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The Consequences of Imposing Negative Interest Rates
Submitted by Pater Tenebrarum via Acting-Man blog,
Negative Interest Rates and Capital Consumption
Ever since the ECB has introduced negative interest rates on its deposit facility, people have been waiting for commercial banks to react. After all, they are effectively losing money as a result of this bizarre directive, on excess reserves the accumulation of which they can do very little about.
At first, only a small regional bank, Deutsche Skatbank, imposed a penalty rate on large depositors – slightly in excess of the 20 basis points banks must currently pay for ECB deposits. It turns out this was a Trojan horse. Other banks were presumably watching to see if depositors would flee Skatbank, and when that didn’t happen, Commerzbank decided to go down the same road.
However, there is an obvious flaw in taking such measures – at least is seems obvious to us. The Keynesian overlords at the central bank who came up with this idea have failed to consider a warning Ludwig von Mises once uttered about the attempt to abolish interest by decree.
Obviously, the natural interest rate can never become negative, as time preferences cannot possibly become negative: ceteris paribus, consumption in the present will always be preferred to consumption in the future. Mises notes that if the natural interest rate were to decline to zero, all consumption would stop – we would die of hunger while investing all of our resources in capital goods, i.e., while directing all of our efforts and funds toward production for future consumption. This is obviously a situation that would make no sense whatsoever – it is simply not possible for this to happen in the real world of human action.
Mises warns however that if interest payments are abolished by decree, or even a negative interest rate is imposed by decree, owners of capital will indeed begin to consume their capital – precisely because want satisfaction in the present will continue to be preferred to want satisfaction in the future regardless of the decree. This threatens to eventually impoverish society and reduce it to a state of penury:
If there were no originary interest, capital goods would not be devoted to immediate consumption and capital would not be consumed. On the contrary, under such an unthinkable and unimaginable state of affairs there would be no consumption at all, but only saving, accumulation of capital, and investment.
Not the impossible disappearance of originary interest, but the abolition of payment of interest to the owners of capital, would result in capital consumption.
The capitalists would consume their capital goods and their capital precisely because there is originary interest and present want-satisfaction is preferred to later satisfaction. Therefore there cannot be any question of abolishing interest by any institutions, laws, and devices of bank manipulation. He who wants to “abolish” interest will have to induce people to value an apple available in a hundred years no less than a present apple. What can be abolished by laws and decrees is merely the right of the capitalists to receive interest. But such laws would bring about capital consumption and would very soon throw mankind back into the original state of natural poverty.”
(emphasis added)
Ludwig von Mises: he warned that the abolition of interest payments would induce the owners of capital to consume rather than invest it. Society would soon be impoverished as a result.
(Photo via Wikimedia Commons)
Of course today’s central bankers to a man seem to believe that what makes the economy grow is “spending” and consumption. This is putting the cart before the horse. Since the accumulation of capital threatens to go into reverse due to their policies, there may well come a time period during which reports of aggregate economic statistics appear to indicate that “economic growth has returned”, while all they reflect in reality is the fact that scarce capital is in the process of being consumed. This process is also known colloquially as “eating one’s seed corn”.
How to Counter Deposit Flight: The Cash Ban Debate is Revived
In practical terms, the main reason why large depositors have only grumbled, but not (yet) fled the banks imposing penalty rates on them – in spite of the fact that fractionally reserved banks are not merely warehousing and guarding their funds, but using them for their own business operations – is that withdrawing money in the form of cash and storing is doesn’t come for free either.
Not only must one pay for storage, security and insurance in that event, but one is also cut off from the convenience of effecting payments with a mouse click. Moreover, possession of large amounts of cash, although officially not illegal, is dangerous because it is “suspicious” in the eyes of the State’s minions.
In the US, private persons who are found in possession of large amounts of cash must fully expect that it will be confiscated without trial or any evidence of a crime by means of the “civil forfeiture” procedure. As the Washington Post informs us, in spite of a recent storm of negative publicity regarding these government-directed shakedowns, “the racket is still humming”.
Nevertheless, large depositors could presumably take the necessary legal precautions (again at a cost) to ensure their cash does not become suspect. So there is certainly a possibility, especially if the penalties incurred for keeping large amounts of money on deposit should become even greater, that depositors may decide to remove their money from the banking system and keep it in the form of cash currency.
The probability of this happening has increased further due to the decision of European governments – which governments elsewhere are planning to emulate – to “bail in” bank creditors in the event of bank failures. In the modern fractionally reserved banking system, depositors are legally held to be creditors of the bank, even though this flatly contradicts the contractual promise that they will be able to withdraw their money on demand.
Absent this legal contradiction, fractional reserve banking would of course not be possible. By extending this privilege to banks, governments have greased the wheels of modern-day welfare/warfare statism, so depositors holding money in demand deposit accounts will continue to be regarded as “creditors of the bank”, regardless of the obvious absurdity of this legal doctrine. While we believe that it is proper and laudable to shield tax payers from having to bail out failing banks, the situation in which owners of demand deposits find themselves in is completely untenable.
