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Author Topic: Negative interest Rates around the World - Bitcoin as an alternative  (Read 158 times)
bitmover
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September 12, 2019, 11:03:53 AM
Merited by DdmrDdmr (2), pawel7777 (1), oaz7t (1)
 #1

I was taking a look at interest rates around the world, specially in G20
You can check them here: https://tradingeconomics.com/country-list/interest-rate?continent=g20
And you can also check their inflation rate here https://tradingeconomics.com/country-list/inflation-rate?continent=g20

I crossed that data and made this table.

Quote
Country       Real interest rate
Netherlands        -2,8
Germany            -1,4
United Kingdom    -1,35
Switzerland        -1,05
Euro Area        -1
France            -1
Australia            -0,6
Japan            -0,6
Italy            -0,5
Spain            -0,3
Canada            -0,25
United States        0,45
Singapore        1,34
China            1,45
South Korea        1,5
Indonesia        2,01
India            2,25
South Africa        2,5
Brazil             2,57
Russia            2,7
Saudi Arabia        4,05
Turkey            4,74
Mexico            4,84
Argentina            31,59

You will see that first world countries are mostly with negative interest rates. Germany, for example, with a 0 interest rate has 1.4% inflation rate. So the real interest rate would be -1.4%.

This way, there is certainly a reason for all this interest in Gold, Silver and other metals. And, for bitcoin.

Millionaires and institutional investor can't put all their money on Stocks, neither on negative interest rates. Alternatives such as metals and bitcoin are certainly interesting.

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September 12, 2019, 11:35:34 AM
 #2

Considering what places like India have been willing to do to force their populations into the banking system by cancelling high denomination notes I wonder what they'd be willing to do elsewhere if they really got a boner for negative interest rates.

Cash is in their sights already. If enough people cottoned on to crypto they might toss their cookies. Guess it might be too late by then.

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September 12, 2019, 12:15:19 PM
 #3

Lol I just stumbled upon an article about Trump's tweet wanting negative interest rates earlier:

https://www.newsbtc.com/2019/09/11/bitcoin-trump-interest/

The US could easily join in on the countries with negative real interest rate, and soon. I just hope people know what this means for their portfolio (and money, really), and how Bitcoin could be a good diversification option given its unique qualities.

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September 12, 2019, 01:39:05 PM
 #4

Some say that this is clear sign of upcoming economic crisis, and if we consider the data that there is about $15 trillion of government bonds with negative yields, and that number is go up almost three times in less then a year. I do not see easy way to fix the global economic situation, especially since all the moves of the world's powers lead in one direction only.

Probably the biggest culprits for this situation are banks like always, but this time (like in the past), US government with Trump is just make things even worse by trading war with China, and before that imposing sanctions on Russia, and with constant trading war with Iran. How can the world function normally if one country considers most of the others bad?

I see Bitcoin as alternative, but no one can say what will happen if the world falls into a new major economic crisis, it will be big test for sure.

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September 12, 2019, 02:40:50 PM
 #5

Its really an economic concern though although some people might see it as a good sign because literally for countries like Germany whose inflation rate is 1.4%, it means that the general increase in the price level of commodities in the country has only increase by that range which is something some countries battling 14% to 16% would die to have at least for the average citizen to get value for money within a period of time. The disadvantage however, is the part whereby there is hardly any growth in the economy because it means the country is only growing at the speed of a snail couple with the negative interest rate that would discourage savings among other things.

Bitcoin to the rescue to me is a long way route because government would rather create a new currency, establish bailout, create some artificial scarcity, borrow funds from economic bodies across the globe just to prove they are in charge rather than accepting a currency like bitcoin as a way out event though they know that might be a cheaper alternative to consider because they can't control it.
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September 12, 2019, 03:15:52 PM
 #6

Exactly, that's what Satoshi has envisioned.

