Tuesday, March 18, 2008

Credit crunched?

What happens in just a couple of months when the Federal Reserve can no longer reduce interest rates as they are already 0%!?!

2 comments:

John said...

What happens is going to be great!
Instead of us having to pay *them* when we borrow money, they will be paying us to borrow it! Suddenly for every grand you owe Visa, you will get paid 300 quid at the end of the month, unless you are stupid enough to pay off the minimum balance that is... or if you are a muslim, which people aren't allowed to pay interest so I suppose that works in reverse, too?

Mark Wadsworth said...

Have you never heard of negative interest rates?

Real negative interest rates (when inflation is higher than interest rates minus income tax) is perfectly common.

In olden times, banks used to charge people a small fee for the service of looking after their money safely. And in (I think) Switzerland (or was it Japan?) in the 1980s or 1990s some banks paid interest on the basis of central bank rates minus 2%, which was a bit embarrassing when central bank rates went dow to less than 2%!

I don't think that John's vision will ever be realised, though.