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NIRP Has Arrived: Europe Officially Enters The "Monetary Twilight Zone"

Tyler Durden's picture




 

Goodbye ZIRP, hello NIRP. Today's decision by the ECB to officially lower the deposit facility rate to negative (as in you pay the bank to hold your deposits) is shocking, but not surprising: we previewed just this outcome precisely two years ago in "Europe's "Monetary Twilight Zone" Neutron Bomb: NIRP"

Here is what we wrote in June 2012 about Europe's unprecedented NIRP monetary experiment.

Just because ZIRP is so 2009 (and will be until the end of central planning as the Fed can not afford to hike rates ever again), the ECB is now contemplating something far more drastic: charging depositors for the privilege of holding money. Enter NIRP, aka Negative Interest Rate Policy.

Bloomberg reports that "European Central Bank President Mario Draghi is contemplating taking interest rates into a twilight zone shunned by the Federal Reserve. while cutting ECB rates may boost confidence, stimulate lending and foster growth, it could also involve reducing the bank’s deposit rate to zero or even lower. Once an obstacle for policy makers because it risks hurting the money markets they’re trying to revive, cutting the deposit rate from 0.25 percent is no longer a taboo, two euro-area central bank officials said on June 15... “The European recession is worsening, the ECB has to do more,” said Julian Callow, chief European economist at Barclays Capital in London, who forecasts rates will be cut at the ECB’s next policy meeting on July 5. “A negative deposit rate is something they need to consider but taking it to zero as a first step is more likely.” Should Draghi elect to cut the deposit rate to zero or lower, he’ll be entering territory few policy makers have dared to venture. Sweden’s Riksbank in July 2009 became the world’s first central bank to charge financial institutions for the money they deposited with it overnight."

There is only one problem when comparing the Riksbank with the ECB: at €747 billion in deposits parked at the ECB as of yesterday, the ECB is currently paying out 0.25% on this balance, a move which may or may not be a reason for the depositor banks, primarily of North European extraction, to keep their money parked in Frankfurt. However, once this money has to pay to stay, it is certain that nearly $1 trillion in deposit cash, currently in electronic format, would flood the market. What happens next is unknown: the ECB hopes that this liquidity flood will be contained. The reality will be vastly different. One thing is certain: inflating the debt is the only way out for the status quo. The only question is what format it will take.

More from Bloomberg:

It won’t help the prospect of a functioning money market because banks won’t be compensated for the risk they’re taking,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. It would make more sense to lower the benchmark rate, thus reducing the interest banks pay on ECB loans, and keep the deposit rate where it is, Green said.

 

The ECB has lent banks more than 1 trillion euros in three- year loans, with the interest determined by the average of the benchmark rate over that period. Societe Generale SA estimates that cutting the key rate by 50 basis points would save banks 5 billion euros a year.

 

The deposit rate traditionally moves in tandem with the benchmark, which policy makers kept at a record low of 1 percent on June 6. Draghi said “a few” officials called for a cut, fueling speculation the bank could act next month.

Sadly, because all this is merely operating in the confines of a broken system, just as the LTRO provides a brief respite only to commence crushing banks such as Monte Paschi, so any further intervention by the ECB will only lead to a faster unwind of an unstable system.

Other institutions have opted against such a move. The Fed started paying interest on deposits to help keep the federal funds rate near its target in October 2008 and has reimbursed banks with 0.25 percent on required and excess reserve balances since December that year.

 

Some Fed policy makers last August argued that reducing the rate could be helpful in easing financial conditions. While they discussed doing so in September, many expressed concern that such a move “risked costly disruptions to money markets and to the intermediation of credit,” the Fed said in minutes published on Oct. 12.

 

The Bank of Japan (8301) introduced a Complementary Deposit Facility in October 2008 to provide financial institutions with liquidity and stabilize markets, and has kept the interest it pays for the funds at 0.1 percent since then. Governor Masaaki Shirakawa told reporters on May 23 there would be “large demerits” to reducing the deposit rate because it could lead to a decline in money-market trading.

It gets worse: by trying to help banks, the ECB will actually be impairng them:

If the ECB cut the deposit rate, it would take an important profit opportunity away from banks,” said Tobias Blattner, an economist at Daiwa Capital Markets Europe in London. By doing so, the ECB would also be “encouraging banks to lend to the real economy” even though “there’s hardly any demand for credit,” he said. Blattner predicts the ECB will cut its benchmark and leave the deposit rate at 0.25 percent.

