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Negative Interest Rates: What Does This Mean For You?




Interest rates always fluctuate, but now they are taking an unusual turn. Several countries have introduced negative interest rates. Thus, it projects an impression that the central bank’s interest rate is less than zero.

Negative real interest rate and actual interest rate varies from one another.

Actual interest rate is that one which is less than inflation.

On the other side, negative rate means that the bank you use is paying the central bank to keep your account open.


Where is The Negative Interest Rate Being Used?

The European Central Bank was the first central bank to use negative interest rates. They introduced a -0.1% rate in June 2014. They changed the rate to -0.4% on March 10, 2016.

Other country’s banks are also using negative interest rates. Sweden, Denmark, Switzerland, Germany, and Spain all use negative interest rates.

The Bank of Japan is one of the newest adoptees. It cut its rates to -0.1% in February 2016.

The mean interest rate for countries using negative interest rates is -0.1%. Every thousand dollars the banks in those countries make, they have to give a dollar to the central bank.


Why Banks Use Negative Interest Rates

The above countries all have one thing in common. Their economies are not doing well. They are either in recessions or are close to being in a recession.

Haruhiko Kuroda, the governor of the Bank of Japan, has cited the country’s economy as the reason they put the negative rate into place.

Negative interest rates are a way to put money in lenders’ pockets. The idea is based on Keynesian economic theory. This theory states that the best way to feed an economy is to give people more money to spend.

The Eurozone is using negative interest rates to combat its problems with inflation. The Euro has lagged behind other currencies in terms of inflation. It has been dragged down by the economic meltdown in Greece.

Sweden has had similar problems. Its economy has been deflating.

Denmark, Switzerland, and Spain have other reasons for implementing the negative interest rate. Their currencies are low when compared to others. A currency that is low does not facilitate international trade.

All of these countries want to prevent an economic collapse. This drastic measure comes with many other financial moves aimed at boosting the economy.


Do Negative Interest Rates Help the Economy?

The effect of the Negative Interest Rate to the economy is still in progress – thus, no concrete claim may be advised as to whether it is helpful to the economy or not.

Keynesian economics only works if people spend the extra money. People keeping their money in bank accounts will not help the economy.

Banks that give people more money also have fewer profits. They will have tighter budgets and fewer resources. These restrictions put a strain on the banks.

People who are afraid of the banks going bankrupt might withdraw their money and keep it in cash. Keeping cash under a mattress does not earn money, but it does prevent you from losing all of your money if the bank closes.

It does increase the odds that you might be robbed. Storing your cash somewhere secure, like a safe, costs money. The cost of a safe could be less than the cost required to keep a bank account.


What Do Negative Interest Rates Mean for the USA?

What will negative interest rates do for the American economy?

The affect the negative interest rates will have depends on if negative interest rates work.

If they do, economies in Europe and Japan will be stabilised. Other countries might try using it to stop their financial problems. International investments will be safer to make.

Exporting goods to those nations will be easier. The citizens will have more money to travel to America. That gives the tourism industry a boost.

If the project fails, those economies will go into recession. They will buy fewer goods from international sources. Citizens will have problems buying goods and services.

It will be riskier for those countries to borrow money. That will make their debt more expensive. Other countries may have to give them a bailout.

The economic issues could also cause political unrest and revolutions, as that of Greece’s.

The failure may have some positive results. There will be less competition for natural resources. Americans who want to travel to Europe will find it is much cheaper. Imports from those countries will be less expensive.

Should the Federal Reserve employ negative interest rates?

At this point, the answer is “no”. The American economy does not need the help.

In March 2016, the United States’ economy grew by more than two percent. The gross domestic product has grown, and the unemployment rate has gone down.

The United States is a base for a majority of the Fortune 500 companies. It has more of them than any other nation. The United States have a large technology and manufacturing sectors. The global economic output is larger than China’s global economic output.

Overall, the United States has returned to or surpassed its state before the 2008 recession. There is no need for the United States to use negative interest rates.

