Loved this video and even more relevant today than when it was made a few years ago. I can't believe it has so few views. Thanks a lot for making this!
Thanks Aswath . My first time listening to you . At the end you said that these negative interest rates open the doors more widely for a digital currency . Well in 2019 Facebook has announced their currency called Libra .
A phenomenon in the USA is large,commercial banks consolidating into a very few megabanks,those banks tend to pay depositors very low interest rates,but there is a corresponding rise in the popularity of credit unions,which tend to pay higher interest to depositors. The credit unions seem to be the new local banks in that consumers tend to do their banking at these credit unions. I think some megabanks have lobbied politicians in the hope of getting laws passed that would restrict the ability of the public to bank at the credit unions.
Those who have direct control on the economy (in the USA could be the IRS or the FED) should focus on lowering taxes instead of just lowering rates to promote investments.
This was a very prescient presentation. Quick questions: why do no current commentators seem to focus on real rates, and only nominal. Aren't negative rates likely forecasting upcoming deflation? What if the expected return on today's negative rate bonds is still priced in around 1-2% real? It seems like the market is rendering a verdict that the central banks won't be able to change this situation in the near to mid term.
I discovered the brilliant mind which is Aswath Damodaran a few days ago. A small correction though... 15:55 "As the Danish central bank lowers rates, what if the ECB also lower rates?" It's beside the point being made, but Denmark has had a fixed exchange-rate system since the 1980s. The interest rate is very much dictated by Draghi. It's explained in detail here: www.nationalbanken.dk/en/monetarypolicy/fixed_exchange_rate_and_erm2/Pages/default.aspx
Thanks Aswath for enlightening me on the topic. I am an equity investor in the Indian stock market with stagnant earnings growth and worried about the future. I do not see negative interest rates are working for the developed economies. Infact, it is creating lot of divergence and added risks.
although ur not a specialist in monetary policy but this is great stuff. I am struggling to understand many things about the negative interest rates which are: - are they an early sign of deflation or the result of deflation ? - is a negative interest rate a result of a very high demand on a certain bond ? - is this deflation the result of QEs and USA gigantic off balance sheet debt ?
There is currently a loud political backlash against the Australian Liberal (actually conservative) government for attempting to bring in a law restricting or banning cash transactions because quite a few people are aware of the risk of negative interest rates.
Negative interest rates: An abomination. A rip off. Possibly an extreme form of taxation? Also fear "de facto negative interest rates" when published interest rates are perhaps small and positive but lower than inflation or perceived inflation,causing some of the same investor and saver behaviors as would be expected during explicit negative interest rate periods. People who lend out money deserve some kind of compensation for doing it,borrowed money is worth something to the person who has the use of it for the term of the loan or mortgage.
Prof when we switch currencies and try to convert the cash flows do we use a constant exchange rate for all the previous CF or use the actual rates and make assumptions about future exchange rates?
Professor, if central banks decided to print larger denomination currency notes (eg: $1 MM note), would it affect the story about costs of holding "cash under the mattress" ?
Larger denomination would make it more attractive to store money under mattress, as it would lower interest rates further, because of its dampening effect on inflation, caused by lowering the velocity of money. en.wikipedia.org/wiki/Velocity_of_money
from the perspective of lowering interest rates and digital currencies, it seems that the long term view is in favour of digital currencies. this is yet another reason to stash your kids savings in them
Funny and very sad moment intellectually ... I remember back in 2007 sitting in a class when a classmate asked this question about negative interest rates and we all laughed at him ... now we are still struggling to understand valuation and implications of this problem...2021
The presentation needs to take on a more global if not higher level perspective. The presentation needs to take on a perspective from consumers of transactions including global consumers. Negative interest rate can become another form of taxation if not a global one. If central banks are setting a negative interest rate and the market follows that trend, the consumers are paying for the loss. The cost of holding cash in bank accounts to perform transactions for convenience. Therefore, the loss can be viewed as another form of consumer taxation that is set by the central bank. Globally, if the bond market follows the negative interest rate, foreign countries trading with a country with negative interest rate may need to hold the country's negative interest rate bond as reserves to perform trade transactions worth billions in the country's currency. Therefore, holding the bond with negative bond rate and losing money on the bond due to negative cashflow can be viewed as global taxation on those countries losing money in holding the negative rate bond. Why would consumers and foreign government hold bank accounts and bonds with negative interest rates? For the convenience of performing all types of transactions including global trading. Trump Administration citicized China for weakening its currency. Here they are weakening U.S. currency by heading toward zero central bank rate and the possibility of bond market following that direction.