 

ECB Executive Board member Benoit Coeure said on Feb. 19 that market interest rates of zero or lower “can result in a credit contraction.”

 

That’s because banks, trying to preserve their deposit bases by paying customers a reasonable interest rate, may reduce lending to companies and households because the return is too low and invest in higher-yielding assets instead.

Finally kiss money markets - which together with Repos are one of the core components of shadow banking - goodbye:

“A deposit rate at zero will be of particular support to banks in southern Europe because it could help encourage some flow of credit,” said Callow. “A negative deposit rate can be damaging for money markets.”

 

Negative rates would destroy the business model for money- market funds, which would face the prospect of paying to invest, said Societe Generale economist Klaus Baader.

 

“But the ECB doesn’t set policy to keep alive certain parts of the financial sector,” he said. “Policy makers want to show that they haven’t exhausted their options yet.”

 

 

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Thu, 06/05/2014 - 10:23 | 4826693 Obama_4_Dictator
Obama_4_Dictator's picture

At this point, what difference does it make!

Thu, 06/05/2014 - 10:24 | 4826701 AynRandFan
AynRandFan's picture

"Some analysts have argued that such examples suggest that central banks should consider setting negative policy rates, including negative rates on deposits held at the central bank. Such proposals are foolish for a number of reasons. First, a policy rate likely would be set to a negative value only when economic conditions are so weak that the central bank has previously reduced its policy rate to zero. Identifying creditworthy borrowers during such periods is unusually challenging. How strongly should banks during such a period be encouraged to expand lending? Second, negative central bank interest rates may be interpreted as a tax on banks—a tax that is highest during periods of quantitative easing (QE).3 Central banks typically implement QE policies via large-scale asset purchases. Sellers of these assets are paid in newly created central bank deposits, which, in due course, arrive in the accounts of commercial banks at the central bank. It is an axiom of central banking that the banking system itself cannot reduce the aggregate amount of its central bank deposits no matter how many loans are made because the funds loaned by one bank eventually are redeposited at another. Is it reasonable for the central bank to impose a tax on deposits held at the central bank when the central bank itself determines the amount of such deposits held by banks and the banking system? Perhaps these and other considerations caused European Central Bank President Mario Draghi in a recent press conference to label negative deposit rates "uncharted waters" and dismiss any possibility that the ECB would consider it."

http://www.stlouisfed.org/publications/re/articles/?id=2316

Thu, 06/05/2014 - 11:17 | 4826862 zaphod42
zaphod42's picture

"Perhaps these and other considerations caused European Central Bank President Mario Draghi in a recent press conference to label negative deposit rates "uncharted waters" and dismiss any possibility that the ECB would consider it."

 

The obvious conclusion:  ECB did it without considering it?  

Hey!  Makes sense to me!!

Craig

Thu, 06/05/2014 - 10:27 | 4826716 WTF_247
WTF_247's picture

What will happen is very simple to figure out.  There will be a massive cash shortage.

There are far more deposits than actual "caah" in circulation.  Think of a bank run on a massive scale.

Additionallly, this will likely foster new methods to store cash - private vaults etc.  If you are going to pay, why would you pay a bank who then takes it and makes money off it also? You can take it all in cash and just store it yourself for a flat rate per year vs a percent of assets forever.  You would only keep a bank account with a small amount in it.  When you need money for a transaction you bring cash to the bank and deposit it.  Gone the next day before they can tax it - although I guess they will likely then institute a "deposit tax".  If banks earnings drop the govt will do ANYTHING in its power to stop it.

Obviously if you have 10B, storage becomes a bit of an issue.

Thu, 06/05/2014 - 19:35 | 4828475 cherry picker
cherry picker's picture

If you have 10 B, you can afford your own vault with security, like a bank and insure it in case someone does rob it.

Thu, 06/05/2014 - 10:30 | 4826724 GernB
GernB's picture

So central banks have to pay people to borrow money... Yea they have control of the money supply for sure.

Thu, 06/05/2014 - 10:39 | 4826752 slightlyskeptical
slightlyskeptical's picture

It seems people think that the common depositers will get negative or zero rates. Not so, this only applies to excess reserves held by the banks. Basically the ECB will now be paying the banks less to hold excess reserves. The hope is that they will start lending.

