US interest rates turn negative

bank lending.jpgThe irresponsibility of some parts of the global banking system continues to upset the blog.

First, there was news that several banks are planning to award themselves huge ‘bonuses’, based largely on their trading success.

Yet the money they are using for this trading has mostly been provided by central banks and governments. And it was supposed to have instead been used to support lending to companies and individuals.

The blog completely fails to see the social value in what has been achieved as a result. This trading may have been profitable for a few banks, but it has created increased volatility in currency and commodity markets, and higher prices for key products such as crude oil.

And now comes news in today’s Financial Times that US Treasury bills are now paying negative rates of interest. The FT says this is because banks are wanting “to polish their balance sheets for the year end“. Once again, the cash being lent out by central banks is instead being used for selfish purposes by the recipient commercial banks.

How can it be sensible for governments to allow this type of activity to continue? The chemical industry is a $3trn business worldwide. Maybe it is time for its leading CFOs to express themselves more publicly on the problems being created by some banks, and set out what needs to be done to solve them?

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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One Response to US interest rates turn negative

  1. DP Chalasani 20 November, 2009 at 8:21 pm #

    Hi,

    I am a new reader of your blog. Just writing to say I find it very interesting. I am a Chemist and I am also very interested in economics. I am almost entirely self taught in economics, from books and the many excellent econ blogs.

    So it is very interesting to me to read someone writing about the economics of the chemical industry.

    Regarding this post, I agree with you. I wonder why the CFO’s and CEO’s of Chemical companies don’t exercise their, what I imagine, considerbale clout?

    DP

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