However, depositors have now been put on notice: not only will they bear the full risk of losing the bulk of their funds when overextended banks are failing next time around, on top of this they will now also have to pay for the dubious “privilege” of bearing this risk. If banks were indeed merely warehousing the money in demand deposits at arm’s length, the payment of a fee for their warehousing services and any other services they may offer in connection with such deposits would be entirely proper and sensible. However, if depositors are forced to take the risk that their money could be lost as a result of the bank’s business activities (over which they have no control), they have very little reason to happily pay such a fee.
Interestingly, when the Austrian press recently reported on the decision by Commerzbank to impose a penalty interest rate on its large depositors, Kenneth Rogoff’s idea of simply banning cash currency was mentioned in the same breath. Apparently Mr. Rogoff is currently touring the world beating the drums for this dubious (to put it very mildly) plan. Here is a translation of the respective passage in the article:
“Harvard economist Kenneth Rogoff even argues in the daily paper FAZ that cash currency should be banned altogether. Central banks could impose negative interest rates more easily that way, he explained. Tax evaders and criminals would also find life more difficult. From this perspective, banknotes and coins appear superfluous, he said at a presentation at the IFO institute in Munich. Measures to spur the economy could be implemented more easily that way.”
(emphasis added)
Since we have discussed Rogoff’s plan in great detail before (see “Meet Kenneth Rogoff, Unreconstructed Statist”) there is no need to rehash all the arguments we made against it. We note though that Mr. Rogoff continues to craftily associate cash with “criminals”, while concurrently asserting that it is our duty to make central planning of the economy easier for the interventionists, in spite of its recurring failure.
In our opinion, a cash ban would constitute a criminal act. One of the reasons is precisely that people would no longer be able to remove their funds from fractionally reserved banks. They would be forced to bear the risks these banks are exposed to, whether they want to or not. Implementing a cash ban would not only amount to an abrogation of all financial privacy, it would clearly represent an abrogation of fundamental property rights as well.
It is noteworthy that Mr. Rogoff is a member of the “monetarist” Chicago school. As Hans-Hermann Hoppe has rightly pointed out, it demonstrates how utterly infested with statism modern society has become that the Chicago school is today held to be the most “conservative” and “free market oriented” school of thought that is still considered acceptable to the establishment.
No wonder – as Mr. Rogoff so clearly demonstrates, it is statist through and through. Ludwig von Mises reportedly once left a meeting at the Mount Pelerin Society in medias res, muttering something along the lines of “you are nothing but a bunch of socialists” after having listened to various representatives of the Chicago School drone on about which liberties the State should abridge next in its relentless pursuit of welfare statism. While it is apparently not certain that this incident really happened, Mises would have been quite correct with this assessment. As Mr. Hoppe notes:
“This seemingly unstoppable drift toward statism is illustrated by the fate of the so-called Chicago School: Milton Friedman, his predecessors, and his followers. In the 1930s and 1940s, the Chicago School was still considered left-fringe, and justly so, considering that Friedman, for instance, advocated a central bank and paper money instead of a gold standard. He wholeheartedly endorsed the principle of the welfare state with his proposal of a guaranteed minimum income (negative income tax) on which he could not set a limit. He advocated a progressive income tax to achieve his explicitly egalitarian goals (and he personally helped implement the withholding tax). Friedman endorsed the idea that the State could impose taxes to fund the production of all goods that had a positive neighborhood effect or which he thought would have such an effect. This implies, of course, that there is almost nothing that the state can not tax-fund!
In addition, Friedman and his followers were proponents of the shallowest of all shallow philosophies: ethical and epistemological relativism. There is no such thing as ultimate moral truths and all of our factual, empirical knowledge is at best only hypothetically true. Yet they never doubted that there must be a state, and that the state must be democratic.
Today, half a century later, the Chicago-Friedman school, without having essentially changed any of its positions, is regarded as right-wing and free-market. Indeed, the school defines the borderline of respectable opinion on the political Right, which only extremists cross. Such is the magnitude of the change in public opinion that public employees have brought about.”
(emphasis added)
Harvard economist Kenneth Rogoff wants cash to be banned to make the imposition of central bank intervention “easier”. Ironically this unreconstructed statist found himself hounded by the political left when a few errors were found in the data used in his book on government debt and growth (the book tried to prove with the help of statistics that too much government debt retards growth. The incident illustrated the danger of relying on statistics instead of sound economic theory to make one’s case).
(Photo via Imago)
Conclusion:
The “unintended consequences” of the negative interest rate policy will vastly outweigh the perceived advantages of any short term boost to economic activity they may provoke. Consumption is not what produces economic growth, and giving capital owners an incentive to consume rather than invest their capital will only hasten Europe’s economic decline.
Given that the failure of these interventions is already absolutely certain, we must be prepared for even more interventions to “fix” the failures produced by the previous ones. Mr. Rogoff’s plan would certainly enable more State control over the citizenry and the economy. Many modern-day intellectuals appear quite keen on abolishing the market economy and replacing it with some form of command economy (just as long as their personal plans are implemented of course). They should be careful what they wish for.
