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Get Ready For Negative Interest Rates In The US
With Fed mouthpiece Jon Hilsenrath warning - in no lesser status-quo narrative-deliverer than The Wall Street Journal - that The ECB's actions (and pre-emptive collapse in the EUR) means the U.S. economy must deal with a rapidly strengthening dollar that will make American goods more expensive abroad, potentially slowing both U.S. growth and inflation; and Treasury Secretary Lew coming out his crypt to mention "unfair FX moves," it appears The Fed (and powers that be) are worrying about King Dollar. This suggests, as Mises Canada's Patrick Barron predicts, the Fed will start charging negative interest rates on bank reserve accounts as the final tool in the war on savings and wealth in order to spur the Keynesian goal of increasing “aggregate demand”. If savers won’t spend their money, the government will take it from them.
As The Wall Street Journal explains,
The European Central Bank’s launch of an aggressive program this week to buy more than €1 trillion in bonds poses important tests for the U.S. economy and the Federal Reserve.
Europe’s new program of money printing—and the resulting fall in the euro—means the U.S. economy must deal with a rapidly strengthening dollar that will make American goods more expensive abroad.
The stronger dollar could slow both U.S. growth and inflation, giving the Fed some incentive to hold off on its plan to raise short-term interest rates later this year from near zero.
...
A stronger dollar has three important implications for the U.S. economy, markets and policy makers. First, it tamps down inflation just as the Fed is trying to raise inflation closer to 2%. Second, it hurts exports and therefore economic growth. Lastly, the attraction of U.S. financial assets could heat up markets just as regulators keep watch for dangerous asset bubbles.
...
U.S. officials have been playing down that scenario, and, more broadly, resisting talk of a global currency war—competitive devaluations by countries eager to keep their currencies as low as possible to protect exports; but “The Fed faces a challenge having to navigate some pretty intense cross currents,” said Bruce Kasman, chief economist for J.P. Morgan Chase.
The U.S., in effect, is importing some of the world’s downward inflation pressure through currency movements.
Treasury Secretray Lew pipes in...
- *LEW SAYS UNFAIR FX MOVES TO DRAW SCRUTINY FROM U.S.
- *LEW SAYS STRONG DOLLAR IS GOOD FOR AMERICA
* * *
And Patrick Barron predicts (via Mises Canada)...
I predict that the Fed will start charging negative interest rates on bank reserve accounts, which will ripple through the markets and result in negative interest rates on savings at banks.
I make this prediction only because it is the logical action of the Keynesian managers of our economy and monetary policy.
Our exporters will scream that they can’t sell goods overseas, due to the stronger dollar.
So, what is the Fed’s option? Follow the lead of Switzerland and Denmark and impose negative interest rates in order to drive down the foreign exchange rate of the dollar.
It is the final tool in the war on savings and wealth in order to spur the Keynesian goal of increasing “aggregate demand”.
If savers won’t spend their money, the government will take it from them.
* * *
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This is good for mortgages right? Right? What about negative interest rate mortgages? That would surely help the housing market!
But,... but,.. Hilsen...'what's his name' said the Fed is going to raise rates.
This is unpossible!
strengthening dollar that will make American goods more expensive abroad. ...
American goods? What goods? We dont make anything ... its all made in China and they will be happy to take Russian Rubles or Iranian Tollars
You can not have negative interest rate when you are a reserve currency.
i laughed hard at this one
NOW GOLD YIELDS MORE THAN GOVERNMENT BONDS!
0 > -1
http://www.zerohedge.com/news/2015-01-24/how-mario-draghi-unleashed-14-t...
Poisoning the "well" of excess reserves, by charging interest instead of paying on them, was a move i predicted here years ago, as an indicator of end game.
It's coming. Of course it is. We knew it would, must. Nothing is fixed, nothing is better, nothing is recovered.
You cannot "be paid" a negative interest when you live paycheck-to-paycheck.
Betcha Uncle Sam does it just fine.
Anybody anywhere is going to want US dollars and US yields right now.
It may be a tattered dirty shirt, but it's just about the last shirt on the block.