This is almost the opposite of easing which is why the Euro is gaining today.

Thu, 06/05/2014 - 10:48 | 4826781 GernB
GernB's picture

Are you saying that the rate central banks charge doesn't affect the rates savers get? If it affects the banks balance sheet, the shortfall has to be made up so somewhere, so where does that money come from?

Thu, 06/05/2014 - 10:58 | 4826805 Vooter
Vooter's picture

Heaven.

Thu, 06/05/2014 - 10:41 | 4826763 DeficitAlchemist
DeficitAlchemist's picture

SouthPark covered Banks & negative interest rates best

 

https://www.youtube.com/watch?v=-DT7bX-B1Mg

Thu, 06/05/2014 - 13:07 | 4827260 One of We
One of We's picture

Never gets old.....

Thu, 06/05/2014 - 10:43 | 4826766 stephysat28
stephysat28's picture

closing on a property in 60 days should i lock in mtg. interest rate now or let it ride?

Thu, 06/05/2014 - 10:46 | 4826775 SpanishGoop
SpanishGoop's picture

I predict a huge rise in ECB deposits.

That's how it works nowdays, up is down and down is up.

 

Thu, 06/05/2014 - 10:52 | 4826789 MuleRider
MuleRider's picture

We always talk about how they pilfer money from the people in so many surreptitious ways....how brazen have they gotten that they no onger hide their theft?!

 

Thu, 06/05/2014 - 10:54 | 4826794 ironmace
ironmace's picture

I'm hearing ads for subprime lenders on the radio again. Here we go.....

Thu, 06/05/2014 - 10:56 | 4826799 indio007
indio007's picture

This is not going to end well...

Thu, 06/05/2014 - 12:35 | 4827155 Seeking Aphids
Seeking Aphids's picture

No kidding.....or are you going for the 'understatement of the year award'? Up arrow on the assumption of the latter.

Thu, 06/05/2014 - 10:58 | 4826807 zaphod42
zaphod42's picture

First comment, reiterating an earlier one:  Banks pay this penalty on excess reserves...  it is not a charge on depositors.

Second comment:  If you think the Banksters won't pass along the expense, you bettah think again, Bitchez.

Result:  some money under the mattress, most into bonds and stocks, a little into commondities (gold, silver, etc.).  The stock market run up will continue, on steroids, bond prices will rise (and returns will drop), with no inflation and no discernable impact on the economy.  If anything, deflation will become more of a problem, though the folks who have gold, silver, and even cash, will benefit.

Craig

Thu, 06/05/2014 - 11:03 | 4826819 fuu
fuu's picture

Marla, wherever you are, you nailed this shit.

Thu, 06/05/2014 - 18:52 | 4828357 Tsunami Wave
Tsunami Wave's picture

Hopefully Marla is gettin' nailed somewhere..

Thu, 06/05/2014 - 11:09 | 4826835 Mark it Zero
Mark it Zero's picture

Sales of safes should start going through the roof.

Thu, 06/05/2014 - 11:14 | 4826852 zaphod42
zaphod42's picture

Many gun stores sell very good safes!

Craig

Thu, 06/05/2014 - 11:12 | 4826846 Counterfiat
Counterfiat's picture

First they raise taxes on precious metals in Europe, then they introduce NIRP, next to be followed by BURP.

Thu, 06/05/2014 - 11:18 | 4826866 JR
JR's picture

This is the beginning of the flames that will consume the central banks. Their failed policies and their thirst for power just continue to drive them deeper and deeper into an abyss where their final failure awaits.

If something is causing really big economic and social problems all they know is to torture people and drive nations' economies more and more into the ground – it is adding colossal failure to more and more failure.

What we really want at the end of the day, we want these big banks to go under, completely out. And this is the direction they are going. That’s what is going to save civilization.

Thu, 06/05/2014 - 12:04 | 4827032 IridiumRebel
IridiumRebel's picture

Flaming Central Banks sound kinda kick ass....

Thu, 06/05/2014 - 11:20 | 4826872 Ewtman
Thu, 06/05/2014 - 11:22 | 4826883 Billy O'Naire
Billy O'Naire's picture

In the comments section of the story regarding the recent European elections, I recall a poster saying (paraphrasing) 'what will this result actually change?.'