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"In the US, private persons who are found in possession of large amounts of cash must fully expect that it will be confiscated without trial or any evidence of a crime by means of the “civil forfeiture” procedure. As the Washington Post informs us, in spite of a recent storm of negative publicity regarding these government-directed shakedowns, “the racket is still humming”. "
Read the above again and again..... Speaks for itself when the "protect and serve" public servants start helping themselves to said public property. It is more perverted than anything the porn industry could ever dream up.
When many here defend the usa, is this is what they're defending. A wild and out of control government and legal system of thugs and thieves.
Negative interest rates are only a symptom, not of a general theory,
but of a generalized stupidity.
Consequences Bitches!*
@negative rates
* I know it's a different laguange and all, but Skatbank? Who isn't going to have sone consequences putting money with a name like that. Oh, and congrats on your handle - very prophetic for these times.
"In the US, private persons who are found in possession of large amounts of cash must fully expect that it will be confiscated without trial or any evidence of a crime by means of the “civil forfeiture” procedure."
Damn boating accidents.
Agreed, the gov has become organized thuggery writ large. That being said, our options aren't exactly Mr. Rogers neighborhood. What will we have when we don't have what we got now?
"... has become"? No, by it very nature, government — the state — is, as Murray Rothbard said, "a gang of thieves writ large."
Interalize this truth and free your mind, that your body (and those of your loved ones) might follow.
the gov has become organized thuggery writ large.
Certainly. But, in truth, ALL government is organized thuggery.
some guy had this on his bumper sticker
don't steal, the government hates competition.
Yes, it does. Yet what nunber in ten, a hundred, a thousand, or ten thousand understands this?
Too few to be counted, unfortunately, and so on it goes, the captured voting for one or another of their captors to save them.
Follow the sadly deluded falak pema, above and below, in his fantasy of "an honest and strong state."
What state wouldn't love him?
And what state doesn't in fact depend on him, the ever useful idiot?
Funny how few people remember that Mises was the one that said that, and they still say it without attributing it to him.
spoken like a true feudal thug; whats mine is mine whats yours is negotiable. Don Corleone.
Before the state existed we did have thugs. State took over from King thug.
All government can also be organised in good governance with an honest judiciary. The pendulum does swing.
But in the case of feudals there is no judiciary. That possibility is just not there.
The CONCEPT (ya know that thingie that Plato invented) does not exist in a feudal order. Thats an historical fact.
Even the USA, that you all now villify, did have an honest judiciary ONCE (must have, look for it in the attic, somewhere under the roof beams).
What has corrupted good governance in the USA ? : MONEY lots of it as monopoly capitalist world order. Candy from a baby makes daddy a Don C !
"What has corrupted good governance in the USA ? : MONEY lots of it as monopoly capitalist world order."
How do you think capitalists become monopolists?
http://en.wikipedia.org/wiki/Crony_capitalism
You're just another "useful idiot," in other words:
http://en.wikipedia.org/wiki/Useful_idiot
Read up. For free:
http://www.barefootsworld.net/nockoets0.html
You and I don't seem to agree who RUNS the US. Its private capital most of the time and government has been its HAndmaiden since the turn of the late 19 th century. The last great leader of State was Lincoln.
The next great leader of State was FDR who came in precisely when the economy had been ruined by the Oligarchs who also ran the government; aka Andrew Mellon who was rich banker and Head of Treasury when the 1929 crisis occurred.
In the US crony capitalism means JPM or Henry Ford LEAD the economy and Wilson or Herbert Hoover follow in minimal state control. That was the Von Mises's wet dream, as the MARKETS RULED and it created 1929 !
Then we had a strong State from FDR until JFK and his demise put the Oligarchy back into power. MIC and OIL.
Put the horse in front of the cart and all becomes clear. Von Mises's sons were Friedman and Greenspan.
The State's righting of ship, Bastiat's alleged legalised plunder meme, is follow on to the rape of state and people by the oligarchs since deregulation began. Cause and effect.
Looks like tit for tat as the way things are heading we will need a new FDR to bring back GL-St. And guess who started it, as in 1929.
If you don't like "tit", the impending and inevitable follow on, then just vote or let in a Caesar type crackpot to END the Republic.
Neo-Mussolini will then be king of USA !
As I said, useful idiot.
Keep voting.
You're the oligarchs bread and butter.
Cos you have a solution OTHER than an honest and strong state?
You're long on certitudes and short on reasons.
I'm long on reasons, there being exactly no history of "an honest" state but an endless succession of strong ones.
Again, read up:
http://www.barefootsworld.net/nockoets0.html
But of course you won't, as your certitudes preclude further investigation.
I've been trying to explain that to him for years, forget it. He's too vested in the current crime family.
Assumed as much.
I otherwise go about my business and get ready:
http://readynutrition.com/resources/52-weeks-to-preparedness-an-introduc...
which implies you like the status quo of Oligarchy rule.
My business is to make money in ways that can survive what's to come, which indicates that I am not invested in a status quo that will be ruinous for the vast majority.
