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Pardon my ignorance , but why is it that normal people can't borrow like hedge funds ?

ZIRP as it's done today is basically a massive wealth transfer.



Normal people aren't structurally important parts of the economy.

Not that I think it's clear that hedge funds and big banks are structurally necessary, but they've managed to create a system where they are considered important by all the people that matter.


> Normal people aren't structurally important parts of the economy.

I suggest we try to remove them to see what happens! :)


Low interest rates reduce borrowing cost. While it's debatable whether that's a wealth transfer, if it is, the transfer is from holders of capital (generally, though not always, lenders) to borrowers.

Those with assets - that is, lenders - would generally prefer a higher [risk-free rate](https://en.wikipedia.org/wiki/Risk-free_interest_rate#Proxie...), not a lower one.w


Hedge funds are in fact losing money as well: http://uk.businessinsider.com/hedge-funds-returns-in-2015-20...

The negative rates are only on central bank deposits. Loans within the finance industry are usually collateralised as well; if you had $1m of collateral you'd find it a lot easier to borrow another million.


ZIRP is a massive wealth transfer as opposed to what? Positive rates?

ZIRP is a wealth transfer in the opposite direction if you compare it to what should be in place right now: very negative rates.

The wealth transfer argument makes no sense in the context of monetary policy.


In order for anyone who has money in the bank to pull out money, they must still see a positive IRR, compared to leaving money in the bank. If they don't the central banks eat that money. So yeah it's a wealth transfer from private money to central bankers. Or else the government should ask for the difference for its own coffers and reinvest that into the economy.


How it is a wealth transfer? Is there some fundamental right to risk free interest?

Banks provide a service and those services cost money. If the value to the bank of your money is less than it costs to provide those services than you need to make up the difference. No one is being "screwed".


The way it actually works is that if the value of a bank to society is less than the profit the bank wishes to make, even after making stupid and bad business choices, taxpayers need to make up the difference.

Hence "screwed."





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