Rise in French National Front (France being key to the eurozone), now negative rates.

Hmmmm....

Thu, 06/05/2014 - 11:29 | 4826901 overmedicatedun...
overmedicatedundersexed's picture

another sign of the economic recovery, here in usa old yeller ahh ms yellin, says low interest rates will be needed for a lonnnnnnnng time...just as ben claimed 5 yrs ago.,..I love the smell of recovvvvery..cough BS

Thu, 06/05/2014 - 11:48 | 4826960 I Write Code
I Write Code's picture

And if you take your money out of the bank, armed government NIRP thugs will come to your house and confiscate 0.1% per month anyway.

Thu, 06/05/2014 - 11:55 | 4826993 zaphod42
zaphod42's picture

Slippery slope that.  

Next thing, they impute value to your house, and ask for 0.1% of your house per year.  Pay up or they foreclose on your home.

Once they get all the houses, families will double up.  Then they will impute free rent to those living with you (children, grandchildren, parents, etc.), and ask them for 0.1% of the value of your rent.  Since you can no longer pay that, they will take your children as slaves / indentured servants.  You may work in their factories, and they will decide what to pay you. 

or not.

Craig

Thu, 06/05/2014 - 12:18 | 4827085 JR
JR's picture

“To blame ‘excessive saving’ for the business decline would be like blaming a fall in the price of apples not on a bumper crop but on the people who refuse to pay more for apples.” – Henry Hazlitt

 In 2005, in a column discussing the question of how fascism might come to America, Justin Raimondo wrote:

"From the moment the twin towers were hit, the fascist seed began to germinate, to take root and grow. As the first shots of what the neocons call ‘World War IV’ rang out, piercing the post-Cold War calm like a shriek straight out of Hell, the political and cultural climate underwent a huge shift: the country became, for the first time in the modern era, a hothouse conducive to the growth of a genuinely totalitarian tendency in American politics…. 

"The Republican Party’s response to 9/11 was to push through the most repressive series of laws since the Alien and Sedition Acts, starting with the ‘PATRIOT Act’ and its successors – making it possible for American citizens to be held without charges, without public evidence, without trial, and giving the federal government unprecedented powers to conduct surveillance of its own citizens. Secondly, Republicans began to typify all opposition to their warmaking and anti-civil liberties agenda as practically tantamount to treason. Congress, thoroughly intimidated, was silent: they supinely voted to give the president a blank check, and he is still filling in the amount…" 

Said Justin: "This all reminds me of one of my favorite Garet Garrett quotes.

'There are those who still think they are holding the pass against a revolution that may be coming up the road. But they are gazing in the wrong direction. The revolution is behind them. It went by in the Night of Depression, singing songs to freedom.'"

Thu, 06/05/2014 - 12:46 | 4827153 zaphod42
zaphod42's picture

Excellent comment, and insight, JR.  Thanks for sending it along. 

An additional thought:  the two parties (both owned by the Banksters) are more alike than dissimilar.  I am not sure what we are seeing is really fascism, though.  I would call it 'corporatism.'  It is what the Banksters thought they would get when they backed Mussolini and Hitler.  Now, they will not repeat that mistake, and they rule by fiat through their minions in Congress(es), never allowing a truly strong leader to come to the fore.  

Which is why the situation with Russia is so fraught with danger.  Putin has become far too strong for the Banksters' taste.  And, they are trying desparately to take him down, or to reduce his power.  How far will they go, and will they miscalculate?  

As Yoda said, "Difficult to see. Always in motion is the future."  

Craig

Thu, 06/05/2014 - 16:02 | 4827853 I Write Code
I Write Code's picture

It's not farfetched at all, it has a long historical tradition going back at least to Rome - and Middle Earth, Saruman's goons in The Shire went around confiscating everything for the common good. 

Thu, 06/05/2014 - 17:14 | 4828092 smacker
smacker's picture

I generally see corporatism as the economic face of fascism and it's often the first face to appear. When the jackboots appear on the streets - either in the physical or by way of progressive anti-liberty laws - the other face will be there for all to see. It's already unfolding.

Thu, 06/05/2014 - 17:41 | 4828148 JR
JR's picture

Exactly, zaphod42. The old debates between Republican and Democrat partisans remind one of the debates on whether our current problems stem from fascism, socialism, crony capitalism, corporatism or free trade.  When the state shoves your face to the ground with its boot, it’s useless to identify the maker of the boot that your attacker is wearing.  He comes at the order of the tyrant, be he carrying the flag of the 82nd Airborne or the Red Flag of Socialism.