We need a new FDR
Please have a ball cap made with that logo.
And wear it,where ever possible.
Preferably with a propeller on top...
Looks more like Zambia or Zimbabwe everyday, this "civilization" we have.
At least in Tijuana back in the day, if you slipped the police a couple of 20's you'd be on your way.
Beware the drug sniffing dog that doesn't know what drugs smell like.
"Do you have any high value items, any gold, or a lot of currency in the car?"
Idaho trooper interrogating a pony tailed 72 year old man with CO plates during a 1.5 hr rest stop fishing expedition (no pot found).
So, in an article about EUROPE charging depositors for the privilege of keeping their money in the bank, you complain about AMERICAN abuses?
Like it or not, these abominable practices are European continental ideas which have been injected into the veins of the great Republic. Like any other form of foreign virus, the host suffers while it fights off the disease.
Bastiat's legalized plunder!
Calamity is certainty! Prepare and plan accordingly!
First off, that is USA, not usa. Secondly, almost nobody here defends the USSA which is what you meant to say.
We actually have too much cap ex in the USA...something I find rather surprising. Europe has zero demand...which seems logically impossible but when interest rates are at one half of one percent in Germany "that's not being commanded by the State" as that is Statist Failure.
And why not ban paper money in lieu of making it worthless too!
Huh? US businesses are buying up their own stock, i.e. returning capital to investors. Some are even borrowing money to do that. Where's all this capex spending you say there's too much of?
Most of these stock-buying companies are letting their physical plant decay. R&D, who needs that? The returns could be 2-3 years from now. Buy back stock and make the top 50-100 people in the organization rich off their stock options instead.
Thereby, assuring hard times, or bankruptcy, for that company in the future. The unintended consequences of ZIRP, not to mention negative rates(NIRP), are already in motion.
Other than the energy sector, where is this capex? It's all in China, but now even their manufacturing is slowing.
Why doesn't Rogoff go back to Russia or wherever he came from?
He's from Rochester, New York.
Unless you are Native American you have no right to send him to Russia!
And even if you are Native American, sending him would amount to an act of cruelty against good Russian people.
Sounds more to me like he is a member of the dual passporst banking elite
He is...
http://www.jinfo.org/Economists.html
When a parasite talks about extracting more blood, can there be any doubt?
Where's the fucking money Lebowsky!!!?
European Union.. NIRP 4 eva.
unintended consequences my ass
GoodFellas: I'm funny how I mean, funny like I'm a NIRP clown?
/sarc
THERE ARE WAY TOO MANY SHINEY HEADS !!!!!!!!!!!!!
Go home and get your fuckin' NIRP shoe shine box.
SHOE SHiiiine, SHOE SHiiine.
Paying without a signature is economic freedom at the personal level. Paying cash also helps in keeping to a budget. This is not a freedom we should give up, and certainly not now.
When cash is outlawed, only outlaws will have guns.
No, really. Do you think they'll let you buy an evil gun when they control the e-cash? Even in a private sale? They've already tried to close bank accounts of "dubious" businesses such as gun stores. What Rogoff didn't say is that income tax evasion is a lot harder in a cashless society. Want to pay the babysitter, it will have to be a bank disclosed transaction. Exactly what they want.
'A quote about controlling the money.' -- Some French guy
Can they outlaw precious metals and bartering?
They can make it illegal, that's easy. The IRS already has a reward program, 10% of the evaded taxes I think. That will be enormously expanded to 10 or 50% of the fine. In hard economic times, you won't be able to trust relatives, especially if it is a "silent witness" program where you never find out who ratted you out.
"It is your patriotic duty to pay your taxes. Tax evaders are destroying the economy. You want the government to be strong, don't you? We are fighting a war with Eastern Sloblovia and you need to do your part. Turn in tax evaders!"
The Enemies Foreign and Domestic trilogy is free on Amazon right now. Highly recommended.
No, that wouldn't be convenient so people won't do it. They'll find some other convenient peer to peer alternative. What it WILL do is introduce people to alternative currencies and weaken the national currency.
It won't be all at once. They will decrease the larger bills from circulation and lower the bank reporting standard from $10K. Businesses will have a (gradually decreasing) top limit on cash transactions. Going to the grocery store? No more than $X per day, because you can't hoard food, hoarders are starving the poor and creating shortages. (And it has to be a Michelle Obama approved bag of crappy tasting nuggets.)
This will also make it easier to implement a single world-wide e-currency. You wake up one morning and you have simoleans instead of dollars. And they buy a lot less than before.
The enemy is evil, not stupid. You'd be wrong to underestimate them.
Great quote!
Eating the seeds instead of planting them
I tend to agree with you a lot. One one thing however,... please change that avatar. LatinaLover sets a good example.
It might soon become apparent the economic efficiency of credit is beginning to collapse and the additional money poured into the system coupled with lower rates can no longer drive the economy forward. When this happens we are at the end game.
At some point the return on loaning money is simply not worth the risk! Why do you want to loan money if most likely you will never be repaid or repaid with something that is totally worthless? When this happens the only safe place to store wealth will be in "tangible assets" and the only lenders will be those who print the money that nobody wants.