KEEP STACKIN' THAT SHINY PHYZZ, BITCHEZ!!!!
It's still on fire-sale and way under price of production per ounce.
Stack your fucking asses off, bitchez...cuz when this fucked up game ends and everything collapses...stackers just might be the central banks of their respective communities.
Phyzz will win in the end. And if any of us die before that happens, who fucking cares...leave it to somebody else who understands what's going on so they may carry on.
Get out of the bankster system NOW. Do it now before harsher capital controls restrict your ability to withdraw however much "money" you have in their criminal bankster system.
Get it out now...buy phyzz, hold a good amount of straight cash as dry powder. Do whatever ya gotta do, but get your shit outta the system now or you will never get it back.
Or don't and fucking suffer. Your choice.
You have been warned plenty, over and over and fucking over again.
DON'T EVER SAY THAT YOU WERE NEVER WARNED!!!
We the people?
Who are you kidding. More like We the Banksters. We have your money printing press. Ha ha. We buy everything we want, everything with real value, even your women and children, with little pieces of green paper and you are left holding the bag. We get your farms, your businesses, your homes, your forests, mountains, rivers and oceans. You people never learn. We then tell you that you have to pay back the money we spent on ourselves buying all your stuff because it's your "national debt". You just don't get it. We literally tax you to death. You never learn. We brainwash you with our media that blankets the nation, we brainwash your children to grow up and protect us by becoming cops. You never learn. We trick you and your children into going to foreign countries and bombing their children's limbs off so we can steal all their frickin resources. You must all be completely brain dead. We even come right out and tell you all the ways that we're screwing you over and we tell you exactly how we do it to you. You eat it up. You buy it like it's going out of style. You're pathetic. Of course we're going to continue. You're just begging us to screw you over. Why would we stop?
Go long Bank of Sealy.
Our comercial bank in Pennsylvania is 'charging' $20 per month for simple checking accounts with a balance less than $20,000.
Won't take long to wipe out that pay check to paycheck stuff.
So the more debt you owe, the more you can earn. Think of the revenue the US government can earn if they can convert all their bonds to bonds that pay negative rates...
By God, this debt can pay for itself!
It's a miracle!
In Soviet Russia you pay the banks to borrow money.
In America, bank pays you!
I am going to be like a bankster:
Please give me the money but I am going to choose not to spend it and keep it as reserves against a future rainy day.
Thanks SoulGlow
from earlier....
Y'all just wait until they start actually buyin' the shit! Y'all want negative rates, you gonna be gettin' negative rates world wide.
And you all thought that inflation was the way outta this shit.
LOL
We're gonna be payin' them to borrow from us to spend on diddly fuck all useless oligarchy pocket lining projects on which they're gonna be makin' money borrowin'!
Talk about free fucking money!
This is the ultimate fucking shafting of the People.
Yes, they "make" money by borrowing.
QE 4evah, justified
Thus, print to make the deficit smaller! (Of sorts)
Krugman's wet dream.
This will not end well, my friends.
The Implications Are Mind-boggling.
Goobermenits can now engage in unlimited "justifiable" QE as they're getting paid to do it, paid to borrow!!!!!!
Crony projects funded while "generating profits" from the borrowings.
I can see it now. The Democrats (especially) touting this as the Great Way Forward for the Middle Class.
Justified Spend, Borrow and Print!
Free shit for everybody deluxe
fuck fuck fuck fuck fuck fuck fuck
OMG. The way out never was inflation! It's deflation!
Long Live the Liquidity Trap.
fuck fuck fuck fuck fuck
We've been looking down the wrong rabbit hole!
Krugman's splooge is dripping off the chrome printing press in the Mariner Eccles room.
Well, I been sayin and doin' bond buyin' but now it becomes entirely clear.
It'll be when everything yields less that ZERO that people start rushing to buy the least negative yield in a deflationary environment.
Do you all realize that this is a reason for the liquidity Trap?
If things have negative yields, I'll take cash, thank you very much.
Oh fuck fuck fuck fuck fuck
I'm getting ready to throw up.
