Negative Interest Rates
Nominal interest rates are normally positive, but not always. Given the alternative of holding cash, and thus earning 0%, rather than lending it out, profit-seeking lenders will not lend below 0%, as that will guarantee a loss, and a bank offering a negative deposit rate will find few takers, as savers will instead hold cash. During the European sovereign-debt crisis, government bonds of some countries (Switzerland, Denmark, Germany, Finland, the Netherlands and Austria) have been sold at negative yields. Suggested explanations include desire for safety and protection against the Eurozone breaking up.
More often, real interest rates can be negative, when ...view middle of the document...
25%, at the same time as setting its overnight deposit rate at -0.25%. The existence of the negative overnight deposit rate was a technical consequence of the fact that overnight deposit rates are generally set at 0.5% below or 0.75% below the policy rate. This is not technically an example of "negative interest on excess reserves," because Sweden does not have a reserve requirement, but imposing a reserve interest rate without reserve requirements imposes an implied reserve requirement of zero. The Riksbank studied the impact of these changes and stated in a commentary report that they led to no disruptions in Swedish financial markets.
A currency can be freely exchanged into another currency for any purpose, without regulatory restrictions. Convertible currencies are generally associated with open and stable economies, and their prices are typically determined through supply and demand forces in the FOREIGN EXCHANGE market. It’s also known as HARD CURRENCY.
A currency that is freely exchangeable (i.e. without government restrictions) into other currencies or gold. Some currencies only have limited convertibility, which means they are exchangeable in certain circumstances but not all the time. A currency is fully convertible (or has full convertibility) when there are no restrictions at all on when it can be used.
GE, Siemens and Alstom analysis
At the end of April 2014, Alstom's board accepted GE's €12.35 billion bid for its power generation and transmission units. Then GE's rival Siemens signalled it was likely to counter bid. Whatever the outcome, it is beyond being a simple wind power deal, yet the effect on the sector could be significant.
* French government steps in
GE's largest-ever purchase is complicated by the French government trying to keep domestic jobs, prevent outsourcing and improve the price. The government wanted state-controlled Areva to buy Alstom's offshore wind unit were GE's bid successful while Areva has also indicated it could be interested. The government has requested GE to extend its bid deadline to 23 June. The comments could have been designed to force GE into concessions. GE is not expected to divest Alstom's offshore wind unit.
* Offshore expertise
As buyer, GE would benefit from Alstom's 6MW Haliade, the first prototype operating onshore since 2012, and another Haliade off Belgium since 2013. Alongside Siemens and ABB, Alstom is also one of three leaders in offshore wind turnkey solutions using AC or DC converters. GE must diversify its wind markets globally. Most of Alstom's 1.5GW Haliade pipeline is in French waters, and 42MW is off America. In Brazil's hot onshore market, GE leads with more than 1GW in orders, while Alstom's Ecotècnia subsidiary has 400MW-plus. Buying Alstom would consolidate GE's supremacy. Asked whether GE might close any of Alstom's Brazilian assembly plants.
Alstom has been more active in emerging wind markets than GE, which is worried by its...