Soon, The US will pay you to borrow...

[M.Dancer]

WASHINGTON — The U.S. Federal Reserve Board on Tuesday aggressively cut its target for overnight interest rates to a record low zero to 0.25 per cent, and said it would employ “all available tools” to dispel a year-long recession.

The surprise move to lower its target for the benchmark federal funds rate by 0.75 percentage points to up to a full point from its prior 1 per cent put the Fed in unprecedented policy territory. Financial markets had expected the Fed to lower rates by no more than three-quarters of a point.

http://business.theglobeandmail.com/servle...y/Business/home

And the G&M asks....How much deeper can central banks cut?

[msj]

Yep, ZIRP is officially here (zero interest rate policy).

Welcome to Japan, everyone!

I notice that last week T-Bills were being bought up in such a frenzy that the people/institutions buying them were getting the equivalent of a negative interest rate.

The best rationale I saw for this was that it was a small price to pay to ensure one gets the full principal back. To put funds into a bank account may not have cost the premium paid on the T-bill but if you are putting in more than the FDIC limit then T-bills are the safest way to reduce one's risk.

If that is the rationale then there is a lot of scared money out there and zero percent isn't likely to help.

[M.Dancer]

I notice that last week T-Bills were being bought up in such a frenzy that the people/institutions buying them were getting the equivalent of a negative interest rate.

Makes me feel like a financial genius, locking in my RSPs at 4.1%...

A woman in our office has an open variable mortgage. When she got it her rate was near 6%, now it is just over 3%...my RRSPs pay more than her mortgage..

[Wilber]

Makes me feel like a financial genius, locking in my RSPs at 4.1%...

A woman in our office has an open variable mortgage. When she got it her rate was near 6%, now it is just over 3%...my RRSPs pay more than her mortgage..

Hope the feeling lasts. Who knows what a financial genius is these days. You just do what you think is right and hope for the best. The last two year GIC I bought at the beginning of the month is paying more than the current rate on my line of credit. Great, but if we get into a real bout of inflation, we won't be geniuses any more.

[capricorn]

You just do what you think is right and hope for the best.

Five or ten years ago, those people who invested in the stock market wisely probably racked up 20-25% profit on their investment. When they lost half of those profits when those stocks plummeted aren't they in fact still ahead of the game? I mean, isn't it just that they got used to the big payoff and now the payoff is not so good and they feel hard done by when their portfolio shrank? I wouldn't know since I kept my investments in RRSP GICs cause I was over 50 and chicken.

if we get into a real bout of inflation, we won't be geniuses any more.

Would inflation cause interest rates to go up or go down? I'm totally green about this topic and am really curious. Anyone know?

[Smallc]

Would inflation cause interest rates to go up or go down? I'm totally green about this topic and am really curious. Anyone know?

I believe that it would require that we raise rates in order to try to keep the inflation in check.

[Wilber]

Five or ten years ago, those people who invested in the stock market wisely probably racked up 20-25% profit on their investment. When they lost half of those profits when those stocks plummeted aren't they in fact still ahead of the game? I mean, isn't it just that they got used to the big payoff and now the payoff is not so good and they feel hard done by when their portfolio shrank? I wouldn't know since I kept my investments in RRSP GICs cause I was over 50 and chicken.

You would be surprised how many blue chip companies have had their stock values decline to values that are at or lower than they were ten years ago so the capital gain has been wiped out with many of them. The upside is at their present prices the profitable ones are producing the highest dividend yields in their history. If they remain profitable, don't have to cut their dividend and their values don't decline any farther, they are a much better investment than GIC's. The trick is as it has always been with stocks, picking the right ones to buy.

Would inflation cause interest rates to go up or go down? I'm totally green about this topic and am really curious. Anyone know?

The last time we got into double digit inflation during the mid eighties, mortgage rates peaked out at around 20%.

[capricorn]

Thanks for the info Wilber, an eye opener for me.

[Topaz]

I came on this website and its about the Fed. Reserve and the US money and which banks are under the Fed.Res. and who among Americans are connected to them very interesting reading. www.andrewgause.com