When I couldn't think gold and silver could shine any brighter.
what about when gold and silver are going down 10% per year when bonds are returning -1%?.
The answer to QE1 QE2 QE3 and EU1 is Gold!
have I not been saying Cash Is King?
"OMG. The way out never was inflation! It's deflation!
Long Live the Liquidity Trap.
fuck fuck fuck fuck fuck
We've been looking down the wrong rabbit hole! "
Deflation for the 1% = Real Assets & Labor on sale. They off loaded THEIR bad debt onto the govenment/99% and got CASH.
Trickle Up eCONoME !
Inflation for the 99% = penury. What inflation? It's what the Banksters call THE SPREAD.
The 'little people' will NEVER be granted negative interest rate loans!
You will know that the system is totally fucking upside down when corporations and rich people start trying to get a tax loophole so they don't have to pay capital gains on interest from borrowing.
'Privatize the profits & socialize the losses' shoulda told us everything we needed to know about how the process underway.
Uh huh, tell that to Yellen, right to his face!
Publicus
Ha ha ha hah ha hA HAHAHAHAHAHAH!!!!!!
Oh yea? Just wait until next Christmas. You will be needing a submarine to hunt yield regardless of what currency is vommiting out of some central bankers ass.
Looks like those mattresses are going to look more and more attractive.
http://m.libertysafe.com
Or check those guys out. Highly recommend them.
Who says you can't?
People say and think lots of things that prove to be wrong.
"You can not have negative interest rate when you are a reserve currency. "
Oh, shit... That IS funny.
IF:
inflation+fees+taxes > return on deposit/bond
-what do you call it?
this explains why Merrill Lynch just gave me a mortgage for 1.75%
"this explains why Merrill Lynch just took from me a mortgage for 1.75%".
There, just fixed it for you..
You gave them a mortgage (on the property) in exchange for the money they gave to you so you could purchase the property..
banks do not loan, they Borrow(deposits for speculation)...........the so called 'borrower' merely accessed his/her own 'credit'.......for this the bank charged him a 'vig' of 1.75 %......
actually i cash out refi'd the shit out of the property at a ridiculous appraisal
Property cannot generate income in and of itself.
Forests and woodland creatures don't pay bills. Farmland don't farm itself. Steel doens't forge itself into products. Etc.
THE ONLY COLLATERAL THAT EXISTS IS HUMAN PRODUCTIVITY.
As far as I am concerned, all capital either comes from the earth or is the result of human action. This is why "human farming" in the form of income taxes is so insidious, and so universal. It also explains why the 1% want to crowd us into cities and deny us access to land.
Yes we do. Social Media devices, Bad movies
and Rap music.
We make Burger King burgers. Oh wait...
Don't you worry none, pilgrim! They will compensate by giving you a negative toaster, which turns bread into dough.
If interest rates go negative will time start running backwards?
I don't want to go back to high school.
Or re-endure 14 years of Bushama.
What you expect Jaimie Dimon to give back his billions?
Yes, raise raise rates indeed:
http://www.deangraziosi.com/real-estate-forums/mortgage-news/44534/fed-d...
http://blogs.cfed.org/cfed_news_clips/2011/03/fed-unlikely-to-remove-its...
http://www.marketmontage.com/2012/03/05/wsjs-hilsenrath-federal-reserve-...
http://blogs.wsj.com/economics/2013/06/13/fed-likely-to-push-back-on-mar...
http://www.forexlive.com/blog/2014/07/26/hilsenrath-fed-will-debate-when...
The links above go back to 2010.
One might begin to wonder if he is the reincarnation of the boy who cried wolf as one reads what appears to be the same story for five years.
I wonder if the words,"You can eat the peanuts out of my shit" means anything to the fucking banksters!
Give me Liberty or give me NIRP!!!!
Except that you will never, ever be able to sell that house for more than a third of what you paid. Buyers look at the monthly nut, and a 7% loan was normal once, and will be again.
There has never been a worsse time to chain yourself to a money pit.
except during inflation...which we're told doesn't exist
Well thats just it isn't it?
WHAT GOOD IS FORWARD GUIDANCE IF YOU CHANGE YOUR MIND?