Quote
The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.
Source: https://satoshi.nakamotoinstitute.org/posts/p2pfoundation/1/#selection-45.1-45.539

I think the central banks are going "full-retard." They want to extend this bubble (boom) as long as possible, not realizing that the bubble must pop (bust) for the economy to become healthy. What central banks failed to understand is that people won't use this increased money supply for something productive. They will use it to inflate other commodities.

Hence, Bitcoin indeed will be a reasonable saving instrument, an alternative to gold, silver, land, property, etc.

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pawel7777
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September 12, 2019, 03:28:37 PM
 #7


OK, where's the catch? Argentina's >30% can't be real.
Their inflation indeed seems to be around 50%, but I find it hard to believe that the actual interest rate can be at 86%. This must be either a short term thing, incorrect data, or banks doing exit scam.

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September 12, 2019, 04:03:16 PM
 #8

If it's a sign of upcoming global recession, it would be a test for Bitcoin just a much as it will be for the global economy. Bitcoin is not a digital gold yet, it also shares similarities with stocks, since it's a very risky high-return investment with big volatility - this can easily turn people away during the crisis, as they will be looking for something safe rather than simply something that is not inflationary. Plus Bitcoin has its own cycles tied to halvenings, and they are far more important for the price.

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September 12, 2019, 04:06:41 PM
Merited by pawel7777 (1)
 #9


OK, where's the catch? Argentina's >30% can't be real.
Their inflation indeed seems to be around 50%, but I find it hard to believe that the actual interest rate can be at 86%. This must be either a short term thing, incorrect data, or banks doing exit scam.

No, it is not incorrect data. I know about a little about their situation, as I am from Brazil.

The country is completly broken. Government is in fiscal debit every year, and asking for additional loans to pay previous debits.

Additionally, the right wing president is probably not going to be elected again, and the socialists will take over. This generated an additional concern and a problem with trust with the investors. The situation will probably get worse.



Quote
“The IMF like everyone else needs clarity on the economic program from the Fernandez team,” says Siobhan Morden, head of Latin America fixed-income strategy for Amherst Pierpont Securities in New York.

“It would require a huge positive shock post- election to stabilize investor confidence, including commitment to an IMF program,” she says.

Such a commitment would not sit well with the bulk of Fernandez voters who see the Fund as too austere for their current needs. https://www.forbes.com/sites/kenrapoza/2019/09/09/argentinas-central-bank-is-running-out-of-money/#39f0993f2ce2

Someone would need to be crazy to invest in Argentina now, even with 30% real interest rates, because goverment will probably devaluate their money by printing more. Argentina is known to fake inflation data, so probably their real inflation is far more than the actual interest rates.

Quote
Inaccurate inflation, growth and poverty reporting has been an open secret since Fernandez took office in 2007. She sparked howls from the opposition last month when she said Argentina had a lower poverty rate than Germany.
https://uk.reuters.com/article/uk-argentina-election-inflation/dont-lie-to-me-argentina-false-inflation-data-to-end-next-year-idUKKCN0PW22O20150722

Argentina even manipulated Big Mac price (from mc Donalds) to keep inflation artificially lower:

Quote
Argentina likely manipulating Big Mac prices to keep inflation seemingly lower

And compared to what is on the menu, like a quarter pounder or chicken McNuggets, the Big Mac is cheap. With fries and drink, it’s just 22 pesos, or about $5.50. The other meals start at 33 pesos.

So why are the Golden Arches hiding those two all-beef patties, special sauce, lettuce, cheese, pickles and onion on a sesame seed bun? And selling them at 30 percent off? Boyano’s not surprised at all. In fact, he called it, “an obvious thing."

Boyano said Argentina’s current government, especially commerce secretary Guillermo Moreno, is notorious for telling companies to fix certain prices to keep the official inflation rate down.

The Economist magazine publishes one of several inflation indicators. Its famous Big Mac index uses the prices of Big Macs worldwide to measure inflation rates. The magazine called out Argentina last year for manipulating the price.


