"Stop Being So Negative": Putting It All Together

Tyler Durden's picture

Submitted by IceCap Asset Management

Putting it all together

Considering:

1) governments are unable to eliminate deficits

2) global government debt is increasing exponentially

3) 0% interest rates are allowing governments to borrow more to pay off old loans and fund deficits

4) Global growth is declining despite money printing and bailouts And, we've saved the latest and greatest fact for last: as stunning as 0% interest rates sound, the mathematically-challenged-fantasyland called Europe has just one upped everyone by introducing NEGATIVE INTEREST RATES.

As of writing, over 25% of all bonds issued by European governments has a guaranteed negative return for investors.

Germany can borrow money for 5 years at an interest rate of NEGATIVE 0.10%. Yes, instead of Germany paying you interest when you lend them money, you have to pay them interest.

These same negative interest rate conditions exist across many of the Eurozone countries, as well as Denmark, Sweden and Switzerland.

Since the majority of the investment industry unequivocally supports world central banks, it has convinced itself that negative interest rates are actually good for the worldís economy and it will help the world along its sunny path to economic freedom.

Call us dumbstruck, dumbfounded or just plain dumb. But, our every analysis of these policy moves always brings us to the same conclusion ñ thereís a pretty big adjustment in financial markets on the horizon.

6 years ago, we were told that bailing out the banks and auto companies would save the world.

As this worked so well, we were next told that the world needed 0% interest rates. As this worked so well, we were next told we needed money printing.

As this worked so well, we were next told that Ireland, Portugal, Spain, Italy, and Greece needed a bailout.

As this worked so well, next the IMF issued a report recommending a Global Wealth Tax of 10% be applied to help governments resolve their debt problems.

As this worked so well, next the IMF, the EU, and the ECB all declared that if your bank goes under ñ people with term deposits and GICs will pay for the bailout.

As this has worked so well, now every major central bank in the world agrees that negative interest rates will finally be the policy measure to finally tip the world back onside.

This will work so well, that the world should prepare for even more draconian measures to kick start the recovery. The global hunt for taxes has become very popular, as has the movement to physically remove all cold cash.

Yes, as recommended by Larry Summers, the world is moving ever so closer to completely adopting electronic money as the only way to do business. Many say this is good, after all many of us are practically there already. However, this movement towards electronic money is another attempt to eliminate black markets and allow governments to collect more taxes to fund the deficits.

But perhaps, the biggest financial crime not talked about is the damage to the worldís savers. While most do not realize it, but our central banks and governments have clearly decided to absolutely crush savers and in favour of borrowers.

The combination of all of the above failed policies has in effect punished savers, and rewarded borrowers. We now live in a world the elderly can no longer collect 5-6% interest on their savings accounts.

Instead, and unknowingly to most of them, they have become fully invested in the junk bond market and the stock market. Thatís quite the switch in investment strategy.

* * *

Much more in the full monthly letter (pdf)

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AlaricBalth's picture

As the following narrative is slowly being implanted into the publics consciousness:

Negative Nominal Interest Rates: History and Current Proposals

"Nonetheless, the most commonly thought method for removing the zero bound is taxing money. To begin with, the easiest way to implement such a scheme was to abolish coin and bank notes altogether. Buiter (2010, pp. 222-226) considers coins and bank notes to be redundant media of exchange, the larger part of it being held abroad for legitimate (store of value in countries with high inflation rates) and illegitimate (underground economy) reasons. In developed countries, its function of providing liquidity could easily be satisfied by bank accounts. Roughly half of Dollar and Euro notes are held abroad and of the remainder only a small fraction is held for transaction purposes.24 As stated above, without coins and currency, levying the tax on all non-bearer bonds is technically simple. . . If coins and currency are completely replaced by electronic transfers via registered accounts, in theory there is no limit to the domain over which the rate of interest can be set. In addition, there would be the additional advantage of hitting the underground economy as the absence of anonymous bearer bonds would make all economic transactions traceable."

https://www.wiwi.unimuenster.de/cawm/forschen/Download/Diskbeitraege/DP4...

NIRP: Taxing money as a proxy for inflation.

They are going to get your capital one way or another.

SafelyGraze's picture

instead of calling it "money" (whatever *that* means), call it "points"

collect a million points

redeem them for prizes

some points may be deducted from your total from time to time

void where prohibited

Skateboarder's picture

[Great post SG.] The world is a theme park, and restrictions and limitations apply, bitchez!

Devaluable Imperial Credit (DIC(k)) sounds like a nice name too. "yo dawg, you owe me five DIC(k)s, mothafukka!"

Great exercpt Tyler - captured the new NIRP world in four simple, irrefutable points. I actually look forward to reading the whole thing.

Manthong's picture

Cool..

So Obama will give up golf..

 when the Cubs win the World Series..

and the Vulcans land to rescue the world banks.

 

El Vaquero's picture

Points?  How about calling it credits?  It kinda fits.

A Lunatic's picture

How about calling it fraud......?

847328_3527's picture
Staffing company puts expansion plans on hold amid oil downturn

 

It appears Houston's energy downturn has begun to reach the businesses that feed off it to survive.