Go ahead...JOIN THAT CURRENCY WAR MISTER FEDERAL RESERVE GUY!!!
About as good as an arrow launched after its cockfeather fell off
Not necessarily. If they are trying to get people to refinance right now, that sorta tells you which direction the banks expect interest rates to go. And that depends on why you are buying a house. If it's an investment, ya you will probably owe more than it's worth in the next few years, but if you are buying it to love in long term and have a decent amount of equity in it, it's not going to matter if it loses a third of its value unless you do something stupid with a home equity line of credit since you are living in it, not investing in it
The banks never stop trying to get people to refinance because they make money off of it. That has nothing to do with the interest rates.
Take two people.
One can access credit.
One can't.
See which one gets a house first. See which one has a house when they die.
The person who can access credit will have a house early, and most likely keep it till death (or trade it for another, which is kept till death)
The person who can't access credit has an amost zero percent chance of saving enough to buy a house outright, during the course of their life. Very, very few people can save enough to buy a car, let alone a house.
Debt is a fact of life. Mortgates are productive and useful. They allow people who otherwise might not have the self discipline the ability to gain a house, and to force themselves into paying for it.
Self discipline is the key. And very few people have it. Hence mortgages.
And such is the reason I would say that to buy a property, to 'chain yourself to a money pit' is worthwhile and has greater benefit on average than waiting, and spending money pointlessly in the meanwhile.
If you want to put this into proper perspective, ask yourself what the bank does with the promissory note that accompanies the mortgage. Your signature creates the funds, which the bank pockets, then requires that you pay them again through mortgage payments, plus usury under the threat of foreclosure. The entire mortgage industry is based on fraud, which should surprise no one since this is also true of the entirety of the financial matrix.
"All the perplexities, confusion and distress in America arise, not from defects in their Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation."
As far as I was aware, it gets transferred to the banks asset ledger. Or is repackaged and sold to be transferred to some other entities asset ledger. And there it remains, producing a small return as it is paid down. If I borrowed the money off a mate, they would run the shebang in exactly the same way.
I have two words for you...
property
taxes
that's your money pit... after-tax income going into local coffers to fund who-knows-what
True, the taxes are a drain. But renting, you have body corporate fees, AND property taxes. Are we all supposed to live in hotels?
Stay until either they thow you out -or you decide to walk away.
Millions are in default all around me. I don't know how much of the property taxes are being paid in many municipalities in this region..
The banks wildly inflated the price of the housing stock so as to reap larger nominal profits. Now it has crashed and the borrowers that required a fucking place to live are stuck with the bill. Unless they walk. ...& go ...where?
Click around the NYC metro/west New Jersey/Newark area for a taste:
http://www.zillow.com/visuals/negative-equity/#9/40.8969/-74.0781
City ZipCode Price Index Delinquency Rate
Bronx 10456 $256,200 40%
Manhattan 10036 $1,150,000 15%
Manhattan 10027 $921,300 11%
Engwd. Cliffs 07632 $1,137,300 12%
Englwood 07631 $339,000 23%
Tenefly, NJ 07670 $740,700 11%
Leonia, NJ 07675 $467,100 18%
Demarest, NJ 07627 $703,400 10%
Fairfield, NJ 07004 $464,500 21%
Paterson, NJ 07503 $230,600 31%
Paterson, NJ 07501 $202,200 40% 42% underwater, prices down 39% from peak... ( po' 'hood' )
Paterson, NJ 07524 $219,600 43% 44% underwater, prices down 37% from peak... ( 'po' hood' )
Ridgewood, NJ 07450 $665,000 7% 5% underwater, prices down 7% from peak... ( 'rich neighborhood' )
Newark, NJ 07114 $278,200 40% 49% underwater, prices down 36% from peak...
Go look around...
The level of delinquency is shocking. The dollar amount is astronomical. The banks that underwrote this are fucked.
Average time from 1st missed payment ( IIRC: 3rd missed is filed as 'deliquent' ) to foreclosure in NY/NJ is just about 3 years... and the backlog is rising... The banks cannot absorb losses of this magnitude. How much is with the GSEs or sequestered at The FED...?
