The Fed Wants to Test How Banks Would Handle Negative Rates

[LiberalArkie]

By: Rich Miller

As interest rates turn negative around the world, the Federal Reserve is asking banks to consider the possibility of the same happening in the U.S.

In its annual stress test for 2016, the Fed said it will assess the resilience of big banks to a number of possible situations, including one where the rate on the three-month U.S. Treasury bill stays below zero for a prolonged period.

"The severely adverse scenario is characterized by a severe global recession, accompanied by a period of heightened corporate financial stress and negative yields for short-term U.S. Treasury securities," the central bank said in announcing the stress tests last week.

In that particular simulation, the unemployment rate doubles to 10 percent, the same level it reached in the aftermath of the last financial crisis.

Snip

http://www.bloomberg.com/news/articles/2016-02-02/rates-less-than-zero-is-bank-stress-fed-wants-to-test-in-2016

[NeoGreen]

1. Does this mean that the bank will pay me...

..if I take out a loan?

Flip-side, should I start taking cash out of the bank so I can play Scrooge McDuck in my basement?



Hmmmm....

[LiberalArkie]

2. I think Japan started it a few months ago. I think it means that the economy sucks.

I think I read where they don't want people saving their money, just spending it. I personally do not know anyone who can save anything more that putting pocket change in a jar.

[NeoGreen]

3. Yes, the economy does suck for the non 1%

I vaguely remember the quietly ignored report on NPR in mid-January where Japan's central bank instituted negative rates.
I'm not sure the extent and depth of the policy. I'll have to search for that.


On a related note: I recently purchased and viewed a copy of Robert Reich's Inequality for All.

I highly recommend you get a copy from Amazon, Netflix or the local library and watch it and share it.

https://en.wikipedia.org/wiki/Inequality_for_All

http://www.amazon.com/Inequality-All-Robert-Reich/dp/B00G0PXU2Y/ref=sr_1_2?ie=UTF8&qid=1454524287&sr=8-2&keywords=inequality+for+all

https://www.facebook.com/InequalityForAll/

[dogman]

4. How is this not an indirect tax?

It would seem a deflationary move. Has austerity won?