The collapse of credit can pose major problems such as what we saw when many sellers were forced to demand payment up front before shipping goods in 2008. Credit is the lubricant of commerce. After a major reset real money and real positive rates will return as economics demand. More on this subject below.
http://brucewilds.blogspot.com/2014/06/the-economic-efficiency-of-credit-can.html
Basically this means the State has to take over the money supply of the world by redirecting it; something they cannot do directly as the banksta structures are too well protected and they OWN the market.
All the state can do is to DRY out the Market, the cancerous, casino part, all the while protecting the people's pensions etc. Negative rates is one pervasive arm. If you control the Money supply...which the CB do now. The state is now trying to bypass the banks without taking them over, something they cannot do directly as the bankstas control the WMD which they can explode if their interests are DIRECTLY threatened; aka if they nationalize the banks directly.
This is now a dangerous game, as its every nation state or bloc against its own rogue banksta structures, which are partners and enemies via the shadow banking shenanigans; a Jekyll and Hyde situation.
One helleva cobweb. The politicians, alike the banks, are also compromised as clients and deal makers for the same banks they are now trying to bridle.
It so incestuous its a Dracula ball for the vampires of all continents.
Who controls whom?
There could be tens of trillions of peer to peer transactions going on with cash every week which the government and banks know nothing about. By banning cash they think these would halt?
Obviously they wouldn't halt. People would simply use something else as the medium of exchange, and it's highly unlikely to be bank credit. By banning cash they would destroy the currency.
It's been the plan from day one. Time to reach out, scare the consequences. Anyone can switch currency. Asssets reside. Wealth is restored. Global Banking is fucked on printing fake money again. Correct problem CB. BIS. Force feeding debt no longer works. Get your act together before everyone flees.
You're the standing joke based on G20. Shall I say more?
In Argentina some 'areas' created their own currency that was only accepted in the neighborhood by locals. Bitcoin is an attempt to make that global but if TPTB want everything to be digital they will get BTC too.
Once these concepts become more attractive to people the whole structure will crumble or violence will ensue. I'd bet on both, assuming the system stays functional even that long.
How many local farmers do you know? You go to the store like everyone else. And stores won't sell to you for crypto coins. Not just grocery stores, but every store.
Keep in mind, most of the DOW 30 were effectively bankrupt 12 years ago!
That low or negative interest rates prevents capital accumulation is
very well know. And the PTBs don't give a (!) because they don't want
that capital "accumulating" in the hands of competitors for the
above mentioned bankrupt cronies of the PTBs.
Read: everyone knows damned well that ZIRP is a rolling fiasco!
And nobody ( either the PTBs, or the welfare cases you call "citizens" ) cares!
Cash is only needed by the poor. Rich folk and oligarchs have so much in hard assets that cash plays very little in there life. They buy and sell property in the multi millions and that isn't in cash. They trade in all markets but that isn't in cash either. To ban cash means you ban living outside of their domain and it starts with laws to stop people feeding the homeless and near ends in you becoming homeless.
Market economies don't work and neither do command economies. No economy works that is centrally controlled by criminals bent on theft of taxpayer dollars. Look at Mexico today with their command economy for blackmarket drugs. Mexico is likely near collapse as is the USA and the EU due to command economies. Governments are now getting into the pot business with government run grow ops that charge cartel pricing for the pot that no individual can afford to purchase. Government pot costs well over $100.00 USD by the time it reaches the end user. Governments attempt to control all economic activity but their own economic activity which ensures that whatever they decide to do is always viewed as a higher priority that what the people demand of them. Competency is not legislated and when governments fail they are not required to tell us about it. In brief, totalitarianism kind of has a bias IMHO.
The boomers be like, "oh we get to scrounge everyone with fines and fees to feed my IRAs on my TAX EXEMPT Muni bonds"
Except that the Muni bonds are taxing them with a negative interest rate.
Brilliant.
ALMOST as brilliant as their quality control of big pharma on medicare.
"The doctors will take care of me, I already paid into Medicare my whole life..." (this is how status quo enforces standards, reference: Joan Crawford and others who were scammed by the system, you can't take your lootings and winnings with you when you leave this life. Just ask the Eyptian mummies.)
Their handling of the subprime scandal was CLASSIC! "Let the bankers clean up their own mess"... with everybody else's money.
Now it's their turn.
Negative interest rates- I'd recommend the exchanges in Mexico becuase they charge a whopping 0% capital gains tax rate, but you know... their enforcement of quality control only goes as far as the cash their cops can take from you. Maybe they'll use narcodollars to liquidate their banks since the almighty petrodollar is obsolete you know!
"cleaning up their own mess" would have meant bank stockholders and bondholders would bite the bullet, not the general public (a blantantly corrupt expectation).
The only sensible and moral regulatory solution prevails in Isle of Man: every financial company chartered to do business in that jurisdication must accept liability to make good any losses by any other financial company also chartered there.