Interesting tool, thx for the link
Only the poiltically connected bankers will be paid to borrow. You and I will be stuck paying to stash our money in the bank, and borrowing at 3%
Your credit card will still be 30%.
Now if CC's had NIRP....
If credit cards had NIRP, that would be like giving the serfs the same deals as Banksters and that is expressly forbidden in the religion of NeoKeynesianism.
STOP!!! THIEF!!!
;-)
That would be the instant death of USD as world reserve currency.
Not gonna happen eveeeeeeeeeeeer
Agree. You can do it with every other currency but the dollar. Unless they want the remnibi to be the reserve currency the next day. Hint: they don't
The renminbi is pegged to the dollar.
...but that peg isnt directly controlled by the ny fed.
It's still pegged. The Fed prints dollars, the PBoC buys dollars accordingly so the peg remians.
The PBOC sets the peg wherever they fucking like.
If I were the PBOC, I'd love the strong dollar. A vast majority of my reserves are dollar based. As it rises, I can swap them out for other things... like oil and gold.
My bonds bills and notes all have big capital gains.....
Nuffin' wrong wif it right now....
That shoe peg will be the next to drop.
Pegs can move or disappear. Ask the Swiss. Ask the Danes next month.
So the Chinese unpeg and their currency becomes the new standard?
Fiat will all fail together.
.
Japanification.
The Fed is going to re-open the spigots.
Food Inflation "never lies".
Indeed.
Want to see the future of US rates?
Look at this chart:
http://www.wetrade4you.com/wp-content/uploads/2014/09/Japanese_10-Year_Government_Bond_Yield_1994-2014.png
We are currently at about the 2007 mark...
it will go faster because we are in end game
I still fondly remember all the experts telling us in 2008 "the US is not Japan, we will never have a lost decade (or three)". Even then I had me doubts.
The Quickening bitchz.
-- Art Bell
Already happening with the printing press,
You hear that Mr. Anderson? That is the sound of inevitability... [/Agent Smith]
My name is NEO!
Well ya coulda seen it comin, ifin ya had taken your head out of your ass.
The only thing that has kept inflation so outrageous that PhD's could notice it from erupting has been that the velocity of money is way way down. If the Fed forces the giant hedge funds masquerading as banks to actually put their money to work then velocity will go way up.
The policy "wonks" have been lying about the inflation and guess what...
HERE COMES THE PRICE COLLAPSE.
Just as an aside question: does the US have a trade deficit with just about every other country on the planet?
what is trade deficit?
if saver don't have money - when what? wtf realy?
This guys don't have a fucking clue what are they doing
Which means that when I take on debt, I get paid???
Sounds great to me!!!!
Are you a banker?
(lulz at you thinkin' YOU'RE gonna get paid....lolololololol)
Hey man, would you mind holding on to this $100 bill? Ill even pay you .1% of my savings, per month, to keep my money, does that sound fair to you?
Plus that 100 $ will be worth 90$ in a few years.
Plus that taxes on that 100$ bill are going up.
Plus you will not be able to leave that 100$ bill to your kids.
Plus you will have a higher probability that your neighbors will sneak into your house and steal crap from you.
So yes, that is the deal...
Putting your money in a bank is old school. When they start charging you it's time to exit banks.
They have killed the whole idea of saving in a bank.
Take out 100% loan to value and buy Physical PMs. Then default on your loans.
F-the Fed and the banksters. Make them eat shit.
Get a nice big mortgage on some prime farmland - and hedge that debt with an appropriate amount of PM's. When it hits the fan, cash in the PM hedge and pay off the mortgage. Of coursew havinfg some additional savings in PM's would be a wise idea as well.
me no understand, why would someone invest 100,000 when maturity wil be 99,950?
Ask again after your "investment company" Corzines your 401(k).
Same reason why people are paying the Swiss over 1% to borrow from for 2 years...so they can speculate in their currency as it appreciates.
Transfer your money into the Bank of Sealy. It's safe and secure sitting next to gold and silver coins.