There’s broad consensus among private economists here that inflation is more than double the government’s official rate. Last year, President Cristina Fernandez de Kirchner’s administration sued 12 economists for publishing their own figures, including those of former undersecretary of finance Miguel Kiguel.

https://www.pri.org/stories/2012-02-07/argentina-likely-manipulating-big-mac-prices-keep-inflation-seemingly-lower

Well, I could write a lot more about it, but that´s enough.



TLDR: In reality, Argentina probably has a negative interest rate.

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September 12, 2019, 04:12:02 PM
 #10

It is a slow moving train wreck "in slow motion too." And the sad fact about this, Central Banks will push on with the Negative Interest Rates policy. It's like a desperate man asking against all hope for a miracle reprieve. I say world governments have no choice but to bite the bullet in the end.


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September 12, 2019, 05:24:36 PM
 #11

I don't know about the other countries, but the data is definitely wrong for India. The main benchmark interest rate is published by the Central bank and as per the published rate, the interest rate is 5.75% and not 2.25%! I believe there are more countries in the list where the data is wrong.

However, let me tell you that, bitcoin or any other cryptos are not the biggest beneficiaries of such low/negative interest rate, it's GOLD! If you don't believe, please look at the chart below,



Hope this helps!

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bitmover
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September 12, 2019, 06:50:11 PM
 #12

I don't know about the other countries, but the data is definitely wrong for India. The main benchmark interest rate is published by the Central bank and as per the published rate, the interest rate is 5.75% and not 2.25%! I believe there are more countries in the list where the data is wrong.


You didn't understand. I am talking about real interest rate (interest rate - inflation).

In case of India, it is 5.40 (interest) - 3.15 (inflation) = 2.25

5.75 was the previous interest rate, it is now 5.40.

However, let me tell you that, bitcoin or any other cryptos are not the biggest beneficiaries of such low/negative interest rate, it's GOLD! If you don't believe, please look at the chart below,

now I can see that you really didn't even read my post at all......

This way, there is certainly a reason for all this interest in Gold, Silver and other metals. And, for bitcoin.

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September 12, 2019, 06:54:52 PM
 #13


OK, where's the catch? Argentina's >30% can't be real.
Their inflation indeed seems to be around 50%, but I find it hard to believe that the actual interest rate can be at 86%. This must be either a short term thing, incorrect data, or banks doing exit scam.

Catch is that people dont trust Argentinian banks and rather keep their wealth in Gold or in foreign banks. That is why they offer good exchange rates for your money since they lack of it.   You see that people trust Switzerland banks most so that is why their interest rate is lowest.

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September 12, 2019, 10:04:31 PM
 #14

[snip]

Catch is that people dont trust Argentinian banks and rather keep their wealth in Gold or in foreign banks. That is why they offer good exchange rates for your money since they lack of it.   You see that people trust Switzerland banks most so that is why their interest rate is lowest.

Sure, but to offer 30% above inflation banks have to make enormous profit, otherwise they'll have to print more money (or pull an obvious ponzi), meaning inflation rate is probably understated. Or it's just a bait to lure deposits in and change rates quickly to match inflation.

...
Someone would need to be crazy to invest in Argentina now, even with 30% real interest rates, because goverment will probably devaluate their money by printing more. Argentina is known to fake inflation data, so probably their real inflation is far more than the actual interest rates.
...

That would make sense. Thanks.

ps. Do you guys feel it's a good time to bet on further collapse and short Argentine Peso or is it too late and is it all already priced in?

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September 12, 2019, 10:14:07 PM
Merited by pawel7777 (1)
 #15

ps. Do you guys feel it's a good time to bet on further collapse and short Argentine Peso or is it too late and is it all already priced in?

In my opinion, and most analysts out there, it depends on the election. Everything seems to indicate that Kirchner party will take over again. If that happens, you are good shortening Argentina peso, as their situation will probably go in Venezuela path (like Chaves years).
Kirchner is allied with Chaves party and to left wing parties from Brazil (when we were broke, until 3 years ago, when they were removed by impeachment).

