The Fed Wants to Test How Banks Would Handle Negative Rates

[Purveyor]

As interest rates turn negative around the world, the Federal Reserve is asking banks to consider the possibility of the same happening in the U.S.

In its annual stress test for 2016, the Fed said it will assess the resilience of big banks to a number of possible situations, including one where the rate on the three-month U.S. Treasury bill stays below zero for a prolonged period.

"The severely adverse scenario is characterized by a severe global recession, accompanied by a period of heightened corporate financial stress and negative yields for short-term U.S. Treasury securities," the central bank said in announcing the stress tests last week.

In that particular simulation, the unemployment rate doubles to 10 percent, the same level it reached in the aftermath of the last financial crisis.

Three-month bill rates have slipped slightly below zero several times in recent years, including in September after the Fed delayed rate liftoff amid global financial market turmoil, touching a low of minus 0.05 percent on Oct. 2.

more...

http://www.bloomberg.com/news/articles/2016-02-02/rates-less-than-zero-is-bank-stress-fed-wants-to-test-in-2016

[JDPriestly]

1. In terms of policis, this is bad for Hillary and good for Bernie.

[jomin41]

2. I should understand this stuff but

things were simpler when I studied economics and I slept through "Money and Banking" so...

Anyway, looking at the global picture, it seems that there is so much money around that it's not worth anything. In fact, if you want to loan me some, you've got to pay me to take it. Is that the deal? People are searching frantically for a lucrative place to stash their millions, inflating one market after another. Commodities, housing, stocks, bitcoins(?), risky tech ventures, movies. But, if you want safety, you gotta pay for it. Makes me laugh for some reason. Is this a result of under-investment plus low wages or what?

So, "Loose" money is good for Bernie because he's the one who wants to raise some(more)? Sounds good.

On edit: http://www.democraticunderground.com/111676115 More info here.