Dr. Gary G. Kohls in his recent Global Research article on “The Powers and Abuses of America’s Mega-Corporations"  put it this way:

“The Italian dictator Benito Mussolini is often quoted as having said that ‘fascism should rightly be called corporatism as it is a merger of state and corporate power.' He should know, he invented the term and the concept. Italy’s anti-worker, union-busting corporations loved him as much as most 1930s German corporations  [Wall Street] loved and supported Hitler (and the Bolshevik bankers loved and supported Lenin and Stalin, i.e., Marxist Communism).”

Charles Burns, in his scathing critic of “The History Channel’s Mendacious Propaganda Concerning the World Wars” yesterday on LewRockwell.com, spills the beans on how this shuffling about, co-opting of politicians and confusion in terms fits the elites’ plot to destroy sovereignty. He writes:

“Mussolini, before the war was more than an ‘antiwar activist, a pacifist.’ He was a prominent radical Marxist socialist revolutionary, editor of the leading Socialist newspaper, Avanti!

Avanti!, under Mussolini, had an anti-war stance on the war, urging neutrality for Italy when the war began in August 1914. Mussolini formed the pro-war, interventionist newspaper Il Popolo d’Italia and the Fasci Rivoluzionari d’Azione Internazionalista (“Revolutionary Fasci for International Action”) in October 1914.

“This paper was 180 degrees different than his editorial stance at Avanti! Why the sudden change? He was bribed by the French who provided funds to start his publication. Mussolini was always the ultimate opportunist. He soon left to join the Italian Army.”

Unfortunately, all the words to describe what is happening have become corrupted.  What we are experiencing are institutions and processes that are increasingly coming under state control.  And the problem is that as the years go on, the citizens are losing their control of the state.

Thu, 06/05/2014 - 12:29 | 4827125 Seeking Aphids
Seeking Aphids's picture

Sadly this is not farfetched, Craig. During the pogroms in Eastern Russia (now Kazahkstan, etc.) tax collectors took everything, including animals. Once this was all gone they instituted a 'food tax' and took any sacks of flour that farmers had hidden away for winter....no limit to what 'central planning' can do once it sets its mind to it.....

Thu, 06/05/2014 - 12:00 | 4827014 Tigg47
Tigg47's picture

I have nothing to say, just listen and look...

http://www.youtube.com/watch?v=g5xRBz780JA

Thu, 06/05/2014 - 12:23 | 4827057 zaphod42
zaphod42's picture

My view is a simple one: to determine actual inflation, compare where gold sells to what the average, semi-skilled worker earns in a week.  

The problem with using that is the blatent manipulation of gold markets that has depressed gold values, combined with the hoarding of money in stocks and bonds that holds down those wages to unnatural levels. 

If gold markets were not depressed, gold would be selling for what that average wage is, based on natural inflation rate in current conditions.  Probably near $3K/TO.  Makes gold sound like a real value, doesn't it. 

Of course, considering that silver should be about 1 day's wage (divided in to pieces of 8 for the hourly wage), silver is the real value.  It is selling for 1/10 to 1/8 of where it should be vis-a-vis gold.  

Not that we should look for free markets to actually work any more.  It's all fixed - and I do not mean repaired!

Craig

edit:

On reflection, perhaps the indication is that gold should be selling for about $500/oz, representing its true worth, and this is signalling actual deflation?  And, the problem is that the 1% are sucking all of the money out of the system, and buying stock with it?  In which case, the only thing inflated is stocks (implying the danger of total collapse of markets)?  And we are in the midst of a much larger, and more dangerous depression than we have realized?  

Which would also explain why all the QE and ZIRP/NIRP in the world cannot create inflation.

 

Thu, 06/05/2014 - 12:23 | 4827109 Bemused Observer
Bemused Observer's picture

This low price environment is a window of opportunity for us little guys...I hope a lot of folks are taking advantage of it.

I can't buy coins or boullion, too broke, but I DO get quite a lot of PMs at yard sales, etc. Just got a vase from the 1880's, solid sterling silver, and weighing over 3 pounds, for 5 bucks. It was so tarnished, it looked like a piece of junk. The owners probably threw it in the garage at some point and forgot about it, forgot what it was. After a cleaning, I found it actually has greater value right now as a vase (good maker). But I really bought it for the metal, for the longer term.