Every financial institution therefore pays exceedingly close attention to individual behavior and financial transactions by every other institution which might prove to be loss-making if not detected and scotched.
It is political cronyism -- not capitalism -- which transfers liability to the general public instead. Going to jail should also be the first punishment alternative, not the last.
reading about that idea by Harvard's Rogoff to ban cash, I was reminded of the famous quote by William F. Buckley...
I would rather be governed by the first 2,000 people in the Boston telephone directory than by the 2,000 people on the faculty of Harvard University.”
Pater Tenebrarum is consistently one of the best independent observers of the economy on the 'net.
https://www.g20.org/
See, you have B,C,L,T,Y groups. G is the kingpin.
Enjoy. Why didn't you know this?
look more closely... the B is the kingpin, the G is bread and circuses.
We just go into a barter cash society. Banks go tits up.
Mises was correct:
As a direct result of the suppressed interest rates + unacceptable risk of of big losses in value of financial assets due to absurdly excessive fragility, I sold ALL my financial assets in 2013 and started on a plan to spend ALL my money.
Already have
A great winter home with pickup truck, multiple specialized fishing boats, a cargo van converted to be a fishing boat tow vehicle, compact car for city errands, etc.
AND
A great summer home with all the same equipment as the winter home
AND
a fabulous huge diesel motorhome to travel between the 2 homes with the change of the seasons.
Additional toys coming to enjoy life before the mega-crash include
Big twin-engine offshore fishing boat
AND
Medium-sized twin-engine fully-instrumented airplane to fly out to the Caribbean islands with big load of gear to go fishing & SCUBA diving.
I expect to die DEEP in debt, just like all the governments of all the countries on earth.
My new motto: Live like there is no tomorrow because there isn't.
Apparently you've decided to concede the coveted, 2014 "Most Reduced Carbon Footprint" award.
After 60+ MILLION hyper-breeding latins have invaded America & 8 congressional amnesties, there is in effect no border between the USA and the BILLION hyper-breeders to the south, not to mention Africa & Asia, so the concept of "reducing carbon footprint" is a pathetic joke.
"hyper-breeding latins"
LOL!
There are a grand total of two Latin countries in the top 80 on a list of birth rates (Wikipedia).
Also:
The Pew Research Center reported that the birth rate for foreign-born women plunged an unprecedented 14 percent between 2007 and 2010 compared with a 6 percent decline for U.S.-born women.
The Latino birth rate plummeted 19 percent for Hispanic immigrants during that period.
Latinos have been hit particularly hard by the recession, and the downturn in births is especially sharp for immigrants,” said D’Vera Cohn, co-author of the Pew study that is based on analysis of data from the Census Bureau and the National Center for Health Statistics.
Pew found the birth rate for Mexican immigrants, the largest group of Latinos, has fallen 23 percent since 2007.
But hey – why let facts get in the way your argument?
Here are some additional facts not included in what you reported:
1. They are ALL catholics, self-explanatory regarding breeding rate, birth control, abortions, etc.
2. The stats that you reported do NOT take into consideration the breeding rate by IQ, education, vocation, skills, & income - the worst of the latins breeds the most, the stats are offset by the best of teh latins btreeding less. Net result is that the unsuccessful, commonly referred to as "poor" replicate far faster than than the successful, who are also more intelligent & practical.
Ah, so what you really meant to say is that a subset of the very large latino population has a higher birth rate, but decided to just use "hyper-breeding latins" as shorthand. Brilliant.
Saying "the successful, who are also more intelligent & practical" further underscores how little you really understand about birth rates, as the poor largely choose to have more children precisely for practical reasons.
My Indian graduate school statistics professor's wisdom applies here:
"How is statistics like a bikini?"
"What it reveals is interesting, but what it conceals is critical."
You are a typical pseudointellectual, blinded by robotic adherence to misleading statistics when reality is obvious to even the blind:
The latins have grossly overbred their own countrys' economic capacities and have been departing in a flood of MANY TENS OF MILLIONS for the opportunities and entitlements in the USA. THAT IS AN IRREFUTABLE FACT.
Oh, I see now! When you said "hyper-breeding latins", you meant that they had high birth rates in their original countries, and not that they breed at a high rate here in the U.S., right?
What an asshole. You sound almost exactly like the President of the NY Fed., William Dudley, as he was squirming and stammering under Elizabeth Warren's recent, withering examination.
NO, what I am saying is that your "statistics" are crap - I have travelled extensively in the latin shit holes and have seen with my own eyes how grotesquely over-populated they are, so I must conclude that the people doing & publishing your stats cannot possibly be including all the human rodents.
Are you one of them ?
When the SHTF and the economy finally implodes completely we will all need to survive until the reset manifests and that could take considerable time. Saving money is always a wise thing to do just in case one ends up in a situation of having none to barter with. If you are going to have to go to Bartertown to buy beer and smokes you will need some money or commodities to barter with unless you plan on showing up with guns n ammo for the brewskies n' smokes? The toys can be sold
for food and the banks can't collect if they are dead broke themselves
and can't afford the repo man cartel pricing so the toys are good for bartering in Bartertown. The fishing equipment is great for a food source
when the crash happens. Where you will find gas is beyond moi. There will be a future after the economy completely impodes, but that future will be bleak at best from my calculations. Either way you will need cash to survive unless you have physical bullion or a good stock of commodities to barter with, but tomorrows will come and go
inspite of the economy or the people in the world.
