Summary
- As I have done in previous years, I decided it would be fun to rank the most popular articles based on page views.
- I would like to take this opportunity to thank each and every one of you for clicking on my articles.
- So, here’s a recap of the most popular REIT articles in 2019.
- This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »
Earlier in the month, Investopedia published an article titled “The 2019 Terms of the Year.”
As it explained in its opening paragraph:
"Each year at Investopedia, we take a look back at the most popular financial topics that captured our readers’ attention. The top terms on our site for 2019 were influenced by everything from presidential debates and data breaches to celebrities and economic theories. And this year’s winner is no surprise. Our No. 1 term for 2019 is negative interest rates, the phenomenon of getting paid to borrow and taking a loss on loaning.”
That's quite the concept – and a disconcerting one too when you consider that there are plenty of people out there who will buy up government bonds under those conditions.
It’s something that happened in Europe during the financial crisis. And it came back years later, as summed up in a recent Financial Review piece:
“Europe has been the epicenter of negative rates policy since the European Central Bank took rates below zero in 2015. Denmark, Sweden, and Switzerland followed the ECB with negative rates policies to help stem excessive currency appreciation of their own currencies against the euro.”
Japan has been implementing such policies as well. It’s kind of “a thing” right now. And, as evidenced by the Swiss National Bank’s – expected – announcement on December 12, it will still be “a thing” in 2020.
Photo Source
Assessing GDP in the Western World
As already touched on, there are reasons for nations to go this route. However, I tend to agree with CNBC writer Al Lewis that:
“Paying any government to take your money is as irresponsible as feeding children nothing but candy bars. It’s what you might call a ‘moral hazard.’ But this term seems to have been eliminated from the economics texts following the bailouts of reckless financial institutions in the 2008 financial crisis.
“Negative interest rates, and even super-low interest rates, are only going to encourage more government borrowing. This in turn allows politicians to make all kinds of grandstanding promises – until one day, when the debt pile gets too big, interest rates return to historically normal levels and taxes go up to pay for it all.”
Not to pick on Europe especially, but that political borrowing and spending sounds about right. It’s precisely what got the continent into the extended financial crisis mess in the first place.
The U.S., meanwhile, had and continues to have its own issues. With that said, the U.S. is doing better comparatively speaking, as shown by Trading Economics:
“The Eurozone quarterly economic growth was confirmed at 0.2% in the third quarter of 2019 – the same as in the previous three-month period, the final estimate showed. Household consumption, government spending, and fixed investment supported the expansion. While net trade and inventory changes contributed negatively to GDP.”
Meanwhile, in the U.S…
“The U.S. economy grew by an annualized 2.1% in the third quarter of 2019 compared to an advance estimate of 1.9% and following a 2.0% expansion in the previous three-month period. Upward revisions to private inventory investment, nonresidential fixed investment, and personal consumption expenditures (PCE) were partially offset by a downward revision to state and local government spending.”
Not too bad, right?
If You Want to Come Out a Winner…
I know some people are worried about what will happen if the U.S. goes into a recession in 2020. Will we have to employ negative interest rates ourselves? That CNBC piece, for one, was definitely concerned about the possibility.
...Originally Posted On Seeking Alpha
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