I’m wondering if it might be better to start charging people for us to hold their money.
WASHINGTON (AP) — Interest rates on short-term Treasury bills were unchanged to higher in Tuesday’s auction. The rate on three-month bills remained at the lowest level on record and the rate on six-month bills reached their highest level since late September.
The Treasury Department auctioned $20 billion in three-month bills at a discount rate of zero percent, unchanged from last week. Another $20 billion in six-month bills was auctioned at a discount rate of 0.080 percent, up from 0.065 percent last week.
Because of the Columbus Day holiday on Monday that closed federal government agencies, this week’s auction was held Tuesday.
Short-term rates have been at ultra-low levels for a number of years, reflecting efforts by the Federal Reserve to boost the economy by pushing borrowing rates down. The Fed’s key benchmark rate has been at a record low near zero since December 2008.
This week’s continued three-month rate of zero percent means the government was able to auction $20 billion in short-term securities to investors who were willing to loan money to the government for three months without getting any return on the investment. The 0.080 percent rate for the six-month bill was the highest since those bills averaged 0.105 percent on Sept. 28.
The discount rates reflect that the bills usually sell for less than face value. The three-month price for a $10,000 bill was $10,000, showing that the buyers are earning no interest on those bills. The six-month price for a $10,000 bill was $9,995.95.
At those prices, the annualized rate of return for a three-month bill was zero, while the rate of return for a six-month bill was 0.081 percent.
Separately, the Federal Reserve said Tuesday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable-rate mortgages, fell to 0.27 percent last week from 0.31 percent the previous week.
Well, we’ve finally gotten to the point of free money. We are suppose to believe people and entities are willing to loan the US money, for nothing in return. Well, actually at a loss given that we have an inflation rate above zero. Happens all the time, amirite?
This is illusionary. It’s not real, and it doesn’t reflect reality going forward.
I fear the Fed is now firmly entrenched in modern Keynesian economics and politics.
While the low interest rates set by the Feds may have originally been an effort to boost our economy, it isn’t today. We’ve gone 7 years without the low rates giving the economy any measurable boost. Even the dimmest of idiotic central bankers should by now realize that’s not how it works. One must have prospects of future gains in order to borrow money, even if the rates are low.
Here is a graph of the Fed’s interest rates since 1990 ……
Here’s how we stack up against other central banks …….
central bank interest rate
region percentage date FED interest rate United States 0.250 % 12-16-2008 RBA interest rate Australia 2.000 % 05-05-2015 BACEN interest rate Brazil 14.250 % 07-30-2015 BoE interest rate Great Britain 0.500 % 03-05-2009 BOC interest rate Canada 0.500 % 07-15-2015 PBC interest rate China 4.600 % 08-25-2015 ECB interest rate Europe 0.050 % 09-04-2014 BoJ interest rate Japan 0.100 % 10-05-2010 CBR interest rate Russia 11.000 % 07-31-2015 SARB interest rate South Africa 6.000 % 07-23-2015
Pardon the formatting, I can’t seem to get the table to cooperate.
Now mind you, the world, as a whole, is in an economic $hit-hole. And, mind you, the interest rates on our treasury notes are not the same as the interest rates of the Fed. Rather, the rates the Fed sets impact the rates we get from our treasury notes.
Given that low interest rates do not stimulate an economy (look at the ECB’s and Japan’s rates!), then, the reasons for keeping the rates low are for a different effect. Now, I do believe a sudden large jump, for instance, to 2% or some such would cause a huge shock and a probable sudden depression. But, are we to believe a slight increase to, say, 0.4% would cause a calamity of any sort? Nope. Great Britain seems to be doing better than the US and their rates are twice ours!
That’s not the reason why they’re keeping their rates so low.
Now, many would see this as a good thing. …….. Let me be clearer for those not so well versed in this “stuff”.
The interest paid on our treasury notes goes directly to our “US FEDERAL BUDGET DEFICIT”. Even a slight uptick in the rates the Federal Reserve charges would cause a significant increase in the interest rates our treasury notes would have to pay. The higher the Fed rates, the higher the deficit, the more we have to issue bonds, and then the higher the deficit. A vicious cycle!
But, what if we didn’t have to pay any interest on our treasury notes? Or, what if what we paid in interest was less than our real inflation rate? Then, the money we pay back is less than the money which was loaned to us! Suddenly, we’re making money off of the people loaning us money!!!! Which is exactly what’s happening with our short-term treasury notes.
Mull that over in your head for a bit. Think about it.
It’s illusionary. It’s the equivalent to the perpetual motion machine. Indeed, it is the perpetual motion machine. Money is only a proxy for things done and made. Things done and made are the only things which gives money any value. If we can make money from people lending us money, then, we’ve solved the perpetual motion problem. But, the perpetual motion machine isn’t real. It can never be real. And, neither can it ever be a reality that you can borrow yourself wealthy.
But, this is why the Fed is keeping their rates low, and, it entirely violates their charter and our law.
This then brings me to start to understand why we have the insipidly stupid stubborn insistence that GDP is a euphemism for economic health. You see, government spending is part of the GDP. Start cutting government spending and the GDP will initially lower. Yet, it can easily be seen that if government spending is cut, the average citizen can be wealthier. (Less spending = less necessity to tax).
Earlier in the post I wrote “modern Keynesian economics”. I predicated Keynesian with “modern” because Keynes, in spite of his short-sightedness, never advocated what we see today. It’s an interpretation and bastardization of what Keynes thoughts were. It is done so because his writings more closely fit as an excuse indebt an entire nation of great wealth.
Consider what the leading Repub presidential candidate advocated, recently. We should tax the wealthy more and no taxes for the rest of us rabble. I seriously doubt that Trump has ever read Keynes, or any other economic thinker. Tax proposals such as his have no regard towards the debt of the US, nor, does it even regard the attempt to alleviate the necessity for taxes. The proposals such as what Trump and others, such as Sanders, are only vehicles to control the masses and accumulate power.
[On an aside, I’m personally repulsed by the notion that I would be compelled, by federal statute, to suck off the teet (or other appendage) of a fellow citizen.]
The low interest rates are simply an addiction, much like an addiction to heroin. Only, an addiction to heroin would be much safer.