Thu, 06/05/2014 - 12:12 | 4827062 kellycriterion
kellycriterion's picture

ZIRP, NIRP, QE, taxes, perpetual debt roll, currency manipulation, gold manipulation, inflation, it's all capital controls and confiscation of the income producing value of assets. Except the still somewhat rare but growing instances of confiscation of assets.

But ZeroHeroes still don't get it, still don't connect the dots, still don't follow the "money", still contradict themselves regularly, still rage against the darkness while sticking candles up their rear. They won't spread their bets. They don't seem to realize the dictum of "if you don't like the game, don't play", doesn't apply if the game is life.

The most popular theme on ZeroHeroe is get the bankers, the corps, the wealthy, the Jews, the Bilderbergers, etc. Then there won't be anyone left to corrupt gov.god.

But what has actually happened when the political class has had the exclusive OPM franchise? Not pretty. ZeroHeroes are junkies who aren't happy with their hand and want a re-deal, not a real deal.

Thu, 06/05/2014 - 17:28 | 4828123 if
if's picture

Fair critique, but you're ignoring systemic risk while gleefully counting your gains at the casino of life.  A mismanaged casino is more likely to go bust before you can cash your chips. That's what ZH is warning.

Thu, 06/05/2014 - 17:33 | 4828136 kellycriterion
kellycriterion's picture

1. See my handle and google.
2. My accounting switched from how much to where over 20 yrs ago.

Thu, 06/05/2014 - 12:14 | 4827070 El_Duderino
El_Duderino's picture

Yet another confirmation that consensus economics makes no economic sense. They really are nuts...

Thu, 06/05/2014 - 12:20 | 4827097 SmittyinLA
SmittyinLA's picture

newsflash Gold is for chumps and little people, we're at war with Russia till we get nuked or they surrender, gold will be depressed for the duration of the war, its just what you do when you go to war with Russia, suppress gold and try to suppress oil.

Their modeling software says Putin will make deal, retire.

Will Putin follow his programming? Only the MCP knows. 

Thu, 06/05/2014 - 12:27 | 4827120 vyeung
vyeung's picture

I smell Germany heading to the EXIT!

Thu, 06/05/2014 - 12:31 | 4827131 CHX
CHX's picture

In real term it's actually just NIRPer

Thu, 06/05/2014 - 12:35 | 4827149 ChargingHandle
ChargingHandle's picture

Well unfortunately this may set the precedent and it most likely is coming to a bank near you.

Thu, 06/05/2014 - 12:37 | 4827159 Omegaman2211
Omegaman2211's picture

How is being given a good reason to no longer use banks unfortunate?

Thu, 06/05/2014 - 12:37 | 4827158 Jack Burton
Jack Burton's picture

Force money into stocks. With a negative return on a savings account, the only way to show any return is to enter the market. Once there, your investment cash can be front run and skimmed to no end by the big players and their inside pipeline of information and HFT models. Since 2008, central banks have worked to force the prudent savers out of working and saving and into spending or stock markets. The game is rigged, this new program of negative savings returns will boost equity incomes for the top 1%. It has been that way since 2008. Wealth transfer by manipulation.

Thu, 06/05/2014 - 12:51 | 4827204 Jack Burton
Jack Burton's picture

I will be watching the Max Kieser Show on RT today to hear what Max has to say about the "War on Savers". Max may seem to be missing a few screws, but that is just him trying to grab your attention and get you to understand the wealth transfer going on by manipulation of interest rates in favor of stock markets and the 1% who hold most equities.

Thu, 06/05/2014 - 14:28 | 4827532 MeelionDollerBogus
MeelionDollerBogus's picture

All pension funds & exchange rates get a purple NIRPle!
The king is dead, long live the king!

Thu, 06/05/2014 - 14:38 | 4827556 Lugnut
Lugnut's picture

From Zirp to Nirp. Soon to be followed by Herp - Derp, to reflect the collective IQ of the regulators.

I guess the proposition they are really offering but not saying is. Give us your money and we'll keep a small percentage.

Or

Leave it in the banks and risk donating it on a bail in we may or may not impose later.

Heads I win tails you lose.