That's why Modi changed the Indian currency...people had massive safes full of cash and he wanted to tax it. Stuffing money doesn't work if your govt. just invalidates the paper you're holding...
24:25 'The greater they offer an opening to a Digital currency that actually meets the requirement for a good currency& issuing authority you trust'. Fed: Centrally backed Digital Currency are coming!
“You thought you controlled all the levers when, in fact, you control none of them”
...You are the most honest teacher I’ve ever had. Thank you.
9
you sir are the best wisdom youtube had ever have
Great job! Thank you! The video is dated 4 years ago, but it is a great shot even today...or moreover :)
Loved this video and even more relevant today than when it was made a few years ago. I can't believe it has so few views. Thanks a lot for making this!
Thank you professor for this amazing class!
Damodaran: "even if the central bank is buying 80, 90, 100 billion worth of bonds."
Jerome Powell: This isn't even my final form
Thanks Aswath . My first time listening to you . At the end you said that these negative interest rates open the doors more widely for a digital currency . Well in 2019 Facebook has announced their currency called Libra .
This was an excellent assessment of the topic. Thankyou.
Hats off to The Great Madrasi Valuation Anna!
Very useful series of videos. I came across your blog (Valeant coverage) last week and am glad that I found these videos.
A phenomenon in the USA is large,commercial banks consolidating into a very few megabanks,those banks tend to pay depositors very low interest rates,but there is a corresponding rise in the popularity of credit unions,which tend to pay higher interest to depositors.
The credit unions seem to be the new local banks in that consumers tend to do their banking at these credit unions.
I think some megabanks have lobbied politicians in the hope of getting laws passed that would restrict the ability of the public to bank at the credit unions.
Man I can't thank you enough. I wish I studied in NYU!
Finally found what I'm looking for, thank you so much professor
Mind-blowing explanation, sir!!!
Thank you so much for the invaluable education, Sir
Those who have direct control on the economy (in the USA could be the IRS or the FED) should focus on lowering taxes instead of just lowering rates to promote investments.
This was a very prescient presentation. Quick questions: why do no current commentators seem to focus on real rates, and only nominal. Aren't negative rates likely forecasting upcoming deflation? What if the expected return on today's negative rate bonds is still priced in around 1-2% real? It seems like the market is rendering a verdict that the central banks won't be able to change this situation in the near to mid term.
They are great for creating asset bubbles and rewarding the rich but not good for most people
I discovered the brilliant mind which is Aswath Damodaran a few days ago. A small correction though... 15:55 "As the Danish central bank lowers rates, what if the ECB also lower rates?" It's beside the point being made, but Denmark has had a fixed exchange-rate system since the 1980s. The interest rate is very much dictated by Draghi. It's explained in detail here: www.nationalbanken.dk/en/monetarypolicy/fixed_exchange_rate_and_erm2/Pages/default.aspx
Great video. 6 years later his final remarks were dead on
Thanks Aswath for enlightening me on the topic. I am an equity investor in the Indian stock market with stagnant earnings growth and worried about the future. I do not see negative interest rates are working for the developed economies. Infact, it is creating lot of divergence and added risks.
although ur not a specialist in monetary policy but this is great stuff. I am struggling to understand many things about the negative interest rates which are:
- are they an early sign of deflation or the result of deflation ?