...or...
It could be preparatory for a purely transactional currency in a world where paper is no longer held as a store of value....
...as in.... when the dollar dies do you really think another purely fiat currency will just take it's place?...really...?
That has been my question for some time. How, exactly, are the people of the world to be expected to accept (let alone embrace) a paper and/or electronic replacement after the exact same type of currencies collapse? Would they not, instead, reflexively turn to hard assets, and actual physical stores of value that are nearly written in their DNA, such as PMs?
When the bus keeps going off the road, you don't fault the bus. You fault the driver. With a knowledgable and responsible driver at the wheel (who is kept that way with total transparency) managing the Medium of Exchange (MOE), inflation is guaranteed to be zero ... everywhere ... all the time.
The MOE driver monitors DEFAULTs and balances them with INTEREST collections, thus assuring zero INFLATION.
The operative relation is: INFLATION = DEFAULT - INTEREST
We've always had (from our perspective) very bad drivers. From their perspective (looking down from the 0.01%) they're brilliant.
One of the consequences of negative interest rates that I can think of is that I will pay cash for everything.
Take every bit of money out of the bank in the form of cash and then use cash to pay for everything. No more credit card debt. No more loans from the banks ... cash. That doe snot appear to help expand the money supply.
The reporting is irrelevant at that point. The best excuse in the world is that I took all my money out in cash because they wanted to charge me for storing it in the bank. Case closed.
Oh, and as far as safety goes ... by giving money to a bank you have given the bank an unsecured loan (that is the legal standing). And, since they are not willing to pay you anything for that loan, there is not even a risk premium associated with the loan being unsecured. How many banks would give you the same deal?
Who is the idiot?
What greater distribution of wealth than to depreciate the currency through promoting inflation...
and to have those that have earned and saved watch as their assets are shaved and given to others...
Question the Fed...they have no mandate or right to PROMOTE inflation. Stable prices are their directive.
Kenneth "Rogaine" Rogoff, your guillotine is ready. We'll take a little off the top.
I Love Mises to pieces. Roggoff is a Grubering bitch; even starting to look like Cass Sunstein.
With a properly managed Medium of Exchange (MOE), the only way you can have negative INTEREST collections is if your INTEREST collections exceed DEFAULTS. The main object of any MOE is to freely certify trader's promises and to guarantee that those certificates never lose value over time or space (and are eventually returned and extinguished) ... the effect being the MOE is the most sought after and widely accepted item of simple barter.
First, understand what money is: Money is "a promise to complete a trade". It is created by traders and certified and monitored by the MOE manager.
This is obvious when you examine trade: Trade happens in three steps: 1) Negotiation; 2) Promise to deliver; 3) Delivery. In simple barter, steps (2) and (3) take place simultaneously, on the spot. Money in these cases is an object of simple barter. For trades over time and space (like buying a house), the trader makes his promise, gets it certified, and gives the certificates to his counter-party in the trade. He then completes his trading promise by monthly returning an amount of certificates to the MOE manager until all the certificates have been returned.
The MOE manager monitors these trading promises for DEFAULTS (and rollovers ... government's favorite game ... are DEFAULTS). These DEFAULTed certificates must be reclaimed to preserve the value of in-process trades and certificates put into savings. This reclamation is done with INTEREST collections of like amount ... as soon as they occur. This guarantees zero inflation of the MOE.
The operative relation is INFLATION = DEFAULT - INTEREST.
Now, examining this relation, you can have negative INTEREST only if INTEREST collections exceed DEFAULTs. Because the whole process is fast reacting and self balancing, such a condition (just as INFLATION from too little INTEREST collection) cannot exist but in small amounts and instants of time and integrate to zero over time.
There will always be DEFAULTers, just as in insurance, there are always CLAIMS.
Puleeze! This conversation is NOT RELEVANT to people not under the Central Bansterz SPELL! Who believes this bullshit? Pay the savers 4%
In general, people are assholes for following them to ZERO interest rates. Minus rates? Bigger assholes.
If there were no originary interest, capital goods would not be devoted to immediate consumption and capital would not be consumed.
This reveals an obvious failure to understand that money is "a promise to complete a trade" and that profit collected by capitalists is not interest ... it is simply profit.
Let's peel the capitalist onion. Let's say we create a bank and put in $1M of capital. This allows us to lend out $10M (i.e. certify that amount of trading promises). Say we make a spread of 4% in the process. That's 40% with the leverage we have. So by the rule of 72, our $1M capital at 40% is doubled in less than two years. After two years, we take back our $1M (the capital) and let the other $1M ride forever.
So, from this simple illustration, capital is two years. There are no such things as capitalists. They've already gotten all their capital back and redeployed it.
Capitalism is the biggest con going and it has no relation to money whatever!