 

http://www.bizjournals.com/houston/blog/2015/05/staffing-company-puts-ex...

SofaPapa's picture

Skip to the good part:

Get your ration.

StychoKiller's picture

Ya gotta luv Big Brother, he increased the chocolate ration to 28 grams today!

qomolangma's picture

https://www.wiwi.unimuenster.de/cawm/forschen/Download/Diskbeitraege/DP4

 

The link does not work... not available.

 

Anyone can still access the file?

CrazyCooter's picture

Truer words have not been spoken on this subject ...

Regards,

Cooter

Sudden Debt's picture

There are now 2 new propositions to spur European growth.

1. Lower the workingweek from 34 to 30 hours. 

Theythink they’ll create more jobs with it but all they’ll do is increase pressure and stress. But salaries will go down. 

youth unemployment is still the biggest issue here in Europe.

2. Pay people salaries with a digital currency that has to be spend in the next 12 months after receiving them. So people can still save money but for a limited time and to a max of 1 year in salaries Which for 90% of the population won’t be a problem as they live from paycheck to paycheck.

The socialists rule the world, and for them, for it to become a fair world, nobody should be able to own anything.

There was even one politician who proposed inheritances to be forbidden and be directed to the state. But than a journalist asked the smartest question: so will that also apply to your children and what do you think they’ll say to it?

And the moron politician just kept silence and gave a smirky face.

So socialist want to take from everybody but never forget they will keep providing for themselves.

And they always manage to sell their story because it’s so populistic. most people don’t have a million on their checking account and they all think only the millionaires will be targetted.

And in the end, those who are poor now will be way worse off.

those who are middle class will live like the poor do now.

Everybody will be stepping down the ladder 1 step at least. So people who have it hard now should realize that shit will become just plane hard in the future. Just look to greece where all the poor people ended up on the streets, spit out by their society. They rank the highest on the suicide lists.

cnmcdee's picture

People think in terms of cash as wealth. If all your needs are met, and you are in comfort and have no cash - then cash / fiat / money is irrelevant.

When you can find a life outside of *all* banker control a. you do not need debt, b. you need next to no cash, and c. you are living comfortably in the life you want to live d. All the banks AND the government are totally and completley FUCKED. They can raise taxes but it has no effect on you because you do not really have an income.  They can raise, lower, negate interest rates but it has no bearing on you because you do not need to save or borrow.

They can try all kinds of things but in the end - their done.

IF you *really* want to screw the governments and the banks in perpetuity teach people to bypass the whole system.  100 years ago this was hard, today technology makes it very viable.  Solar panels used to be $10/ watt today they are $0.70 game changers...

Slarti Bartfast's picture

And if they keep raising property taxes?

Debugas's picture

they can tax your property which you need to meet your needs

rbg81's picture

Which for 90% of the population won’t be a problem as they live from paycheck to paycheck.

---------------------------------------------------------------------------------------------------------

Yes, you hit the nail on the head.  This is the real reason for the thinning of the Middle Class.  Make increasingly greater number of people living paycheck to paycheck or dependent on Government bennies to stay afloat.    Once you have a significant majority in this boat (60%+), you can get the green light for all kinds of social engineering.  Except that social engineering will just widen the wealth gap.  In other words:  a vicious circle.

In  a few decades, thanks to automation and AI, you will only need about 10-20% of the population to produce all goods and services.  The lower 80% will exist for one purpose:  to vote and keep the current political class in power.  And of that productive 20%, the 1% will continue to be demonized, but redistribution will only impact the 80-99th percentile.  The top 1% will hardly feel it and the top 0.1% will continue to thrive.

SWCroaker's picture

I don't like your world.  Would relocate to another planet if I could; thankfully, will likely be scattered ashes in a few decades, so sympathy to the rest of ya.

Kidding aside, an excellent and succient synopsis.

SWCroaker's picture

Yes, kidding.  I'm not really a callous self-interested old bastard.   I just play one on the Internet.

j reuter's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://goo.gl/e4mV9C

DirtyHowi's picture

would somebody please shoot this asshole..

 

thanks

B2u's picture

I keep loading up my short postions.  Just as trees  can only get so tall, the market cannot keep  growing forever.

Sudden Debt's picture

Actually, I don’t think we’ll crash this time. There’s no limit to madness you know.

Fun Facts's picture

The political class have become subservient to the banking class, as planned.

As a result, for practical purposes national sovereignty no longer exists in the captive western fiefdoms.

truthserum's picture

That's about what the King proclaimed about those American upstarts in 1777-78

Semi-employed White Guy's picture

There not about to let small investors make money from shorting their mess. Be prepared for a margin call.

nmewn's picture

BOOM!

And there you have it:

"The global hunt for taxes has become very popular, as has the movement to physically remove all cold cash.

Yes, as recommended by Larry Summers, the world is moving ever so closer to completely adopting electronic money as the only way to do business. Many say this is good, after all many of us are practically there already. However, this movement towards electronic money is another attempt to eliminate black markets and allow governments to collect more taxes to fund the deficits.

But perhaps, the biggest financial crime not talked about is the damage to the worlds savers."