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Ackman’s Hot Streak Continues, Dumps Berkshire, Says ‘We Can Be More Nimble’




Ackman’s Hot Streak Continues, Dumps Berkshire, Says ‘We Can Be More Nimble’

Bill Ackman’s hot streak continues. This comes after he announced that his Pershing Square hedge fund has returned an average of 25% this year. It also trounces the average hedge fund return of -7%. Additionally, this reveals that it sold its $1 billion stake in Warren Buffett’s Berkshire Hathaway. The fund first invested in Berkshire less than a year ago and only weeks took a larger stake in the conglomerate.

Completely exiting the Berkshire position surprised many on Wall Street, as Ackman has long admired Buffett as a mentor. He recently said that Buffett had built Berkshire “to withstand a global economic shock like this one.”

It appears that Ackman, like many, may have felt frustrated by the lack of activity from Berkshire during the recent market downswing. Berkshire’s cash balance has ballooned to $137 billion. Many, including Ackman, had likely expected a portion of that cash to be used to scoop up bargains during the late-February selloff. The said selloff took markets down nearly 30%.

Instead, Berkshire stood pat, and that appears to have been enough for Ackman to pull the plug on his investment. While discussing the exit, Ackman said that due to Pershing’s smaller size compared to Berkshire, “we can be much more nimble… and so our view was generally we should take advantage of that nimbleness, preserve some extra liquidity in the event that prices get more attractive again.”

Pershing Square’s success over the last two years had thrust Ackman back into the spotlight. This, perhaps, turned the chapter on a period where he became more famous for his misses than his home runs.

He was invested in Valeant Pharmaceuticals as it collapsed. He also famously squabbled on live TV with fellow billionaire Carl Icahn over Herbalife. Then, he gave a nearly 3-hour-long presentation explaining why he thought the company runs as a pyramid scheme. He finally exited his $1 billion short position at a loss.

Ackman’s current hot streak started last year, when Pershing Square returned 58.1%. This is its best annual return since the hedge fund was founded in 2004. After years of letting others make the firm’s investment decisions, Ackman took back the reins in 2018 with a back-to-basics strategy he learned from Buffett.

He returned the fund to a strategy that invests in simple, predictable, cash flow positive companies. He said, “It’s very hard to lose money by buying great businesses if you pay a fair price. For a while there, we forgot that our main job was to make money, so we woke up, and now we’re back in the money making business.”

Making money is exactly what Ackman did earlier this year. He did so with “the single best trade of all-time,” as what many calls it. He correctly predicted that the coronavirus would wreak havoc on our economy. Because of this, Ackman made a $27 million bet that netted his firm a $2.6 billion profit in less than two months as the markets crashed.

Now, his war chest is full again. It appears that Ackman is ready to buy should asset prices come down again.

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4 Ways To Lower Your Mortgage Payments




4 Ways To Lower Your Mortgage Payments

The number of Americans who have lost their job due to the coronavirus pandemic standing at more than 40 million. With this, many are struggling to pay their mortgage bills each month.

For nearly every one of us, housing is the single largest monthly expense. And unlike kicking a Starbucks habit to save a few dollars every month, your mortgage payment can’t be trimmed out of a budget.

Fortunately, you have some options available to help lower your monthly mortgage payment.

Refinance Your Loan

The Federal Reserve lowered rates back down to zero in late March in response to the coronavirus pandemic. With this, mortgage rates hit new record lows in early May. is advertising 30-year fixed-rate mortgages as low as 3.5% and 15-year fixed-rate mortgages as low as 2.89%.

The benefit of refinancing at a lower rate is two-fold. The main benefit is with a lower rate on your mortgage, your monthly payment will go down, making it more affordable. The secondary benefit is that with a lower rate, you’ll pay less interest over the life of the loan. This potentially lets you save tens or hundreds of thousands of dollars.

