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Santelli & Hunt Warn About "Dire Consequences" Of Negative Rates
As more and more Fed speakers, talking heads, and status-quo-protectors talk of, beg for, and demand negative interest rates (NIRP), the mainstream is starting to wake up to the possibility of this farce coming to America. As Lacy Hunt tells Rick Santelli in the brief clip below, "the evidence is overwhelming that QE was more of a negative than positive," and warns the consequences of NIRP are dire (and The Fed has the tools to enginner it) as "to make it effective they would effectively have to call in the currency."
It appears, given the rising volume of chatter about negative rates that Americans are being conditioned to accept this... As Lacy Hunt explains below, the consequences for Main Street and Institutions is not good...
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"to make it effective they would effectively have to call in the currency"
Yeah, so?
They wouldn't hesitate for a minute to do that. They already want to do it ostensibly because it will "reduce crime," "improve tax compliance" and all that happy "do it for the children" horseshit. What makes you think they wouldn't do it for a much more important reason- saving their precious ponzi scheme?
There isn't enough currency in the system to call in. Entities like large corps have no place to store the massive amounts of "money" they use to on a daily basis. They have no other option than to use he banks. As far as the average saver goes, for some strange fucking reason they keep trusting the banks and they consider them to be a safe haven. It would not surprise me a bit if they just paid the negative interest in order to "protect" their savings.
Surely the Fed has some constitutional restrictions of how much they can take from people/how much they can do? If not, why not?
You must be new here.
Just because it flew there doesn't mean it would fly here.
May take a suit to challenge the Fed's power. It would be hard for some judge to say it is okay without putting some limit on it otherwise taking all of it would be acccepable. Theymay never let it come before the courts but who knows?
Who exactly appoints the judges and pays their salary?.........yep, that's who will get the favourable ruling. The average Joe is absolutely helpless to change anything because the politicians have effectively neutered any founding father documents. The real issue will be that if the US plays too many financial games (remember USD are held world-wide) as new super powers turn up the military heat, you could end up with a world war bankrupting the whole darn thing and it certainly has plenty of historical precedent.
The Fed can only call in it's notes (FRN). If they did that, they'd end up with an unusual demand on Treasury notes and coins. Then it's time to back up the truck for dollar coins. :)
Nigga Please!
Full regulatory and judicial capture is the fucking problem. Allow me to simplify this for you;
"Give me control of a nation's money and I care not who makes it's laws" — Mayer Amschel Bauer Rothschild
+100 Good one
They don't. The "dual mandate" can be interpreted in any ways they see fit. They could outlaw charging interest rates so consumers pig out and they could say it's for "maximum employment and price stability" and they're off the hook.
two hoots:
Even if there were constitutional restrictions on the Fed, what difference would it make? The Constitution is routinely ignored by this administration. Just look at the agreement that just about everyone in the universe has called the Iran Nuclear Treaty. Notice the word "treaty" in that name. Treaties require a 2/3 approval by the Senate, yet this "treaty" gets by by having more than 1/3 of either the Senate or the House support it. Tell me where in the Constitution is that?
Restrictions? Don't make me laugh. These assholes (and I mean any of the fuckers in power, Dem/Rep, Fed, ANY of them) do what they want, when they want and how they want.
Aren't estimates of available currency ~300 billion?
I think you would be surprised how many people are already holding currency because the banks don't pay shit. I know many, many people who have taken this approach. And I have a friend who advises retirees and he literally tells them they should be holding 6 months of cash - not in the banks.
They go to NIRP and bank runs will ensue.
If memory serves about 900 billion + of which a fourth is overseas
There isn't enough currency in the system to call in
I don't understand your comment.
"Calling in" doesn't mean confiscating, but converting into a balance in a computer system and forcing people to use only electronic payment methods thereafter.
