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Tuesday, December 9, 2008

Economy Investors Paying the Federal Government to Take Their Money

Posted by Jonathan Golob on Tue, Dec 9, 2008 at 11:05 AM

From Bloomberg:

Treasuries rose, pushing yields on the three-month bill to minus 0.01 percent, as U.S. stocks declined amid concern that the recession will deepen.

In other words, investors are willing to give the government $10,000 now, if they're promised to get $9999 back in three months—willing to accept a guaranteed loss on investment.

Deflationary spiral, anyone?

Other news? Also from Bloomberg:

China’s exports may have contracted last month as industrial output cooled, adding pressure for policy makers meeting in Beijing this week to do more to sustain economic growth.

“Things are not so good,” Fan Gang, an adviser to the central bank, said at a Beijing forum today. “November figures will come out soon, and industrial growth will be something around 5 percent and export growth will be negative.”

The government has already unveiled a 4 trillion yuan ($582 billion) stimulus package and cut interest rates by the most in 11 years as a global recession reduces demand for toys, textiles and electronics. A decline in exports would be the first in seven years and increase the risk that the slowdown in the world’s fourth-biggest economy will become a slump.

Perhaps it's time for some policy changes.

Comments (6) RSS

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0.01% of $10,000 = 0.01/100 * 10,000 = 10,000/10,000 = $1.

The return is $9,999 on $10,000 invested, not $9,999.99

Posted by maxk on December 9, 2008 at 11:15 AM

Deflation is still deflation.

Main problems right now are:

1. Declining value in houses mean many mortgage holders are losing money on their primary asset, so the wealth effect is negative, and they spend less.

2. Banks still won't loan money to those who will spend it (think small business and middle class and working poor).

3. Bank credit cards still have usurious 28 to 30 percent interest rates even while the nominal interest rate is around 1 percent - and have doubled or triple minimum payment amounts. This means people would be insane to purchase anything with a credit card and chokes off retail sales.

4. Auto dealers can't get car loans for people who have good credit (something like two-thirds of eligible applicants).

Want to solve it? Reinstate laws against usury (e.g. 15 percent credit card max), force banks to loan money instead of hoarding it (hint: confiscate CEO/exec assets until they do), and shoot any Republicans in the head.

Oh, ok, maybe not the last one, but that might be the only thing that works with them.

Posted by Will in Seattle on December 9, 2008 at 11:30 AM

What is usury?

Posted by Shove that Bible up your ass on December 9, 2008 at 12:10 PM

Didja see the World Bank China report? Folks who know say it's the shit.

http://siteresources.worldbank.org/INTCH…

But didja hear about Richard Duncan too? He pointed out in Far Eastern Economic Review (available online if you have a Seattle Public Library card) that Asian banks, chief among them China's - because of the _exact_ sequence of events Fallows pointed out in your link - effectively financed, made possible, the excessive U.S. consumption that propped up China's export industries, fueling the real estate bubble that is unwinding so disastrously for us, and soon for them too. Petards are auto-hoisting in China, and he prescribes massive emergency bank shorings-up and stimuli to protect them against a protectionist US backlash, which would devastate them.

Posted by tomasyalba on December 9, 2008 at 1:02 PM

@3 - i don't know, what's a dictionary?

Posted by Will in Seattle on December 9, 2008 at 1:43 PM

@5 under Will in Seattle I found this humorous and pertinent definition;

Lecherous old man that lies about himself out of insecurity.

Posted by Canada doesn't even want you. on December 9, 2008 at 2:15 PM