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Old 02-11-2016, 01:37 PM
JUICE JUICE is offline
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So in 2000, mom and dad planned for retirement assuming Xi% long-term return on ith asset class. In 2015, NIRP alerts mom and dad that their assumptions and planning are inadequate. Mom and dad begin to save more. I think there's more psychology involved, unfortunately no time to link, but in Europe, NIRP has caused increased savings for some population segments, who as you might guess tend to be older with higher incomes and assets.

Or... surprise, surprise, lowering accumulation rates on savings causes savings contributions to increase.

And, yes, it's speculative as CB policy decisions are opaque. However, the relevant point is that smaller banks utilize the "old" banking model - accept deposits, lend for economic investment, earn money on net interest margin - which subjects profits to some strain under NIRP. Bigger banks have their investment divisions whose profits actually increase as ZIRP/NIRP causes rush into risk assets.

Regardless of its veracity, the speculation is verifiable, at least at a cursory level. Either more smaller banks fail or are acquired by bigger banks after NIRP... or not.

I'll leave as exercise to reader to opine on whether financial sector consolidation after the various recent CB interventions is coincidental or not.
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