Friday, 5 February 2016

The NIRP quiz

10 questions on negative rates

1. With rates around zero, is being charged to deposit and charged to borrow 

a) Stimulatory.
b) Fair.
c) Fiscal tightening in disguise
d) The original precursor to the saying 'never a lender nor a borrower be’.

2. If you could cancel out two countries' economic problems by merging them together would you 

a) Merge Germany with Greece.
b) Merge Japan with Brazil.
c) Merge the USA with Mexico (mostly just to annoy Trump).
d) All of the above. Brilliant idea.

3. If you thought gold was any different to any other 'thing' would you

a) Buy it as a hedge against inflation as it's in limited supply vs uncontrollable fiat money.
b) Buy it as a hedge against deflation as with a zero yield it will outperform NIRP currencies.
c) Buy it because the Brazilians will be buying it for a) and the Japanese for b).
d) Sell it to pay the negative yield premium your bank has somehow worked out they can charge you on your mortgage.

4) Which of the following are caused by central bankers' fallacious beliefs in the effectiveness of NIRP

a) A restriction in money supply through the punitive charges on reserves banks are subjected to on all their lending.
b) The ludicrous rise in stock valuations.
c) The ludicrous fall in stock valuations.
d) The lack of size 9 1/2 socks in your local department store.
e) You not winning the lottery.
f) That extra pint on the way home, sorry darling.
g) All of it. It’s them. You know they control everything don’t you? Even the moon landings that didn't happen.

5) If you were looking to invest in yield would you

a) Have a look at Aus$. It's looking perky and Mrs Watanabe must be looking at Uridashis again in this environment.
b) Buy 10 yr bund whilst it’s still +ve because hey, 0.05% on 10yr risk in Euro sounds great doesn’t it? No?
c) Buy stocks as any stock with a dividend is outperforming cash.
d) Buy a flexi-yield slumber-eezeee kingsize and stuff your cash under that.
e) Use the money to pay for a course in wild survival as that will yield the greatest benefits the way we are going.

6) Which would you rather buy

a) A 5yr bund yielding -10bp.
b) A Premium bond where average yield is -10bp but you have the chance of losing £1,000,000 each month
c) Your normal weekly lottery ticket which has always yielded -50% on average.
d) A collection of CHF1000 notes.
e) Gin

7) When is NIRP NIRP

a) When the central bank charges banks to hold their deposits and reserves.
b) When my bank charges me to hold my money in my account.
c) NIRP is only NIRP when I can borrow at NIR.
d) Credit cards pay you monthly on outstanding balances.
e) NIRP shouldn't  exist until the cost of public transport falls as that is the only true measure of inflation. So never.

8) In a negative rate environment would it be right 

a) To apply it to property instead of announcing a property tax.
b) For pubs to charge charities for the loose change held in those collection boxes on the bar.
c) To insist bankers had bigger bonuses.

9) If cash were to be restricted to prevent the populace avoiding NIRP, which method of restriction would you support

a) Biodegradable bank notes.
b) Reverse lottery with bank note numbers being drawn and those notes cancelled.
c) 5% taken off the amount you request at an ATM.
d) Coat all notes with hydrogen sulphide.

10) If you were a NIRP central banker and went back in time to give a lecture at the LSE in 1984 explaining economic policy now would 

a) Your audience fully appreciate your situation and invite you on their anti-apartheid-support-the-miners march in sympathy.
b) You notice the Dean checking his notes and muttering to his assistant closely followed by security guards sideling towards you.
c) You have cataclysmicly upset the rules of time causality by triggering such global panic about the future the world goes on to plow huge resources into economic research  to stave off the impending doom, depriving all other research of resources causing AIDS, Bird Flu, CJD and Ebola to wipe out the the human population long before NIRP would ever have been necessary.

No comments: