. That's preposterous.

Sun, 06/03/2012 - 22:48 | 2490651 Sabibaby
Sabibaby's picture

I guess that's the point of this thread then... why save when you have more insentive to spend?

 

This will end badly :(

Mon, 06/04/2012 - 06:50 | 2491045 zhandax
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.

Sun, 06/03/2012 - 21:41 | 2490515 surf0766
surf0766's picture

The only way they were able to keep pushing rates down was to manipulate inflation lower so the sheep would not think they were being hurt buy higher prices.

When the final print happens the sheep will still not understand.

Sun, 06/03/2012 - 21:44 | 2490517 Alpacanio
Alpacanio's picture

Asian markets are tanking ATM...

Sun, 06/03/2012 - 21:43 | 2490519 A Lunatic
A Lunatic's picture

There won't be a fucking later..............

Sun, 06/03/2012 - 21:48 | 2490529 Sabibaby
Sabibaby's picture

It unanimous then, SPEND NOW!!!

Sun, 06/03/2012 - 22:06 | 2490568 Cursive
Cursive's picture

@Sabibaby

This actually does explain much of the consumer spending over the last 3 years.  The other driver has been the cost of inflation pushing those expenditures ever higher.  Inflation really works great for TPTB.

Sun, 06/03/2012 - 22:13 | 2490590 Sabibaby
Sabibaby's picture

That makes a lot of sense. Does the consumer have reason to be concerned or are they preparing for something? I;m guessing movies and big screen tv's but I suspect a few might have something else in mind...

Sun, 06/03/2012 - 21:46 | 2490524 JustObserving
JustObserving's picture

US debt is too high to afford normal interest rates - so they have to be very low. We are running $1.5 trillion a year deficits now  If interest rates were like those in the 90s, we would be running $1.9 trillion deficits a year.

The Fed has no choice but to keep interest rates low so the US can service its debts.

 

Sun, 06/03/2012 - 21:48 | 2490528 midgetrannyporn
midgetrannyporn's picture

no fed, no debt. problem solved.

Sun, 06/03/2012 - 22:59 | 2490678 vast-dom
vast-dom's picture

i'm giving u a +1 just for that name son!

Sun, 06/03/2012 - 22:04 | 2490563 mickeyman
mickeyman's picture

But if the Fed thinks that low interest rates will boost employment, they have another think coming. Why borrow money to build factories when at zero percent you can afford to keep borrowing and gambling on a leveraged Martingale strategy until you win.

Sun, 06/03/2012 - 22:35 | 2490633 Matt
Matt's picture

So the solution is for banks to charge a higher margin ontop of prime. This will help banks make more profit, encourage people to reduce debt, while keeping interest low for the Federal Government, which cannot possibly be expected to spend responsibly.

Sun, 06/03/2012 - 22:38 | 2490635 surf0766
surf0766's picture

How about we switch to GAAP and not cash accounting and state the real deficit of $5 trillion per year. Who manipulated inflation rates to allow the push down  in interest rates. How many decades did they know this was coming?

Sun, 06/03/2012 - 21:47 | 2490526 Stock Tips Inve...
Stock Tips Investment's picture

One of the functions of prices (and the interest rate is a price) is to convey information. When the price of a product rises, investors and consumers are receiving information. There is much demand for this product or there is insufficient supply or there is a run or any other reason. But investors and consumers "receive" information and make our own decisions. When you "manipulate" the interest rate, you are looking for investors and consumers to behave in certain ways. But this is a price "artificial" in the long run, the market takes care that the price reflects what is really happening between supply and demand. When this finally happens, the consequences can be disastrous.

Sun, 06/03/2012 - 21:56 | 2490542 q99x2
q99x2's picture

Abolish the FED.

Sun, 06/03/2012 - 22:15 | 2490597 X.inf.capt
X.inf.capt's picture

when interest rates go up

and they will go up....

you wont have to abolish the fed....it will collapse all by its self....then we may see a gold standard...if were lucky enough to live through the collapse...and austerity...and riots...and another world war...and the zombies...

*sigh*

Sun, 06/03/2012 - 21:56 | 2490543 Eireann go Brach
Eireann go Brach's picture

Everyone on here should wipe their arse with a $20 bill and then mail to the Fed and Bernankes attention with a note that says "you are full of shit".

Sun, 06/03/2012 - 22:01 | 2490550 A Lunatic
A Lunatic's picture

Can we use a Ten instead? I rather like Andrew Jackson.

Sun, 06/03/2012 - 22:06 | 2490571 urbanelf
urbanelf's picture

Stay away from me Lucky Charms!

Sun, 06/03/2012 - 22:02 | 2490556 FreeMktFisherMN
FreeMktFisherMN's picture

At least I was heartened to get a dollar bill in change last week that had 'End the Fed' coming out of GW's mouth. 

 

As far as interest rates, I cannot even fathom when people say they used to be in the teens. Then again I'm only 21 and for most of my life in which I've been aware rates have been egregiously low. 

Sun, 06/03/2012 - 22:10 | 2490583 azzhatter
azzhatter's picture

I had an 11 3/4% mortgage on my house in 1979 with 20% down payment

Sun, 06/03/2012 - 22:27 | 2490621 FreeMktFisherMN
FreeMktFisherMN's picture

imagine that; legitimate lending standards.

 

 

Sun, 06/03/2012 - 22:06 | 2490572 Let them eat iPads
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Not nearly as funny as cartoon bears, but succinct, to the point and easy enough for the average Ameretard to grasp.

Sun, 06/03/2012 - 22:08 | 2490577 Thunder_Downunder
Thunder_Downunder's picture

But but... what if everyone tries to save at once.. won't we be ... doomed? If capital is withdrawn in a capital constrained environment, wont the cost of capital rise? Rewarding the selfish penny pinching savers, and encourage more hoarding? Wont that unfairly punish the speculators by destroying the marginal returns they're barely achieiving... AKA big banks...?

 

Our keynesian friends tell us that only the wealthy can safely accumulate...  if the foolish masses start saving too the world falls apart, hence they must be forced to spend and take risks... so that the wealthy can consolidate their wealth and save us from the booogie man of recession. And to save us from all the foolish investments we made whilst being forced to spend....

 

I for one, salute the central banks of the world. Saving us from certain doom, and gifting us with a less certain but no less inevitable one :D

Sun, 06/03/2012 - 22:09 | 2490578 azzhatter
azzhatter's picture

It's killing me, I am consuming my seed corn

Sun, 06/03/2012 - 22:09 | 2490580 Bunga Bunga
Bunga Bunga's picture

Lower interest rates mean thicker mattresses bitchez!

Sun, 06/03/2012 - 22:11 | 2490584 FieldingMellish
FieldingMellish's picture

We have become: consume more now and more later.

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