Any AK 47 or AR 15 will take out a theive attempting to make off with the loot.
A burial vault is making more and more sense everyday.
12 ga double ought... don't have to be as particular aiming
Yes you do.
That's a novice's misconception regarding shotguns.
I paint with shotguns, least that was what I was taught.
at 'in home' distances, it is still important. Your 00 is 9 pellets, connecting with 4 means missing with 5. where did they go? what did they hit?
Classic Keynsian bullshit.
Keep buying $usd bitchez /s
Artificial demand. The Fed is the sole buyer of treasuries.
And they then have the nerve to say that gold does not pay interest. LOL.
Long plastic Folgers coffee cans.
No deposits. No banks.
Just look at these several USA track records that are kept OUT OF SIGHT
For URL, see my bio.
"The Public Be Suckered" is the theme ... past, present, and future!
This all sounds so completely out of control. We have to assume that central bankers have no idea what is going on or what they are doing. otherwise these extreme unprecidented moves would not be taking place. We took the depression era caps and controls off of banks under Billy Clinton, with both democrates and republicans cooperating to do it. Now after a few decades the bankers have fucked up the entire world economy.
These failures have been rewarded, in 2008 we rewarded all these fuck ups with unlimited free money. Now they have taken that free money and fucked up the world even worse, though stealing trillions in the process.
If we as citizens sit back and allow this to go on, then we deserve what we get. Nobody holds politicians accountable. Nobody takes to the streets. The revolution and coup from above has finally wrecked our nation and economy and has us on the brink of a nuclear war in Europe.
How much longer before we are like Greece where 50% of youth are unemployed, and the economy shrunk 25%
Jack Burton I agree with your sentiment, but in the United States where they still hand out food stamps and where the other half work hard on a daily basis to keep mind and soul together on $8 an hour, there is little time or inclination to actually think about rebellion.
The existence of a highly wired surveillance systen, highly armed police, highly propagandized press and highly controlled judiciary takes care of the rest.
You need lone wolves like Snowden to commit individual acts of "sabotage" against the system in an array of areas in order to put the fear of God into our would be lesders.
And all this is happening because of 1% of people who don't know the meaning of enough.
1% don't know the meaning of enough? What a weird thing to write.
When I worked in my own company, I didn't cease trying to grow it, even once I earned enough to feed, house and clothe myself. The trait you focus on as a negative one (a desire for more, for growth) is productive and valid at the lowest scale of microbusiness, not just for the wealthy and large business.
Do you stop trying to earn money once you have enough to buy rice, potatoes and bread?
Do you expect the wealthy to stop growing their businesses and their wealth once they employ an arbitrary number of people, or have amassed a certain amount of wealth?
It is nonsense. There is nothing wrong with wanting and striving for more. It is the raw essence of a person, of humanity.
I reckon a little bit longer Jack. All the cops and HMS guys are getting paid ...rather well actually. I do think that it will go full retard, however only after they have completely indebted the US to $ 20 trillion or so, and the Fed 's balance sheet to 50% that amount. That would be the tipping point.
However they do have the majority of the black and hispanic "communities" on "their" side, so there is a lot of cannon fodder to be sent into the streets before Goldman execs get their Armani suits wrinkled.
It will take the full on collapse before people realize what has happened and react. The US public school system has done a good job of the collective dumb down.
Jack Burton - it isn't out of control. It is being well managed and carefully controlled. ZIRP and NIRP are good.
Free markets means those in the US, in Greece and elsewhere all compete with China and India. Better educated with willingness to work longer hours for less pay.
So the free markets WILL cause unemployment and a shrunken economy, unless protectionist measures are implemented. And that is contrary to free markets - so is being resisted as much as possible. The effort is in balancing free markets with protectionism to keep any particular population satisified while allowing them to retrain and study to more effectively compete with cheap, well educated labour elsewhere in the world.
I honestly cant tell if this is sarcasm or not.
Oh. Are there that many mistakes?