Thu, 06/05/2014 - 15:20 | 4827697 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Crypto-currencies want your business unlike the ECB. No NIRP or ZIRP here.

Thu, 06/05/2014 - 16:05 | 4827868 Joebloinvestor
Joebloinvestor's picture

This should really improve the banks bottom line.

Thu, 06/05/2014 - 16:13 | 4827906 syntaxterror
syntaxterror's picture

How about putting an expiration date on the fiat too? That way, the sheep can't put the fiat under their mattresses.

 

Thu, 06/05/2014 - 16:36 | 4827965 alfbell
alfbell's picture

 

 

Only reason I have my money in banks is so that I can do bankwires to escrow companies and attorneys for my real estate and private lending deals. I don't care about a bank acct giving me interest as long as my money is getting a great return on my investments.

Thu, 06/05/2014 - 16:44 | 4827996 Itchy and Scratchy
Itchy and Scratchy's picture

Watch out for the Purple NIRPle!

Thu, 06/05/2014 - 18:46 | 4828339 stormsailor
stormsailor's picture

bubblegum colored cones are better

Thu, 06/05/2014 - 16:47 | 4828008 alfbell
alfbell's picture

 

 

Being a saver, or trying to set yourself up with bond income for retirement, is a losing proposition and probably will remain so for the next 10-20 years. All you retirees and baby boomer wannabe retirees better get educated and get out there and do some active investing and get your money working hard for you and bringing in yield or you'll be eating dog food and living in your car (that doesn't run).

Fri, 06/06/2014 - 02:03 | 4829191 walküre
walküre's picture

There's no yield. Unless you work hard and learn how to raise your own livestock and grow your own garden, you will be eating dog food just like the rest.

Thu, 06/05/2014 - 16:46 | 4828009 Pee Wee
Pee Wee's picture

So the banks are in bed with organized crime, then track and monetize every law abiding citizen's transactions, turn petty criminals in to the IRS and now want to charge me for the Fascist ass-raping?

Goodbye finance, ya'all are heading straight over the cliff like the swarm of drunken ass clowns you are.

Thu, 06/05/2014 - 17:03 | 4828055 smacker
smacker's picture

Introducing NIRP across Europe ought to trigger huge bank runs and bring demands from national electorates for governments to rescind laws which ban the use of cash in large financial transactions, mostly introduced over the years to falsely combat money laundering.

Thu, 06/05/2014 - 18:21 | 4828271 surf0766
surf0766's picture

Eurpoe is fixed. Now eat your dam peas or we will trade you !

Thu, 06/05/2014 - 18:35 | 4828305 James Dandy
James Dandy's picture

Free John Corzine! 

Thu, 06/05/2014 - 18:48 | 4828343 GrinandBearit
GrinandBearit's picture

Shouldn't this be causing bank runs?

Thu, 06/05/2014 - 19:02 | 4828389 orangegeek
orangegeek's picture

when I see NIRP I think of purple nirples that were handed out in school

 

remember those?  damn they would hurt and when you least expected one too

Thu, 06/05/2014 - 19:40 | 4828491 cherry picker
cherry picker's picture

I am going to start selling mattresses, with a fire and water proof pouch to store coin in.

When we go back to cash as a population, we will have convenience as long as you have it on you and .gov wont know what we are spending on or how much.  Best do it now before they make cash illegal, although there is nothing stopping us from using other currencies.

Thu, 06/05/2014 - 21:20 | 4828734 lakecity55
lakecity55's picture

You have a good idea.

I actually ordered some 1oz copper rounds today. Who knows? A barter economy may arise where you can use older silver change and copper rounds for goods. People are going to want a medium of exchange, and real metals have always worked. You guys can laugh, but I actually have some 2' copper ground rods that I put in my safe. My old former CO stashes dimes and quarters. He has rolls of them stashed somewhere.

I have already noticed at gun shows more and more coin guys have booths. Some independent dealers will trade ammo and arms for Ag or Au. If you have a recognized coin or bullion piece from a known refiner, they will take them.

So, some alternative trading has already begun.

Thu, 06/05/2014 - 21:13 | 4828715 lakecity55
lakecity55's picture

This is just nuts.

You may as well hold cash in the tool shed.

Add up inflation+depreciation in the bank+others....rip offs!

