Read on Twitter
Savers compound at -0.084% so meaning income worse. At such a rate, governments gain, savers lose & so pension funds/lifers etc that rely on income to fund future spending will, well,
.
Also, this all will lead to lower UK growth as people'll just save more as they're NIRPED. https://twitter.com/katie_martin_fx/status/1281512733763153922
.Also, this all will lead to lower UK growth as people'll just save more as they're NIRPED. https://twitter.com/katie_martin_fx/status/1281512733763153922
Who are the savers? Well, basically everyone. You just don't know it but your pension that u're forced to contribute to is a form of savings & not just your saving account at a bank.
And that gets managed by professionals. And those people have to buy assets such as 5-yr GILT.
And that gets managed by professionals. And those people have to buy assets such as 5-yr GILT.
As the government fails to prevent a pandemic & decides to then lock-down the private sector & then compensates with more INEFFICIENT spending, the public sector debt SWELLS.
But don't get excited. Growth won't follow. To finance this, central bank helps w/ very low rates & QE.
But don't get excited. Growth won't follow. To finance this, central bank helps w/ very low rates & QE.
All good here in terms of interest expense (btw, principle still there) & even better now that we're compounding debt at negative rates.
Meanwhile, that means u got a situation where the most inefficient part of the economy got massive & so u know ur future is worse.
So u save.
Meanwhile, that means u got a situation where the most inefficient part of the economy got massive & so u know ur future is worse.
So u save.
Let's not forget another consequence of very low interest rates engineered by the gov to finance its larger share of the economy: it forces people to take more risks to get some positive income for their savings. That in itself systemically miss-prices risks. Nothing to celebrate
In short, may I conclude that markets pricing in NIRP for the UK & that can only be negative for the UK in the future as imagine a situation where u need NIRP to survive.
Or maybe the whole negative thing is just a miss-pricing of the future after all & we'll be all PIRP soon
.
Or maybe the whole negative thing is just a miss-pricing of the future after all & we'll be all PIRP soon
.