Granted, China and India aren't necessarily better educated historically, and the current population leave much to be desired. But the point is that their university graduation rates are higher than in the US - and they are more committed to lifelong education than the average westerner. I guess the low quality of education in India and China also leads to a bit of laughter, but over time this will change. Budget increases, you see, and foreign universities setting up shop there.
http://www.zerohedge.com/article/college-graduates-too-many-china-not-enough-america
http://www.bbc.com/news/business-28062071
http://www.usnews.com/opinion/articles/2012/08/22/us-education-must-keep-up-with-chinas-indias-bold-programs
http://www.eastasiaforum.org/2012/07/13/economic-growth-and-higher-education-in-india-and-china/
http://www.bbc.co.uk/news/business-12597815
https://www.insidehighered.com/news/2012/07/12/china-and-india-producing-larger-share-global-college-graduates
This is your first rodeo...right?
Nope. Over 15 horses at my fingertips and I never rode one in a rodeo.
so you must be the government mule then
No he's a 15 horsepower ASS
A ton. Don't even know where to begin.
Start with one mistake. I'll be round to study. After lurking for a few years it is about time I made people suffer for my thoughts.
You go, guy. That is a lot of lurking. But beware, this area calls itself Fightclub for a reason.
Ok. I have another one. When I write 'free markets' I am referring to markets between countries. Not free markets within any given country. We are talking about global issues, right?
What will us old farts who are now looking at .025% on our savings be saying when that turns into a -025% and more? Geez and they wonder why us old fart haven't retired yet. How long till the slimeballs start adjusting our SS payments downward saying you don't deserve enough to buy that can of dog food. Instead of the 1.7% increase, next year they decide to take back 2% and more. Meanwhile that ahole Obama will be vacationing again at Marthas Vineyards with all his poor/rich friends.
Obama will be joining all other former Presidents on the Board of the Carlyle Group.....a pretty nice 'retirement' package.
Don't worry, there will be a time when you will look at envy to the guy that gathers up Jaimie Dimon's shoes outside his NewYork penthouse and scrubs them.
Can the Fed raise rates and continue with QE ? Indeed they can. In fact that is the only thing they can do now. Even Americans will know that the scam is upon them if nominal rates go negative. That will cause a panic, and pm's will get a bigger bid. Fed don't want that.
Therefore nominal rates in the US, effectively > 1% but < 0, will not go nominally negative. The will stay where they are maybe tick up .25%, but the Fed will be buying T Bonds to keep rates very mild. The Fed may not call it QE again, but the effect will be the same. US Treasury will be issuing a $ Triilion bonds to raise more money for Gov't spending ... y'know "infrastructure projects" ... AND the REP controlled Congress will pass tax cuts to "put money in the pockets of the middle class".
This is going to go full retard... I know I know...nerver for full... but there is no other way out. Russia won't be drawn into a War..the ME will continue to be droned to keep them at bay. The Fabian socilaist Keynesians at the Fed have to get "demand" generated from the public. It is effectively a helicopter drop, but they won;t call it that. It will be the Obama / Boehner Recovery Act or some such 1984 malaprop.
The Harry Markowitz school of the Efficient Frontier (bedrock of Modern Portfolo theory), is being replaced with Krugman's Platinum Coin from Mars - The Last Frontier. Tyhe new portfolio theory is the oe followed by Cramer and Krugman ...buy..buy...buy.
QE is irrelevant. Imagine an endgame limit. Suppose all foreign currencies are deep into NIRP. Suppose no one wants any foreign currency, and everyone wants dollars. The foreign currencies will fall to near zero and the dollar will rise near infinity on a relative scale. The Fed will not allow this to happen, so they will be forced to impose negative rates to keep the USA competitive. And if a possible EUR collapse is thrown into the mix, rates in the US could go very negative. The EUR has substantial political risk that seems to be rising with time. Throw in a couple of regional nuclear wars, and the tsunami of flight capital could force the Fed to go totally through the looking glass.
The trouble with all this NIRP bullshit is that real interest rates have been negative since the foundation of the Fed, 100 years ago. Inflation rate has always been greter then interest rate. Thus we end up under this pile of shit.
"Our exporters will scream that they can’t sell goods overseas, due to the stronger dollar."