However, if somehow any different party take over (even if not Macri), Argentina peso will recover, just like Brazil recovered (from 11% inflation and 14% interest rate to 3.5 inflation and 6 interest rate).

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September 12, 2019, 11:27:29 PM
 #16

However, let me tell you that, bitcoin or any other cryptos are not the biggest beneficiaries of such low/negative interest rate, it's GOLD! If you don't believe, please look at the chart below,  
It depends on how you look at things. I can pull out a Bitcoin chart of the same period to show how much it has grown. Bitcoin's growth dwarfed gold's growth by orders of magnitude this year, even after a +30% correction.

I personally don't think there is much correlation because it can't be proven, similarly, it can't be proven entirely with gold, but I have read through various discussions where the point was that Bitcoin is used as a safe haven asset too.

Bitcoin started rallying from $4k to $5k in April, and gold followed not long after in late May/early June. Based on that there is some weight to these discussions. Compare both charts and you'll see striking similarities.

Bitcoin and gold went up today simultaneously after the ECB's announcement to lower interest rates and do QE. Gold however fell back while Bitcoin is still up.

 
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September 13, 2019, 05:43:59 AM
 #17

Inflation is now the most discussed topic in recent years. That is also the reason nakatomo satoshi creates Bitcoin with a large ecosystem like today.
And in the future, if inflation were to increase, people would definitely need bitcoin because every year, its value would increase dramatically due to the increasing demand for purchases over time.

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September 13, 2019, 09:23:41 AM
 #18

Inflation is now the most discussed topic in recent years. That is also the reason nakatomo satoshi creates Bitcoin with a large ecosystem like today.
And in the future, if inflation were to increase, people would definitely need bitcoin because every year, its value would increase dramatically due to the increasing demand for purchases over time.

Both this and the fact that BTC was created right after the last global economic crisis. As a reminder - in some countries during that crisis in order for the state to survive all the bank savings accounts had been subject to taxation (see Cyprus, where there had been imposed daily withdrawal limit from your bank account and payment cards).
This is the supposed advantage of BTC - if you keep it at cold/hardware wallet it is pretty hard if not impossible to automatically deduct the tax fee or payment limits.

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September 13, 2019, 11:38:39 AM
 #19

ps. Do you guys feel it's a good time to bet on further collapse and short Argentine Peso or is it too late and is it all already priced in?

Purely from a technical perspective, it's actually well oversold to use that term.

I expect the USD-ARS ratio to come back to 40-45 if nothing really changes in the short term, which would then be an interesting trade opportunity with how the general trend has been to lose more value against the dollar. Not sure how long you plan to hold that trade, but I for now wouldn't bet against the Peso unless the situation there gets even worse.

Investors tend to front run everything just to be ahead of the rest, and I think that's actually what happened here looking at how much value the Peso lost last month alone. If you want to take the trade anyway, use a well placed stop to reduce potential losses.

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September 13, 2019, 12:03:36 PM
 #20

ps. Do you guys feel it's a good time to bet on further collapse and short Argentine Peso or is it too late and is it all already priced in?

Purely from a technical perspective, it's actually well oversold to use that term.

I expect the USD-ARS ratio to come back to 40-45 if nothing really changes in the short term, which would then be an interesting trade opportunity with how the general trend has been to lose more value against the dollar. Not sure how long you plan to hold that trade, but I for now wouldn't bet against the Peso unless the situation there gets even worse.


The problem is that everything seems to indicate the situation will get a lot worse.

Macri probably not going to be elected again and the opposition, who thinks his economic politics is too autere, is going to win.
The problem is that they are in debit every year. An austere policy is what  imf wants. And the opposition, who is probably going to win, says they will not do what imf wants.

Their rating will go even lower, they will need to get more loans to pay for a less austere policy, raise even more interest rates and so on. We saw this already in most Latin America countries, and in Greece.

However, poor people, who are the majority in Latin America, doesn't care or understand that a cou try can't spend more money than it receives. Some people think that governments are just an unlimited amount of money. If it ends, just print more. And that's what elect presidents here.

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