Negative Rates: Bankers Enticing You to Become a Debt Slave.
In this report, I cover the early market action from London on Friday, June 7th, 2019. I look briefly at the precious metals, the stock market, the dollar, the bond market and the price of WTI and Brent crude oil.
Today I look at an article from Simon Black of Sovereign Man in which he writes about how Nordea Bank from Denmark offered to lend him a 10-year mortgage at minus 0.12%. It does seem puzzling to think that a bank would want to pay you to borrow from them but do not be fooled into thinking the bankers are being nice to you by doing this.
The way this works is that Nordea Bank will be paid a bit more to borrow from the Danish Central Bank so even though it seems like a great deal for you the borrower it is just as good a deal and if not a better one for Nordea. The other side of the coin is that you would be taking on debt in a period of deflating interest rates which means rising bond prices or loans.
My conclusion is that it is very tempting to be told by your local banker or mortgage broker that you will be paid monthly interest to take on a mortgage but do not forget that you will be taking on a debt load which becomes harder and harder to pay off in a period of deflationary interest rates and rising loan prices.
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Simon Black Article: https://www.silverdoctors.com/headlines/world-news/simon-black-bank-in-denmark-just-offered-me-negative-interest-rate-to/
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I’ve had my bank phone me trying to get me to take a loan and when I asked them why I need a loan they said ITS A GOOD TIME TO HAVE ONE i couldn’t believe what I was hearing. Thanks mike
Same here!
Quite often I'm contacted by email, credit reference agencies or my bank , saying that I've been preapproved for a loan. Some of them say a decision in 5 minutes, but the interest rate is stupendous - most think I'm an idiot.
Always, I go for zero % percent interest rate credit cards.
These banksters have learned nothing. Cheers mike
Negative interest rates - an interesting post. I find it hard to get my head around this. So use to positive interest rates. Will have to review it again.
Yesterday's post was most informative!
When financial institutions fail, counterparty risk causes a domino effect throughout the system - as you say.
It seems to be reminiscent of 2006/2007 that councils - such as Kent County Council - pension funds are investing in riskier funds . Reminds me of the Iceland banks being used at the time to obtain a better return and that did not work out well.
Thank you for your posts.
Japanese Government announced recently that they could not gurantee the future payment of National Pension If the economic situation(negative interest rate) did not change. At the same time, they prohibited the factories to produce any new yellow vests.