European Central Bank
Following The Bank of Japan's voyage into NIRP never-never-land, the market has sent a clear signal of its displeasure and now a growing number of Japanese officials (and former officials) are questioning Kuroda and Abe's Peter-Pan-ic dream that 'they' can fly. Having called for sub-zero rates more than two decades ago, Takeshi Fujimaki, the Japanese banker turned opposition lawmaker, warns "The BOJ is trapped," now that QQE efforts have flattened the yield curve, since "if the curve is steep, banks can make profits even at negative rates. It was a mistake to adopt negative rates after QQE." But it is Fujimaki's parting comment that should have most concerned, "Japan has ballooning debt and the BOJ is financing debt, that’s the problem... it will bust and there will be hyperinflation."
"If Britain does vote No the case for a European Union will collapse – the move away from common law and equal treatment has been for everyone to see."
Europeans don't trust financial institutions...
If the Benjamin is killed, it will “deter illicit activities” they say, apparently taking us all for complete idiots. Very organized criminals all over the world could be heard rolling on the floor laughing their heads off at this pronouncement.
In what could well be a final act of desperation, central banks are abdicating effective control of the economies they have been entrusted to manage. First came zero interest rates, then quantitative easing, and now negative interest rates – one futile attempt begetting another. Just as the first two gambits failed to gain meaningful economic traction in chronically weak recoveries, the shift to negative rates will only compound the risks of financial instability and set the stage for the next crisis.
What negative interest rates are really projecting are low-to-no growth and zero-profit environments for the entire global economy sometime in the future, where businesses simply cannot make money. The implication of this is that all businesses will come to the government seeking subsidies. We already see it in agriculture. Education. Health care. Housing. Whether it is loan programs for customers or outright grants. There will be more. This is why capitalism cannot survive no growth. Economies would naturally revert to some form of subsistence, where the need to trade is reduced greatly.
Beware politicians trying to limit the ways you can conduct private economic business. It never turns out well.
This is starting to become very concerning. The momentum to “ban cash" is seriously picking up steam.
It looks like the board-game company sees the writing on the wall and is preparing the children of today for the new world order – a cashless society.
"...a moratorium on printing new high denomination notes would make the world a better place."
- Larry Summers, Harvard Professor
- Oil eases off highs after output freeze agreement (Reuters)
- Saudis and Russia agree to oil output freeze, Iran still an obstacle (Reuters)
- China Loses Control of the Economic Story Line (WSJ)
- Obama starts work to pick Supreme Court justice amid political 'bluster' (Reuters)
- The Never-Ending Story: Europe’s Banks Face a Frightening Future (BBG)
- Apollo Global to buy security services company ADT for $7 billion (Reuters)
After starting out strongly this morning, with DB stock trading just shy of $17/share, European banks have seen some weakness in the past 30 minutes following a report from Reuters, in which sources were cited as saying that there is "firm support for a deposit rate cut within the European Central Bank's Governing Council."
As the following chart from Reuters shows, the year-to-date stock price performance for most European banks is on pace to far surpass - to the downside - the dreadful for the global financial system 2008.
Here is the real reason why suddenly high denomination bank notes are the target: it is not because "drug dealers" and tax-evaders use them, but because between banning Europe's €500 bill and the US $100 bill, over half of all physical currency currently in circulation would disappear.
Negative interest rates act effectively as a hidden tax funneled directly to banks. They are inherently unhealthy. Currently, they could indicate also a measure of unease among two of the four most powerful central banks. If so, that could well escalate.