The interest rate that an eligible depository institution is charged to borrow short-term funds directly from a Federal Reserve Bank.
Click to enlarge.
Would you believe that Japan's discount rate is more than twice as high as ours? Yeah, it's a whopping 0.3% vs. our 0.125%!
What? Don't believe me? Okay, I'll zoom in on the most recent years. Note that I'll be removing the trend lines for reasons that will soon become obvious.
Click to enlarge.
There's no way we can slide into Japan's never-ending financial mess. We are worlds apart!
Caught between confusion and pain, pain, pain
Distant eyes
Promises we made were in vain, in vain, in vain
Source Data:
St. Louis Fed: Interest Rates, Discount Rate for United States
St. Louis Fed: Interest Rates, Discount Rate for Japan
Stag,
ReplyDeleteHere's the funny part: The discount rate is a "penalty" rate of interest. Penalty rate, hahahahahahaha!
Bernanke sure is tough on banksters - no free lunches, no siree. Of course, Bernanke's tough love treatment of banksters is tempered by his fair dealings towards savers.
mab,
ReplyDeleteLOL!
Hey, maybe this is how Jamie Dimon lost $2+ billion.
Borrow $1.6+ trillion at 0.125% and then misplace the interest in the couch?
Could happen. He assured us the loss was chump change. It could have easily fallen out of a pocket.
Could happen.
ReplyDeleteIndeed, stranger things have happened, much stranger:
“We were seeing things that were 25-standard-deviation events, several days in a row” - David Viniar, CFO Goldman Sachs (stated during the financial crisis of 2008.
A string of 25-standard-deviation events???? Talk about bad luck!
The BOJ dropped rates in the mid-late 80s to cushion the shock of allowing the yen to appreciate from ~250 to ~150.
ReplyDeleteThe Fed dropped rates in the early-mid 2000s to cushion the shock of the wars and avoid a repeat of that 1992 unfortunate episode.
In both cases the central bank found they had allowed asset booms to turn into debt bubbles.
At least the Japanese are moving towards doubling their consumption tax. I'm hoping my thesis of "all taxes come out of rents" is correct and that that will knee their land market in the sensitive spot.
mab,
ReplyDeleteA string of 25-standard-deviation events???? Talk about bad luck!
It's all just a case of unexpected charges! (Pun intended.)
Geiger–Marsden experiment
It was quite the most incredible event that has ever happened to me in my life. It was almost as incredible as if you fired a 15-inch shell at a piece of tissue paper and it came back and hit you. On consideration, I realized that this scattering backward must be the result of a single collision, and when I made calculations I saw that it was impossible to get anything of that order of magnitude unless you took a system in which the greater part of the mass of the atom was concentrated in a minute nucleus. It was then that I had the idea of an atom with a minute massive center, carrying a charge. — Ernest Rutherford
Troy,
ReplyDeleteIn both cases the central bank found they had allowed asset booms to turn into debt bubbles.
I'm picturing that moment of epiphany where one central banker turns to the other and says, "We made a boo-boo!"
It's all just a case of unexpected charges!
ReplyDeleteMaybe it's just gossip:
http://www.pbs.org/tesla/ll/pv_gossip_pop.html
They can't all be right, but they can all be wrong. Yes, I'm a skeptic!
mab,
ReplyDeleteNice! Here's a variant of one I learned 30+ years ago. Kind of reminds me of Ben "There is No Housing Bubble to Go Bust" Bernanke.
"One Fine Day in the Middle of the Night"