Are Negative Interest Rates Coming To The US?


Negative interest rates coming there is a better economist the fed economists I should say in Saint Louis the one wrote in a paper that if we want to get a V. recovery we need to look at negative interest rates so is the fed going to look at that and I wonder I wonder if Jerome Powell is willing to go along with that idea join us to talk about A. K. T. R. H. money man patch in what's the likelihood of negative interest rates back well in a very good morning to you jamming in fact let's just mention real quick when we look at interest rates remember there's an entire spectrum of interest rates that run anywhere from overnight all the way up to thirty years we call that spectrum a yield curve the federal reserve today directly sat the overnight lending rate and I guess I should say in a normal environment the market they set up all of the other rates two year five year ten year twenty year thirty year but right now the federal reserve is directly influencing all of those rates because they're going into the open market and they're buying up all of these bonds so the chance of a negative rate is very very very low federal reserve chairman Jerome Powell has been asked this question before he's against it for a couple reasons one Germany and Japan currently have negative interest rates along their curve not all the rates but if you go out to to say ten years on Germany as an example their their rate is negative same thing for Japan or their rate in Japan is zero so don't pal points out Europe and also Japan and says look it hasn't really worked out hasn't done anything to stimulate the economy the other thing is that it makes it tougher for banks to make any money if rates are actually negative in fact it may cause banks to lose money and so Jerome Powell has come out against it yeah really the interest rate really it has an effect on consumers but it's really all about the banks and trying to keep the banks open to making money by lending money and getting it to the people correct you you are absolutely right Cher and I should mention that you know right now we are seeing and on believable I mean off the charts amount of stimulus coming in people are scratching their head wondering why the stock market's been going up in spite of record bad news and right now the federal reserve is you know going into the open market every day and they're buying up various assets now they don't buy stocks but they buy primarily government bonds to keep interest rates you know very very low they're now buying corporate bonds and they're buying tax free bonds and so the federal reserve has been going on on a daily basis and buying up all these assets I think one very very big misunderstanding that I see basically everybody get wrong is when you see this being discussed on television they show a printing press they show hundred dollar bills going across on a big printing press and being wrapped up on a pallet it's important to know all the programs that the federal reserve is doing right now do not require printing any money instead banks remember banks are required to keep money on deposit at the federal reserve the fed is simply borrowing money from these banks but right now you can actually go on the way out of the federal reserve discloses that daily right now the federal reserve has assets on their books right now of over seven trillion in dollars yeah you know but the hundred dollar bills looks so good on TV packs got me going let's let's talk a little bit Jimmy there are and you would be a I'm yes you would be able to come up with a dog absolutely I got special scissors does for that matter all right let me quickly ask you about mortgage interest rates hearing fifteen year loans are as low as two and a half percent right now the housing market is doing surprisingly well what we think is going to happen with mortgage interest rates accent so yep and so the federal reserve is targeting rates that was one of the thing that former fed chair Ben Bernanke dead back after the financial crisis in oh wait or no nine and it worked really really well and so right now you've got rates at record lows we think they're going to stay low for a very long time if we do see the economy start to pick up in the third and fourth quarter and we see longer term interest rates start to move up the federal reserve will use some of their ammunition and go in and buy up bonds in the open market in order to keep interest rates down so of all of the things that we could look at and do right now it is a wonderful wonderful time to refinance a mortgage not every loan is is is going to be favorable to refinance remember you've got to pay for a number of up front tight cost things like the title policy but you would want to call a mortgage professional and ask them if it makes sense to refinance and specifically asked how long do you need to go before you reach the break even point yeah and you generally have is what lesson five years you're good good to go yep if you're gonna stay in the house for longer than that sure you're exactly right it may be two years and you're only going to stay there for a year well then it wouldn't make sense but that look and find out when the break even point is when it it it pays to refinance

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