- is a negative interest rate a result of a very high demand on a certain bond ?
- is this deflation the result of QEs and USA gigantic off balance sheet debt ?
I believe that "QE" stymied the ability of the market to logically value the involved bonds.
There is currently a loud political backlash against the Australian Liberal (actually conservative) government for attempting to bring in a law restricting or banning cash transactions because quite a few people are aware of the risk of negative interest rates.
Great video!
Negative interest rates: An abomination. A rip off. Possibly an extreme form of taxation?
Also fear "de facto negative interest rates" when published interest rates are perhaps small and positive but lower than inflation or perceived inflation,causing some of the same investor and saver behaviors as would be expected during explicit negative interest rate periods.
People who lend out money deserve some kind of compensation for doing it,borrowed money is worth something to the person who has the use of it for the term of the loan or mortgage.
Well said sir. Thank you.
Prof when we switch currencies and try to convert the cash flows do we use a constant exchange rate for all the previous CF or use the actual rates and make assumptions about future exchange rates?
Professor, if central banks decided to print larger denomination currency notes (eg: $1 MM note), would it affect the story about costs of holding "cash under the mattress" ?
Larger denomination would make it more attractive to store money under mattress, as it would lower interest rates further, because of its dampening effect on inflation, caused by lowering the velocity of money.
en.wikipedia.org/wiki/Velocity_of_money
Thank you for sharing.
from the perspective of lowering interest rates and digital currencies, it seems that the long term view is in favour of digital currencies. this is yet another reason to stash your kids savings in them
For more details, refer to the Austrian School.
Not irrational; criminal. Negative rates are a scam.
Funny and very sad moment intellectually ... I remember back in 2007 sitting in a class when a classmate asked this question about negative interest rates and we all laughed at him ... now we are still struggling to understand valuation and implications of this problem...2021
The presentation needs to take on a more global if not higher level perspective.
The presentation needs to take on a perspective from consumers of transactions including global consumers.
Negative interest rate can become another form of taxation if not a global one.
If central banks are setting a negative interest rate and the market follows that trend, the consumers are paying for the loss. The cost of holding cash in bank accounts to perform transactions for convenience. Therefore, the loss can be viewed as another form of consumer taxation that is set by the central bank.
Globally, if the bond market follows the negative interest rate, foreign countries trading with a country with negative interest rate may need to hold the country's negative interest rate bond as reserves to perform trade transactions worth billions in the country's currency. Therefore, holding the bond with negative bond rate and losing money on the bond due to negative cashflow can be viewed as global taxation on those countries losing money in holding the negative rate bond.
Why would consumers and foreign government hold bank accounts and bonds with negative interest rates? For the convenience of performing all types of transactions including global trading.
Trump Administration citicized China for weakening its currency. Here they are weakening U.S. currency by heading toward zero central bank rate and the possibility of bond market following that direction.
That's why Modi changed the Indian currency...people had massive safes full of cash and he wanted to tax it. Stuffing money doesn't work if your govt. just invalidates the paper you're holding...
Thank you
24:25 'The greater they offer an opening to a Digital currency that actually meets the requirement for a good currency& issuing authority you trust'.
Fed: Centrally backed Digital Currency are coming!
Super informative!
sooooooooooo good!!!!!
🧡💛💚💙 Do a video on the Stock-To-Flow model for Bitcoin. Aswath you should be holding some Bitcoin it would be fiscally irresponsible not to. 🧡💛💚💙
Wish i had seen this before fed started unlimited QE + 0 rates in march 2020
Man is BTC gang he just philosophically has something against a non productive asset.
But cash is a non productive asset 🤔
And this opens opportunities for cryptocurrency to take their place.
We're fucked
You could say that negative interest rates do that!
Finally found what I'm looking for, thank you so much professor