As a side "benefit" to governments everywhere, if you are unfortunate enough to be branded as a malcontent or found to be on the wrong side of the Blue-Red divide at any given time in the future, your account can be frozen with one key stroke.

#Forward! ;-)

Sudden Debt's picture

I got my tax note on my dividends this month. Normally I pay 15% taxes on it, now I pay a extra 25% which adds up to 40%.

So it’s not only dividends that are at record lows, taxes more than doubled.

In the end, it will just be working to survive and nobody will ever be able to irease their wealth anymore.

 

nmewn's picture

I think so SD, whether through unplanned inertia or devious design thats what the long term outcome will be.

But not to worry, the kiddies will always have bankrupt governments making moar promises never intended to be kept to fall back on ;-)

Miffed Microbiologist's picture

BOOM, a black market materializes in every sector and dark corner. I have been planning my niche in such a world and believe me, it ain't in microbiology. Time to network friends before it is too late.

Miffed;-)

PresidentCamacho's picture

ya my niche will be microbiology, I'll make medicine, food, booze and drugs in the post apocalypse. Bacteria, yeast, mold, fungus and all the likes are my friends.

JustUsChickensHere's picture

Just to stir the pot ..... look at the old Darkcoin (rebranded as DASH) for an online payments method that is much more private than Bitcoin ... and just as global.

Probably not reliable as a store of wealth, but fine for untraceable payments.

Gold of course for untraceable store of wealth.  You need to use the right tool for any given task. There is no 'one size fits all' in this world

HenryHall's picture

If there comes a time when we can't use government issued money then we shall have to start using commercially issued scrip instead.

 

Either that or gold, silver and copper coins. Now there's an idea - why wasn't it thought of long ago?!

smacker's picture

"...if you are unfortunate enough to be branded as a malcontent or found to be on the wrong side of the Blue-Red divide at any given time in the future, your account can be frozen with one key stroke."

Aye. And just wait till you go to catch a flight out of the country to visit family/friends and some guy with a name tag on his jacket walks up to you and says: "Excuse me SIR, it looks like you have an unpaid parking ticket outstanding (or a speeding ticket...or...or). Would you like to settle it before you catch your flight?"

No pay, no fly.

Dre4dwolf's picture

It doesn't matter anymore the sheeple will be shaved till they freeze to death in the winter, at which point when everyone dies the problem is solved and the reset will be allowed to occur.

They will only allow a reset to occur once the machine trims the fat (namely everyone they want to die, dies).

Until then you will be contempt watching an 150lb overpaid asshole fight tiny asian men in a ring as a distraction.

 

blindman's picture

but what a deal to borrow at a negative
interest rate, man, those people are brilliant
and fortunate. i wish i could do that
too but i'm just not that smart-enough.

macholatte's picture

but what a deal to borrow at a negative
interest rate, man, those people are brilliant
and fortunate.

 

take it to the next step .......

Refinance 500 billion 5% notes to -.01% notes. 

The proportion of GDP going to pay interest just vaporized.

sessinpo's picture

Old news.

Next article/blog.

Boomberg's picture

""The combination of all of the above failed policies has in effect punished savers, and rewarded borrowers. We now live in a world the elderly can no longer collect 5-6% interest on their savings accounts."

5-6% interest has probably been gone for 10 years now. So this is news to anybody? Remind me to stay away from Ice Cap.


raywolf's picture

it's not as unrealistic as you think....

In the days of gold you'd pay to store gold... now in the days of electrnically created money that amounts to little more than Xbox credits why should you earn interest just to have it sitting ?

When capital was scarce, people would pay interest to borrow money... fine... but capital is not scarce now... new cars flash about on the roads, most houses have huge TVs, most people- even homeless are comfortably dressed, with new shows and new coats... the world is awash with capital....

get the govt. big brother out of the way and everyone will earn, but 10% for doing nothing on a deposit account ? come on... that was only realistic in a capital scarce envinronment...

Obama LaForge's picture

Capital is scarce. It's just the central banks tricking everybody into thinking it's not.

Bighorn_100b's picture

Going off the grid never sounded better after reading this article.

ISEEIT's picture

The fucking we are in today would be impossible were Libertarian-ism the dominant political philosophy.

Ah well.....

As I understand it this world has been a disaster from day one...Why would it change?

 

Same shit..Different toilets right?

 

Armed Resistance's picture

Libertarians as the dominant party? You are tripping out.

yogibear's picture

"global government debt is increasing exponentially"

And yes negative rates so they can steal money.
Play with the unemployment rates and pushing people off unemployment insurance. Until riots.

Keep buying that Apple crap and make the elitist happy

BendGuyhere's picture

Negative interest rates amount to the international banker class spitting in the face of the bourgeoisie,

you know-all those uppity little trades people that have been such a pain in the royal bankers' ass for so long.

Thus with a most threadbare academic palimpsest of 'stimulus' the savers and strivers get savagely economically raped.

Thus have they deconstructed the time value of money: the money has no value and neither does your time. If you unwisely choose to save you will be penalized. Your aspirations, your freedom and your autonomy are all offensive to the money master class.