Tuesday, September 1, 2009


I've been meaning to post some links on this since I first saw it in early July.
Never got round to doing it earlier, but luckily just saw a reminder note. So here it is at last!

''"In practical terms, the Riksbank's ( Sweden's Central Bank) (0.25)% deposit rate means that banks with accounts at the central bank are paying Riksbank 0.25% in interest to keep deposits at the institution.
The rationale for the policy is that the negative interest rate will create a disincentive to hoard money, which creates an additional layer of headwind for an economic recovery. In these precarious economic times, that's considered a risk worth avoiding.""
Source: Sweden Experiments with Negative Interest Rates -- Seeking Alpha

Central banks are clearly going all out to force an economic recovery!
New tactics to tackle old problems of ineffective regulation, excessive leverage and inadequate capitalisation at banks and Insurance companies!

The crucial questions we should be asking now is :
  • Will more Central Banks start to adopt similar tactics if the banks refuse to step up lending activities?
  • Could this action needed, if the world economy starts to slide into a ''Fall 2008 style'' relapse as the effect of the numerous stimulus packages starts to wear off ??

More Links
Sweden: negative interest rates and quantitative easing
Mish's Global Economic Trend Analysis: Sweden Cuts Deposit Rate to ...
Sweden Experiments with Negative Interest Rates -- Seeking Alpha

Bankers watch as Swedish interest rates goes subzero

No comments: