Nice cut the corp. tax rate. Well done. What are the LAQC changes, exactly?

"Property investment losses can no longer be claimed by those looking to reduce their taxable income to claim Working for Families."

So is this ring-fencing of losses or half-baked ring fencing? How does it affect the use of LAQC's? We need a few more details on this but I guess someone needs to read the fine print of the budget. It doesn't sound to me like the property investors have been king hit - just winded a bit with a punch to the stomach. No real upside to property then but only a bit of downside. Its probably enough to get National elected again for another term.

Partial ring fencing, aghhh!!
5% gap between company rate and top tax rate still.
More tax avoidance.

Pity that the company tax rate has gone down - that keeps the gap open between the company tax rate and the top personal and trust rate. More scope for tax avoidance. We shouldn't get into a bidding war over company tax rates with Australia - it will just be a race to the bottom.

Good the company tax rate down to 28%

Bad the top personal rate still 5% higher, as others have said, still a nightmare for accountants to administer, and ongoing money and time wasted sorting our tax and salary issues through the courts: stupid.

And on top of the reduction to 30% company fees earlier, managing company imputation subsidiary ledgers, especially around dividends is going to be even more nightmarish. More compliance hassles, more complexity. (Oh bloody hell, even worse multi-rate earner FBT calculations ... !)

Pretty much exactly what was expected. To me it seems reasonable.

If that's the case Brien from then there is still an incentive to buy rental property in your own name/partnership, and take up as much debt as possble.

The opposite of what they're trying to do.

English has just said the loss of depreciation deductions covers commercial property: some commercial property funds are in for a drubbing. And rents will be rising so will be more expensive doing business for Jo Average retailing trying to pay the rent in the mall.

Just distortions on top of existing distortions.

Better the government just shed nine tenths of its obesity, and buggered off out of free markets.

Back to work for me ...

I'm liking the PIE and corporate tax rate reduction :-)

Well, I can already spot a Mack-truck-wide hole in the depreciation game.

'Fit-outs' are BAU, so guess what many, many major renovations will be described as on all working documents?

Who says a Partition cannot be Structural? Or a Floor Covering cannot be applied to a Roof? Or, indeed, the building is shoody and will last only another Decade?

Descriptions, descriptions, it's all in the descriptions....

What are the changes to the LAQC and QC rules? Tell us how it is going to work please.

There is no pleasing some people.

@waymad - agreed and I reckon you could fit the QE2 through the "estimated 50 year lifetime" clause for building depreciation exemption too. How many modern buildings are going to have that lifetime (For a start theres no way master builder guarantees are that long...). Anyone want tio bet on a proliferation of cardboard town houses for investors to depreciate?

If that's the case Brien from then there is still an incentive to buy rental property in your own name/partnership, and take up as much debt as possble.

The opposite of what they're trying to do.

English has just said the loss of depreciation deductions covers commercial property: some commercial property funds are in for a drubbing. And rents will be rising so will be more expensive doing business for Jo Average retailing trying to pay the rent in the mall.

Just distortions on top of existing distortions.

Better the government just shed nine tenths of its obesity, and got out of free markets.

Back to work for me ...

No depreciation on property with a greater than 50 year useful life..... does that mean leaky houses can be depreciated 100%?...lol

So there goes $4000 down the tubes for setting up an LAQC in the last few years. How long for the boffins to find the next best lop hole?

Judging by Phil Goff's reply, jimmy, JK & BE could have 'gone all the way' without any risk at all. Opposition? Really? Where....

@ gdjcpico

So there goes $4000 down the tubes for setting up an LAQC in the last few years. How long for the boffins to find the next best lop hole?

$4000??? More like $400.

Seems like a step in the right direction to me.

I am still bidding at an upcoming residential investment property auction, makes no difference to me at all this budget.
$2000 to set up the LAQC in 2005

GST, Sam Smith. Not much left in the pocket after that. If the economy recovers ( let's hope) personal spending will increase from these quite low levels.

@ LAQC OWNER

- You must be including transfer of assets to the LAQC? A company is only around $450 to set up.

So if I read the www.taxguide.govt.nz correctly, if I have a building with a lifespan of less than 50 years I can get a ruling from the IRD that allows me to continue to claim depreciation.

So owners of rundown old houses on development land could still wangle a depreciation claim?

Thanks Mr English, 6% inflation. House price rises here we go!

Thx Mr English 6% inflation and rocketing interest rates to try to supress it! I just love, cash in the bank.

Building materials all going up by 2.5%...

clandestino..terrible isn't it ...some people getting wealthy...who knows, one of them may end up creating work and income for the like of you!

Still going >.8115. Maybe importing the building materials from Oz will be the go, Dave Smyth! That's the first 1.5% in just one day!

@NA - the EU/USD cross went 0.3c basically following NZD/USD between 2pm and 2.45pm. Did Bill English just move the cross-rate between the 2 biggest currencies on the planet? Globalisation is weird.....

Dave S

The 2.5% increase in GST equates to an overall increase in prices of 2.22%. 1.15 divided by 1.125.

cheers

@ Chris_J & Mike in Welly

- Oh well spotted!

I haven't read the whole Landords link 28_yr_old (now 29) but note "The government expects it changes will whack professional property investors, who would be almost $15,000 worse off every year"

Exactly, william, That's what property investing is all about after all.

$15,000 is a number someone pulled out of their bum! How many properties does a "professional investor" have anyway?

With yer lawyer at $200/hr - nice fillip to GDP there, William....pity aboot the actual production.

And Dave, the technical term is PDOOMA.

Well now that we have had time to digest all these changes - what are peoples opinion on the outlook for housing? Flat, up 5% over the next year, down 5%. Come on folks - stick you necks out and make a call! I'd especially love to hear Bernards take on this. I reckon the overall effect will be flat unless interest rates rise significantly, and if that happens - maybe 5-10% down over the next 12 months if bank interest rates increase by 2-3%. Then everyone will blame the government but we will all know deep down that its because of interest rates.

anyone has any details about LAQC changes; a bit vague???

After deriding younger members of my wider family for showing an interest in purchasing a rental property I also am interested in a future market appraisal. Cheers.

@ Didge

Some will do well and others won't do well. Some will be in between those that do well and those that don't.

Short answer is that the market is not that relevant. People need somewhere to live and if you buy well and manage well, a rental property can still be a good investment.

@Gingerbreadman; nothing exciting, the effect will be that LAQC's are treated basically the same as partnerships (no retention of profits).

clandestino...job creation is done by private enterprise..not by beaurocrats and pollys desperate to stay in office or get into power. Clearly you support the idea that nobody should be allowed to have an income greater than that prescribed by govt and that all wealth belongs to the govt to distribute as it sees fit..to flunkies of course. Go your own way clandestino...indeed why don't you go to Cuba where your concept of freedom and democracy is dominant as can be seen by the standard of living there had by those not closely linked to the ruling 'communists'.

.....and just a reminder:

key promises no gst rise

http://www.youtube.com/watch?v=JiZ7qXR32QE&feature=player_embedded

@GBM - Mark H has a quick post over on the other thread.
http://www.interest.co.nz/ratesblog/index.php/2010/05/20/heres-the-10-ch...

Feeding trolls is like feeding seagulls or giving tax dollars to the fertile underclass, it just reinforces undesirable behaviour. Chaps and chapesses, leave the trolls alone!

N A - thanks for the link. I need to explain this to the oldman!

Matt in Auck,

what is your take on all this? join the fray, admit you got it wrong and continue with your pearls of wisdom :-)

Come in Matt in Auck - are you still breathing - LOL!

NO land tax
NO capital gains tax
NO stamp duty
NO brightline test

Mild tinkering with depreciation and LAQC – no significant change according to John Shewan

Big personal tax cuts and surprise, surprise a company tax cut – yeeeehaaah!

So nothing to fear for the property sector and plenty to fear for those waiting fior prices to fall.

Rich get richer - poor stay poor - renters pay more rent

clandestino..pardon my assault..still recovering from spotting cunliffe and goofy on tv screaming across the floor of the House. I don't know about the gst and crime...maybe it will encourage families to grow their own and that would be good.
It is counter productive to discourage people from using their lives to get rich, which seems to be a Labour thing. Also I see nothing wrong with wealth being passed on down through families. The socialist sickness has caused major problems because it went too far. It evolved into a 'bash the rich' is good idea and just serves to divide society. I note that those on low incomes who win huge lottery sums are usually very quick to grab the trappings of wealth and shift suburbs or cities.

Hold the champers, there, Russell!
Budget: Analysts tip fall in property prices
http://nz.biz.yahoo.com/100520/3/j2oc.html
A bit confusing, but several views.

Russell, I think that most (as in 90%+) of property investors wouldn't earn anywhere near $150k p.a.

Of course the owner/occupier market will remain robust! No one has been on about that. It's the speculator part of the market that's being reviewed. More invetors selling = more owner ocuppiers buying them.
Any real estate agent worth their salt will spruik you with " As long as you buy and sell your home in the same market, you are no worse off"

OK Dave let's say they earn $100,000 - still $2,600 better off with tax cut. You are not going to sell your rental just because you can no longer claim depreciation.

There will be properties taken off the market not added to it - the fear of CGT, Stamp Duty and Land Tax has evaporated. Rent rises will swallow up the average extra $15 per week that the average renter will receive through tax cuts.

If a global financial crisis wasn't able to collapse property prices in New Zealand then this budget certainly is not going to do it.

Life goes on - nothing to get excited about here.

$1b (that is 9 zeros) a month for 36 months on the assumption of 3% growth - realistic?

Does this budget address the net debt ($168b or 90% of GDP) problem?

Spending and tax take will have to be addressed, today will not be sufficient on both sides and more go rounds will be necessary. Need still to talk about:

- Means tested state superannuation.

- Progressively increases to the age of entitlement to state superannuation.

- An end to tax free loans for students.

- Land or comprehensive capital gains tax.

- Lower taxes on incomes.

- Death duties.

- A policy framework for the productive economy that matches the rhetoric - get the speculators out of our currency.

For a start.

The most surprising thing in this budget was the significant increase in government spending. I thought they said at election that they needed to cut govt spending?

As a worker with two investment properties, i welcome the changes. I have never used LAQC or trusts to dodge tax. I see it as as long as your property investment gives you a positive return, which mine is, you are not worse off.

I am glad they closed the WFF loop hole, but sad they didn't abolish it altogether.

Blue Chips Mark Byers only gets $37,500 fine and 75 hours community service

In that example above all Dave has to do is put rents up $12 per week - EASY!

Not sure many individual investors own 25 rental properties

@Russell - You may well be right but I was thinking about the significant number of people who became landlords against their will (sort of) due to not being able to sell at their asking price since the end of 2007. I suppose many would have been people on average incomes seeking to upgrade from a first home to a bigger home (hence they probably have kids and may have qualified for WFF). If that "incentive" is removed I am thinking they may be more willing to drop their asking prices to sell rather than remain landlords when it wasn't what they aspired to in the first place. So I am assuming it might mean more first homes on offer at a lower asking price because it might be better for them to sell at a lower price than keep holding onto a property that makes a loss under these new rules. That's pure assumption on my part. Truth is I don't know but at first sight it seemed to me like this new rule might be offputting to a number of non-professional PIs.

Love that IRD example, Russell. So Dave has $8.8mio ( 25 x average property $352k) tied up in property and yeilds a net profit $112k p.a. That's 1.27% p.a. ! Stick the cash in the bank at say 5% less tax @30% and yeild $308k p.a. with no effort. ( you'd get more than 5% for $8.8m)
And now with depreciation removed he nets $15k less, so $97k p.a., a fabulous 1.1% p.a.
I'd take the $308k on the cash in the bank rathers than the $97k in property returns, any day!

No ring fencing???

what a waste of time.....

Bernard I wonder what you mean by 'I would have liked a clean and broad land tax with a high per-hectare threshold' ?
Landowners all pay large amounts of land tax - in NZ called 'rates' - are you suggesting yet another drain on eg farm land?

@Elley
These "accidental" landlords, whilst may not reduce their income to claim WFF, can still claim losses to reduce their income and pay less tax. This has not changed, so these accidental landlords may not give up their loss making investment property in a hurry.

Russell - do you actually know what this means, or is it a copy and paste without thought?

# Russell Says:
May 20th, 2010 at 4:54 pm

Amanda and Ben are a couple in their late 40s. They have two teenage children and a joint income of $120,000 a year – ... Several years ago they used equity in their own home to purchase an investment property. ...

They purchased their rental property for $300,000 and make an annual profit of $2,700 ($51.92 a week) after costs of interest, repairs, maintenance, rates and annual depreciation of $3,000. The property is now worth about $600,000.
...
Overall they are $23.56 a week or $1,225.12 a year BETTER off.

What this really shows is that if you can buy the property for $300,000 then the tax situation is a good outcome. Try figuring out what their change in position would be if they bought the property last week (they'd be very slightly worse off).

The changes apear to matter measured against current house prices, which is what's important.

The bare facts with no media spin:

http://www.beehive.govt.nz/release/fact+sheet+-+building+depreciation

http://www.beehive.govt.nz/release/fact+sheet+-+laqc+and+qc+changes

http://www.beehive.govt.nz/release/fact+sheet+-+working+families+changes

http://www.beehive.govt.nz/release/fact+sheet+-+personal+tax+cuts

Oh well I guess it's round 2 to the ponzi boys and I gotta eat more s$%t sanwiches for awhile.......
enjoy your gloat you have earned it...nice to see Lassie pop back up feeling smug no doubt.

# shorts Says:
May 20th, 2010 at 5:25 pm

nicholas arrand – why would you divide the net profit over $8.8M? Assuming he has 20% equity that he actually contributed the his return would be 6.3%. If he borrowed 100% of the purchase price by using his own home as security then his return is infinite (being 112000 / 0).

That'd be a hell of a home to make the bank happy with that arrangement.

I'd hope that someone with $8.8m of property was financing them non-recourse. Besides, it says he pays interest. If it was 50:50 then his return is double what nicholas arrand says - still horrible.

Good for you, ruru . Axing WFF will be the best thing in the longer term. One day, and it just might be this day, we will have a government that has the foresight to do what's best for the country; best for us all, you wait and see.

Not too bad, if anyone expected something harder than that on property investors they were dreaming.

Especially with the opposition that created all the loopholes and inflated the whole thing, out there saying they wouldn't have changed a thing.

National still have to try to get voted back in as well.

Can I say “I TOLD YOU SO”?

Todays announcement further proves my point.

“NOTHING IS GOING TO CHANGE”

Things will get touched here and there, take some and give some back where it doesnt really hurt.

The government will always take care of the wealthy and those whos in the game.

Nice tax cuts across the board tho for the hard working people, this should keep people happy for a while.

Good on National, you’ve done it again!

Bill English and John Key can stay next year.

keep up the good work.

Come on you guys give "Matt in Auck" a break.

Interesting enough, all of a suddent after the budget, many have disappeared from here, many have changed their user names.

Hello income tax break. Yes... I think property prices won't drop, but won't increase due to this, but I do think more property taxes will be on the cards in future years if property spikes again.

*****Take note and remember the last sentence with reference to the importance of 1 April 2011***

The alignment of certain investment tax rates with income tax rates is the central feature of an omnibus taxation Bill tabled in Parliament today, Revenue Minister Peter Dunne said.

“The Taxation (Consequential Rate) Bill consists of a good deal of ‘catch-up’ legislation that makes downstream changes to tax law that follow on from earlier tax changes, as well as generally updating tax law and providing greater taxpayer certainty,” he said.

“The Bill introduces new resident withholding tax (RWT) rates on interest paid to individuals, to bring them into line with recent changes to personal tax rates. The new rates for individuals will be 12.5%, 21%, 33% and 38%, depending on their income.

“The Bill introduces a new default rate of 38% for people who do not notify their bank of their correct tax rate. The new default rate will apply to accounts opened from 1 April 2010.

“There will be a transitional period for people who have a bank account at 1 April 2010 and who are on the current RWT default rate of 19.5%. They will be automatically shifted up to a 21% rate for a year from 1 April 2010. They will then have a year in which to either confirm with their bank that 21% is their correct rate or to select one of the other RWT rates. If they neither confirm the 21% rate nor elect another rate, their RWT default rate will then go up to 38% from 1 April 2011.

“The changes to the default rate are being made to motivate people to use the correct tax rate for the interest they receive from their financial institution.

What happens when/if the forecast growth figures which are subsidising/supporting the tax cuts don't materialise.... and the government starts reporting greater than forecast deficits. Meanwhile interest rates rise and deleveraging of privately held debt continues.

The company tax lowering doesn't kick in for a couple of years, so I expect more downsizing - which means further erosion of the tax take and so on and so forth.

There was just nothing stimulatory for business that I could see - but perhaps it just wasn't reported or of interest.

Essentially they are borrowing, to give these tax cuts. If they had done this last year, I am sure there would have been a lot more people complaining. According to Labour, due to inflation, and the rising interest rates, many NZers will be worse off not better off. I am just wondering how there can be such conflicting 'expert' opinions.
I wanted more taxes on property, but I guess they can't do it all in one big whack, they are having to slowly pull the plaster off.

Rob Says:
May 20th, 2010 at 8:25 pm

"Essentially they are borrowing, to give these tax cuts. If they had done this last year,"

Ah, no they are not! They give a few cuts and get it all back again with GST increases, Withholding Tax increases that recently applied from 1st Apri AND the ETS (Emission trading Scheme, new tax) on most commodities like petrol.

Where ever did you get that idea Rob? They are borrowing $240 million a year to keep the country looking like its productive to foreign banks and investors! It's all a charade

"They are borrowing $240 million a year" Sorry Rob, I meant "a week", Yes Gibber, thankyou.

Would have liked the Govt to go harder on the property market. Ringfencing at least.
But like a few others, I agree, the Govt has to do a slow play on bursting the property bubble. They need to keep votes while turning things around at the same time.

Labour can be blamed for this silly situation we are in! What sort of Govt let's property values double in a five year period.

Further steps to come that will affect property:
1) RMA Reforms Stage 2 - Urban Planning Workstream
2) Auckland Supercity
3) Building Act Reform
4) Capital Markets Reform
5) And yes - my prediction - in their second term National will bring in some sort of tax on investment property (i.e. capital gains or land tax)

Overall mark for budget: 7/10

Damian D Says:
May 20th, 2010 at 9:32 pm

"Would have liked the Govt to go harder on the property market. Ringfencing at least.
But like a few others, I agree, the Govt has to do a slow play on bursting the property bubble. They need to keep votes while turning things around at the same time. "

I'd rather they did what's right for the country overall and not JUST buy votes! That's Labours game

Kate

Well yes, fair enough. You have to be making profit in these tough times to pay tax otherwise the 2% doesn't help much and as you say, it's all future stuff. There are however an increasing number of companies reporting much improved results or giving upbeat guidance.
Looking at the bigger corporates seems the market numbers later today perhaps suggest investors might like the look of the 2% cut.
Also might see some wage increase pressure come off at the upper end if you have employees in that category.

@Damian
The previous gov were a bunch of ideologists rather than practitionists. The biggest contributor to rising property prices were 39% top tax rate and WFF.

Wild Bill has gone some way towards un-Cullenising the tax system . But really , how radical is it to put the settings back to 1999 levels , before the socialist wastrals wrecked a good ( albeit not perfect ) tax regime ? The " dead-rats" National had to swallow , to win the 2008 election ( i.e. WFF ) , ought to have been expunged by one word : Greece ! .

There lies our future if we continue to borrow other peoples' munny to bribe voters every 3 years with fiscally damaging and unsustainable promises .

@cam: leaky houses....good point....

regards

OECD rank 22 kiwi Says:
May 20th, 2010 at 3:23 pm

"More money thrown into the blackhole that is Health."

and the alternative is private healthcare at over twice the cost in terms of GDP (8% v 18%)...thats a huge amount of money sucked out of our economy and exported out of NZ.....for a worse outcome, no less.

regards

@ Andy M
"Disappointed that they didn’t completely ringfence."

- There was never any chance of that happening. Rents would have skyrocketed and after an initial tumble in prices and recovery, we'd end up with another housing shortage.

@ Roger Thompson
"The ” dead-rats” National had to swallow , to win the 2008 election ( i.e. WFF ) , ought to have been expunged by one word : Greece ! . "

- Agreed but sadly, they can only achieve lasting change if they have the time to do it. That means getting in for another term.

@ Steven

- Most rental investors aren't on high incomes. Even the ones who own multiple properties.

@Clandestino and Wally,,,,Wally you are right,,,, you can be wealthy and provide opportunity for work but clandestino would probably rather not work. Try getting lazy bludging types to actually put in an honest days effort is a challenge and a scary subculture. I would much rather use friendly hardworking people from other nations that come here to work hard than lazy "world owes me something" kiwis like Clandestino.

Roger,

It flies around Paris and Hawaii.....sipping Moet and eating camapes....and talks cheap.

They then come back home to roost in their Taxpayer funded MCmansions and talk a lot of rot...and watch em rot around em.

The Over Heads are the problem..for any new investment.....not the Solution.

Then they send the BILL to the TAXMAN....for some more.

And so it goes round and round.....in an ever decreasing cycle.

A scam is just that. Food for thought.

6% Inflation.....is the STATED AIM........so guess what......prepare to bail.

Might as well SAVE my breath....

BOLLARDS to the left of em....Brokers to the right.

BUDGET......whose budget....why budget.....OH...fudge it.

And you reckon that this is the last of the Key government changes to property, Bruce? Good luck.

Now the top rate and trust rates are the same a lot of people (in the tax rate)will not be able to avoid paying the tax. This is a big thing and what a lot of bloggers , media have been looking for. I think this is a good thing long term. This doesn't mean people will all of a sudden sell their rentals, will help to cut the speculation and the top tax rate bracket will pay their tax and stop the WFF rort by 10000 people

regards

I agree NA, the question is then that if you are a person (FHB) waiting for the crash on the sideline do you jump in now before interest rates explode??

@28<29

the question is then that if you are a person (FHB) waiting for the crash on the sideline do you jump in now before interest rates explode??

Not really - the yield curve is now so steep that its not possible right now to lock in a fixed term mortgage rate that is likely to be less than the floating rate over the next 3 years. So you will be paying the floating rate as soon as it changes regardless of when it changes. The actual question to ask is: can i afford this purchase on a floating rate assuming interest rates rise by 3% in the next 18 months?

Good point chris B, hence I locked a rental in at 6.5% for 18month last week, fixed rates are over priced at the moment.

the question is then that if you are a person (FHB) waiting for the crash on the sideline do you jump in now before interest rates explode??

Perhaps you've answered your own question. When/if interest rates "explode" there will be a significant number of asset holders that will no longer be able to afford their borrowings - and liquidation (sale) will be the result.

There is only one principle to follow in today's market - be debt free.

I read somewhere else that the point about the future is not to strategise about how to stand out above the crowd, but how to hide from it.

Russell/NA-do you see fixed long term rates falling?? or the OCR/floating rate remaining low?

@28 y.o. Yes; Yes ,and IanC is right though! It's how you see our/the global economy doing. Me? I've got one foot over the side of Christov's lifeboat today.

@NA - How much connection is there between the RBNZ OCR and mortgage rates right now? You might be right that Bollard's signalled rate hikes are about to get pulled - I'm halfway convenced we're entering into the financial crisis part 2 too but this is a full-blown debt crisis now. Lenders are about to stop trusting borrowers and interest rates globally are going to rise, (except for retail deposits of course - the high street is where the peasantry goes to get ripped off after all). Libor is rising, risk premiums are high and the government guarantee is expiring. Banks are under pressure - are they really going to drop rates any time soon?

On another note - have you been watching the AUD/JPY whipsawing at the moment? - The international market is REALLY nervous about risk right now and small indebted rocks in the middle of the pacific count as HIGH RISK.

NA - women and children first.

@Chris B - I'd agree with your "Lenders are about to stop trusting borrowers " and in any context the alternative is to sell whatever it is that the finance is covering. If things get REALLY nasty and mortgages can't be rolled over, by example, then what choice will house owners have, except, sell? If the bank says " Give me the money" well....and that applies on a macro level as well.

@NA - OK so we both agree a crunch is coming. So come on then - justify why, when the commercial cost of money the world over is about to go through the roof, you think mortgage rates in NZ are going to go down.... The only reason I can possibly think that might possibly allow this to happen is if the banks collude to prevent the property market here dropping and subsidise any reduction in cash-flow via Aussie profits - but are they going to be making any profits on Oz? I think not...

Kate

"from the market’s point of view – there won’t be anything orderly about it."

Indeed. The first line says it all, "The German Chancellor said the time had come to agree on stricter financial regulation and urged her fellow leaders to take action."

All talk, no action, no leadership, rapidly eroding Franco-Prussian trust (this is historically a REALLY BAD THING). Lots of public posturing and rumours to swing a very nernous market. Very messy.

You only have counterparty risk premium if there is a transaction. Risk will go up, as you say. But if there's so much risk that lending ceases? The only alternative in a case like that is to sell the asset. Look what happens at this first frights. The Bunds, JGB's get bought. That doesn't push interest rates up. 0% return on your money is better than having 0% of your money returned! And your absolutely right....we shall see. Cheers.