The image of the seed corn and the dogma about interest as an expression of "time preference" of (delayed) consumption is a very limited metaphor.
Most capital goods cannot be eaten (canals, factories, knowledge, siklls, etc) or consumed, although they can be allowed to deteriorate. It is also not true that there is no return on capital investment in the real economy or that the economy is completely stagnant: There is tremendous return on ongoing automation of all aspects of the manufacturing & services economy. Often these gains make previous capital investments obsolete.
And that is what is being missed by doctrinaire missives such as the above. The powers of production are increasing tremendously whereas those of consumption are lagging further and further behind. Capital is in fewer and fewer hands: increasing production is easy, but there is no point.
Rants about statism and 19th century nostrums about the market are not going to solve such imbalances anymore than will printing money. The 85 richest people in the world are seeing their position increase by 668 million dollar$ per day. Obviously something has to change in the way the dividends to progress are distributed. Some doctrinaire approach to "welfarism" will only result in millions starving amidst plenty.
Louisiana passed a law last year making it illegal to purchase any used item with cash. A good first step to total control over our finances. ( After all, if you nothing to hide, you have nothing to fear, right?) When this came out, sputtering pols claimed that they never intended that. What they did intend is not clear.
Oh by the way, licensed pawnbrokers are exempt from the law. Surprisingly enough, they were also the primary movers behind it. Quite a shocker.
The issue of easy money can be summed up thusly....
Make money cheap.....you get cheap money.
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When they introduce NIRPs, won't there be runs-on-the-banks?
There sure as hell will be at least a mini-one in my town.
•?•
V-V
That sounds great. Move away from a state controlled economy where the means of production are confiscated and redistributed based on some moral imperative, decided by those who claim to know best, OR... leave the capital in the hands of the wealthy industrialists who will allocate capital to it's highest and best use, for the highest profit gains in the shortest amount of time...
So, our choices are imperialism or fascism, and that is all? Keynesianism or Von Mises? Neither system will work in a fiat monetary system of debt slavery with money not tied to tangible assets. Nobody gives a shit until they are starving, then the real value of commodities emerges and the real value of money and labor becomes paramount.
And when you are starving the real value of gold compared to wheat becomes obvious. When you are starving, money is irrelevant. The only thing relevant is your ability to trade, to improvise, or to steal (i.e. to be of "value" to yourself).
For anyone who still reads...Lysander Spooner; "A Letter to Grover Cleveland"
Free on the net and will be a transformative read!
One of the brightest men who ever lived.
from Spooner: "any unjust law should be held legally void by judges."
In fact, any law ... just or unjust ... can be held legally void by a jury.
There is NO way this could ever happen without touching off revolution.
What happened in Cyprus was a minor anomaly; and it affected mostly major Russian (mob) money. If they would've squawked, they'd have gotten a "Capone"...
It was that simple.
En masse to the poor body politic, and there would scarcely be a tree without a banker swinging from it.
The truth is, a dollar wouldn't be worth a damn without a right to currency and free depositor access...
...and anything of value would head for the next galaxy in demand.
m
Pretty soon the powers that be will be implementing a full fledged Mark Of the Beast Currency. An all-electronic currency, accessed by some biometric/implanted chip, and allowing the Beast total control. Not only can interest rates be made negative in such a system, but points could be scheduled to expire unless you spend them, and money can be given a "color" so that it must be used on certain types on goods. For example, If people aren't buying enough shoes, more of a worker's pay packet is denominated in points that can only be spent on shoes. And the bankster moneychangers who operate the system have the sole power to convert points of one type into another type - which allows them to extract fat fees and reap ginormous profits.
What you describe is likely. What needs to be discovered is how such a small % of the market can dominate the market. It has always been this way. It always progresses to collapse and resets. There is an obvious way to keep this from happening but both the dominant % and the dominated % resist the proper management of the medium of exchange (MOE).
The MOE can be privatized. It need not be government operated, sanctioned, regulated, or controlled. The prevailing MOE would be impossible for government to own. BitCoin is the right idea ... just the wrong implementation. It has all the flaws of commodity backed MOEs ... only worse.
Todd Marshall
Plantersville, TX
This is a bonanza if momentum breaks. This is a divergence of money as a store of value and as a unit of txn and when it builds lead to the spring of an underground economy. (not talking about drugs, money lanudering, etc here).
Take a break and hang out in Indonesia, Pakistan and lately Thailand to get educated on how underground economies work. These places have decades of experience under cronyism.
There seems to be some confusion by the author of this article. There is no proposal to ban interest rates! The negative interest rates dictated by the Central Banks policies are negative from the perspective of the cost of money to the lenders, not the borrowers. The Central Bank does not want banks to park their money at the Central Bank but to "lend" it out!! Hello, that means at positive interest rates. So, the economic arguement made in this article is extremely misguided to say the least!!
another piece of commie nazi shit from HARVARD.... visualize gruber and rogoff doused in gasoline and hung from a street lamp post and lit up.... these ivory tower commies think FOLKS will just take it up the ass....