Right, except that any companies that actually do export things have their products made overseas so their manufacturing and salary costs go down. And as it's only the execs who work in the US their wages gain more buying power. And if the company fails, they'll have to suffer a $16m golden handjob. I'm sure they'll be outraged by those developments.
The US exports a hell of a lot of food - much of it in the form of 'aid' paid for with taxpayer dollars.
I wonder what happens when the US can't afford to carry that cost - and other nations can't afford to pay cash?
The typical things that happen when there isn't enough shit for everybody. Starvation. Civil unrest. Disease. War.
Everyone assumes that logic prevails here. American industrialist controlling government is so 19th century. Confidence men now control America. Do you think exports matter? Not in the least. We will simply lend to whomever we want to sell to. They will use conjured money to purchase what we want to sell.
On the national level tax revenues matter not. Funding is conjured. Congress passes a law and the funding appears. It is as simple as that. Social Security will not go broke. Congress will conjure the shortfall. The FDIC will not go broke. Congress will conjure the money.
The big banks will not go broke. Congress will continue to flood them with conjured liquidity. It’s all good right up until the moment the currency implodes.
I know Zimbabwe was different. You know, it was a little bitty country run by Africans, right? It can never happen here. We are Americans after all. We have nukes and we once walked on the moon. It can never happen here until it does.
Zimbabwe went from printing one dollar bills to printing fifty trillion dollar bills in less than twenty four months. Nothing seems to happen forever. Then, it happens all at once.
Have you forgotten? We are exceptional!
If we get NIRP then the system collapses.
People will demand cash and hoard it rathrer than leave it in a bank and that has the hidden consequence of deleveraging banks and with nothing to lend allows rampanrt deflation not to start but become a whirlwind.
Before anybody says banks will be locked then think of the consequence of millions upon millions not able to access their honest savings and you have a revolution.
So can't see NIRP,
After taxes and inflation interest rates are already negative.
It is all done gradually as the frog goes from volunteering to a jauzzi before realising much too late that it's a boiling pot.
"After taxes and inflation interest rates are already negative. "
I have been saying this for years.
Ordinary people simply cannot grasp it.
"Blah blah blah my annuity/ira/401k/savings account..."
Who is to say that can't happen. There were massive bank failures in 1932. And if NIRP is high, accelerating, and universal, FDIC insurance won't protect you either. If NIRP is 80% per month, and the FDIC takes a month to pay you, they only pay you 20%. Then you have no place to put that money before another 80% is taxed away next month, leaving you with only 4% of your original currency units.
R E V A L U A T I O N
D E V A L U A T I O N
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You're absolutely right. NOTHING will be left in the end.
Guessing the Davos summit is not going as planned. A little Saturday music for ZH members. Enjoy!
André Rieu Live in Brazil 2013 - Full Concert in HD
Oh by the way ... negative nominal interest rates really interesting NPV and ROI calculations.
Why is gold better than bonds bearing a negative interest rate and stocks:
1) Gold is shiny and you can hold it in your hand, feeling the weight.
2) Gold doesn't charge you a negative interest rate in your safe.
3) Stocks are volatile. Your gold 1 oz. coins sitting there on Tuesday will still weigh the same the Tuesday after next.
4) Yellen can't touch your gold, and neither can Draghi.
5) Pirates love gold, therefore if you own gold, you are a pirate. Yar' there matey !
6) You can bury gold, but not your Scottrade account.
7) Your gold does not need a password.
8) You can swallow your gold coin, and retrieve it from your own shit in about a day, and it will still be worth the same amount. Shit stocks always lose you money.
9) The Swiss can drive down the price of euros, bonds, stocks, but not the price of gold.
10) Gold stored in your safe can't be hypothecated and re-hypothecated.
11) If you line the walls of your house with it, the gov can't see inside with their x-ray vision machines.....
Regarding #4- didn't FDR have Americans trun in their gold or it would be confiscated?
#9...The price of gold has been driven down and manipulated for the past few years. No single asset class can avoid manipulation. I own gold and I think it is a good part of a broad investment strategy, but it is no magic bullet.
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