What negative interest rates mean for you?

Short answer: nothing.

Janet Yellen, Chairman of the Federal Reserve said the Fed will not rule out negative interest rates.

Let’s first explain what happens normally when interest rates are positive. You know that when you borrow money from the bank, you pay back the debt you borrowed and interest. That interest payment is a result of a positive interest rate.

With this logic, one would think that when the interest rate is negative, when you borrow money, you will actually be paid an interest payment rather than paying it. But that’s not the case unless something else happens. But i can’t talk about the something else until I explain what does happen with a negative interest rate.

The Fed lends money to banks at a negative interest rate. Now the bank has a lot more money to lend and so they do. Why? Because they could earn a lot more money by lending rather than simply sitting on it. But the banks lend it at a positive interest rate. The difference between the bank received by borrowing money from the Fed and lending money to borrowers is their profit. That means that if you qualify for a loan, you will likely see a slightly lower interest rate but it will not be negative. This announce means little to most people, then.

In this sense, there is no difference between positive and negative interest rates.

In another sense, they are encouraging borrowers to effectively lend money to other borrowers for an easy return on the borrowed funds. As a matter of fact, because of the stringent lending standards, those who can afford to not borrow will borrow and create their own portfolio of loans. This is essentially expanding the shadow banking industry, rather than decreasing it, which was what the fed tried to do a couple of years ago.

This about face is a result of very low inflation rates in April, which indicates reduction of the economy might be eminent. April’s annualized inflation rate was 0.8%, which is almost non-existent.

The Fed only has two tools: interest rates and money supply. If they increase money supply, they will devalue the currency and make it cheaper for economies using other currencies to purchase US products and services. If they decrease interest rates, they will increase spending because it won’t be as enticing to save money when interest rates are so low.


in re there’s something wrong with the labor market

In a recent article on Business Insider, there is a great economics overview of what it means to have 5.8 million job openings when the US economy has 5% unemployment – that is to say, lots of job openings and low unemployment.

It didn’t cover, however, the economics of job opening. As a matter of fact, it gave itself the opportunity to do so when it explained that this phenomenon could mean there is a mismatch between what employers are seeking versus what employees can offer. Yes, there might be a large gap. But unlike in the past, job openings cost less to have open than before. They can essentially be open for free forever and they can collect CVs even when they are not actively seeking to replace or fill a role. As a matter of fact, employers can simply have a job opening for every role in the firm at all times.

The forever job opening is happening to some degree. There are posting for entry level jobs from five years ago cuz, well, why not. If you are collecting CVs and purging them as they reach their 6 month anniversary, then thry have an ongoing active list of jobseekers when the current employee leaves.

The Panama Papers, see for yourself

From Deutsche Welle

The International Consortium of Investigative Journalists (ICIJ) has created a database where anyone can look through the Panama Paper. You should be hearing a whole lot more about it in the coming weeks as outsiders see morr recognizable names start to surface.

There has also a dirth of reaction from Congress, as some have been complaining. Many in Congress probably do not want to discover that their associates and allies are linked to this inflammatory issue.

Len Gotshalk, former NFL player, created a shell corporation. Whether the activities in his. company are lehal or not is one concern. Another is that not his nme is along side other American clients of Mossack Fonseca, many of whom have criminal records. Most seem to have been found guilty of financial crimes.

Even national governments have created shell companies. Such is the case for the African nation of Ghana, which created a shell corporation for, among other things, its tourism bureau. While the activities in it are not yet known, if it went through MoFon, then we will find out.

This all happened because the hacker, known as John Doe, was able to take advantage of an insecure out-of-date SSL v2 protocol. It turned out that the Firm was using an out of date version of Drupal content management system. This basically means, MoneyCompliance is more secure than the lae firm creating secretive legal entities.

John Doe seems unhappy that governments are not trying to fix inequality. Goes to show how hackers cannot control the story.