Thu, 06/05/2014 - 23:03 | 4828937 Miner
Miner's picture

Historically the "safety" of a bank, defined as its ability to survive a bank run, was determined by the amount of money reserves kept on hand.  Banks that retained 15% of their assets as reserves have been generally stable in the long term.

As I understand it, in the EU the minimum reserve is less than 3%.

IF my understanding is correct then NIRP taxes the bank reserves in excess of this minimum.  This actively punishes the safest of banks forcing them to dance on the razor's edge.

So there's that.

Fri, 06/06/2014 - 00:09 | 4829082 AynRandFan
AynRandFan's picture

Banks weren't "safe" in Cyprus, and they're probably not safe anywhere. Are money market funds any safer? Probably not, maybe worse. Pretty hard to move money around any other way. Small depositors can and should keep a sizable balance in cash or PM's. Good time to be in the burglar-proof safe biz.

Fri, 06/06/2014 - 07:29 | 4829396 AdvancingTime
AdvancingTime's picture

A bad haircut, in this case means you have been robbed. That may be the case if the government reaches in over a long weekend and steals money from your bank account. This is a horrible precedent to set, and the worst part may be how some people are letting it slip out that it would be fair, or in some way justifiable if it is only on the larger accounts.

It is fine if it only impacts the savings of someone else, the savings of what they see as "the wealthy", the problem is someday they may come for you. I shudder to think what kind of world our children will live in.More about what happened in Cyprus in the article below.

http://brucewilds.blogspot.com/2013/03/a-bad-haircut-seizing-bank-accoun...

Fri, 06/06/2014 - 00:13 | 4829088 AynRandFan
AynRandFan's picture

Was it Blood Diamond where people were using diamonds to move large amounts of cash?  Diamonds are small and lightweight.

Fri, 06/06/2014 - 00:05 | 4829078 22winmag
22winmag's picture

What else would you expect after QEgeddon?

Fri, 06/06/2014 - 01:17 | 4829161 JailBanksters
JailBanksters's picture

I love it when a plan comes together !

 

Fri, 06/06/2014 - 02:22 | 4829206 Schmuck Raker
Schmuck Raker's picture

OT: Because there is no proper place yet....

http://kremlin.ru/news/45860

...Hollande finds someone(Finally) willing to shake his hand.

Fri, 06/06/2014 - 07:13 | 4829374 AdvancingTime
AdvancingTime's picture

Modern Monetary Theory often referred to as MMT to its many believers removes much of the risk ahead and guarantees that we will always be able to muddle forward. MMT also known as neochartalism is a economic theory that details the procedures and consequences of using government-issued tokens and our current units of fiat money.  Newly acquired tools like derivatives and currency swaps  allow us to print and  manipulate away problems.

While reading an article about the growth of debt in China's non-financial sector I was forced to reflect on how debt is effected by the interest rates. In Europe the ECB had to step in to halt the economic collapse of Spain, Italy and several other countries that were on the brink. What you pay in interest on debt does matter accept in the manipulated land of MMT. Have we been lulled into complacency by the extraordinary actions taken by central banks and governments over the last six years? This is a key question we must face. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/01/have-we-been-lulled-into-complace...

 

Fri, 06/06/2014 - 08:04 | 4829430 Dre4dwolf
Dre4dwolf's picture

The USA has had NIRP for years already, the Member Banks get a 0.5% loan from the FED for billions, and then turn around and park that money with the Fed and earn a few 1~1.5% in interest on those deposits.

So you have NEGATIVE interest rates in the USA, but its just a technicality.

 

The entire monetary system is a joke, honestly, you can't look at the model we are working under and say that it is anything but a joke/fraud/scam.... but whatever people don't seem to care that they are being robbed. . .  so we have more of the same.

 

Might as well  just give JP Morgan an Intaglio Press and a few blank checks, there really isn't a reason to keep the circle jerk going on, they are only fooling themselves if they think people can't see through the Bull blatant counterfeiting the Fed+Member Banks are doing.

 

The Secret Service should be swat teaming them all . . . in a sane legal world.

 

Fri, 06/06/2014 - 14:25 | 4830731 The Econ Ideal
The Econ Ideal's picture

Money markets are NOT a core component of shadow banking !

Most money funds are very conservatively invested, and only a small few in the past committed the risk management mistakes that have been overblown, primarily to make those invested in them move to riskier assets.

Do NOT follow this link or you will be banned from the site!