You’ll incur some costs to refinance your loan. So, make sure that your monthly savings are large enough to justify the expense. Additionally, if you’ve had your existing mortgage for a number of years, you’ll be resetting your mortgage amortization back to 15 or 30 years. So if you’ve been paying on your 30-year mortgage for 8 years, instead of having 22 years left, you’ll reset back to 30 years (or down to 15 years if you take a shorter term).

Put Your Stimulus Check or Tax Refund Towards Your Loan

If you still have the $1200 of stimulus funds available, or are collecting a tax refund this year, consider using them towards your monthly mortgage payment. It may only cover a portion of your mortgage or maybe just a month or two. However, using this money instead of dipping into your savings or retirement account is preferable. There are discussions ongoing about a potential second stimulus check, but that may not be until later this summer.

Talk To Your Lender About Mortgage Forbearance

If you don’t have the financial ability to continue paying your mortgage, ask your lender about mortgage forbearance. If granted, this will allow you to skip a few months of payments without becoming delinquent or falling behind on your loan. Before you agree to a forbearance plan, make sure your lender explicitly lays out how you are expected to make up the skipped payments. Some may demand a lump-sum payment for the amount you skipped once your forbearance plan ends. Others may tack the amount onto the end of your loan term. Be sure you know exactly what the lender will do once you enter the forbearance agreement.

Find Out If A Mortgage Modification Is Available

If you find yourself falling behind on your mortgage payments and are facing default, your lender may be able to offer you a mortgage modification. A modification changes the terms of the original loan, such as lowering the interest rate, extending the term, or even reducing the principal balance. Typically, a modification is only allowed when the loan is in default. Therefore, if you are making timely payments and are current on your loan, this likely won’t be an option for you. But if you are having financial difficulties, your lender may be able to modify the loan and prevent you from going into foreclosure.

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USDA to Provide $1B in Loan Guarantees for Rural Businesses and AG Producers




USDA to provide $1B in loan guarantees for rural businesses and ag producers

U.S. Secretary of Agriculture Sonny Perdue recently announced that the department is making available up to $1 billion in loan guarantees to help rural businesses meet their working capital needs during the coronavirus pandemic. Additionally, agricultural producers that are not eligible for USDA Farm Service Agency loans may receive funding under USDA Business & Industry (B&I) CARES Act Program provisions included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

“Under the leadership of President Trump, USDA is committed to being a strong partner to rural businesses and agricultural producers and being a strong supporter of all aspects of the rural economy,” Perdue said. “Ensuring more rural agricultural producers are able to gain access to much-needed capital in these unprecedented times is a cornerstone of that commitment.”

In addition to expanding eligibility to certain agricultural producers, the changes Perdue announced allows the USDA to:

— Provide 90 percent guarantees on B&I CARES Act Program loans;

— Set the application and guarantee fee at 2 percent of the loan;

— Accept appraisals completed within two years of the loan application date;

— Not require discounting of collateral for working capital loans, and

— Extend the maximum term for working capital loans to 10 years.

B&I CARES Act Program loans must be used as working capital to prevent, prepare for or respond to the effects of the coronavirus pandemic. The loans may be used only to support rural businesses, including agricultural producers, that were in operation on Feb. 15, 2020.

USDA intends to consider applications in the order they are received. However, the department may assign priority points to projects if the demand for funds exceeds availability.

USDA announced the expanded B&I CARES Act Program authorities in a notice published in the May 21 Federal Register (PDF, 217 KB). Program funding expires Sept. 30, 2021.

Eligible applicants may contact their local USDA Rural Development State Office in the state where the project is located.

USDA is developing application guides for lenders and borrowers on the B&I CARES Act Program. The agency also will host a webinar to provide an overview of program requirements.

To register for the webinar to be held at 2 p.m. Wednesday, June 3, visit:

USDA Rural Development provides loans and grants to help expand economic opportunities and create jobs in rural areas. This assistance supports infrastructure improvements; business development; housing; community facilities such as schools, public safety and health care; and high-speed internet access in rural areas. For more information, visit:

© © Copyright 2020, The Shippensburg News-Chronicle

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