The US may abolish physical cash, but that does not mean physical cash will go away. There will some other currency from some other country that will take that place of the dollar in the black market. Abolishing paper dollars will only hasten the demise of the reserve currency. Effectively, the dollar will no longer be the currency people stash under their mattresses in many places of the world, but just a virtual currency unit only central banks care about. This is a major step towards dedollarization. Also, without physical cash how will the US fund its dirty work? And how do they hope to convince other countries to stop printing their own cash in order to avert the replacement of the dollar?
abolish cash and it's value to the commoner will double overnight--then it will go up from there. Everything illegal goes up in price----its the nature of things. a dollar on the street will be worth ten in the bank ----just saying. I hope they try to take the dollar, euro, cuzaro, et al---they will be in deep shit right now.
Things continue like they are, I might want to start holding rubles. Just sayin'.
Correct. "Full faith and credit"...
In Michigan, Canadian currency is routinely accepted by many businesses, especially bars, restaurants, and mom and pop retail stores. It is discounted based on the current exchange rate, currently about 24% or so.
The thing is a lot of the underground economy is aimed at the lower classes and if cash disappeared the free shit army would become very unhappy. The government controls things by feeding them the classic bread and circuses and a cashless society would really screw that up. The political class would very quickly realize that it would destroy their power and privilege which is the only thing they have. It be a great way to collapse the system...guns versus money.....
nope. The FSA would do very well under a cashless society. This would be the Govt FORCING them to buy stuff (via debit card like systems) that they can then trade in the underground markets. Barter would mushroom with things like booze, blow, and such becoming the gold standard of the currency, with food and other lower "value" items being the small change. "Trade you a pkg of wienies and a package of buns for a can/bottle of beer!"
And the ultimate result of the switch to barter would serve the government right - you can't "tax" barter transactions because there'd be no set value, so no tax rates could be applied. (See USSR)
Of course, there would be absolutely NO "upward mobility" in such a society - but then isn't that the point? To keep the peasants down?
"This is a major step towards dedollarization."
Now consider whether that is TPTB's intended result. NIRP would push that along even quicker than it's already progressing.
Oh drat! Rational, profit-maximizing entities can be so darn counter-productive when it comes to implementing certifiably insane monetary policy.
US silver coins currently sold as junk silver would make an excellant cash medium.
Slightly negative rates in Europe did not result in emptying of savings accounts. Janet Yellen a while back commented on this and how she was surprised. They can have NIRP and eat their cake too and they know it. So it will happen.
That's a good point. Totally agree they'll do NIRP whether that's with or without the abolition of cash.
I'd say the full impact of those negative rates has not come to pass, but your optimism is appreciated. In addition, one could say that Japan has had negataive rates for 30+ years. However, in a global economy, sure, one or two countries may be able to do this, but not everyone.
Are any of those other currencies the reserve currency of the world???
Do you think the status lasts forever? LMFAO!!!
What part of all fiat will die don't you understand?
LOL!!!
".......in a global economy, sure, one or two countries may be able to do this, but not everyone........"
Indeed....
"Banning Cash" would operate to effectively give MANY other Countries more Power than the United States itself.......
That is not going to happen.....
As I have said, anyone who believes that "Monetary Policy" can override "Political Reality" is truly Delusional and will soon enough be disabused of such Delusions...
Look at the market for Treasury bonds and how much foreign money is fleeing into them. NIRP would kill the pretense of the global reserve currency and we would have to go full Japanese in the financial sector, but without reserve status we would implode.....
"So it will happen."
And if it does, it will do no more than ZIRP did other than possibly then forcing nearly everyone into risk assets to lose their life savings in the next inevitable, bone crushing crash.
That would put the illegal narcotics street trade out of business. They would never do that because it would ruin one of their best businesses.
If there's no cash, then how do the politicians and bankers pay for their blo & ho's
Paying banks an overnight safe keeping fee seems fair
uhh...which bank did you say you work for again?
consequences shmonsequences.
print dat tang!!!!!!!!!!!
Negative rates is in fact capital theft and destruction!!!!!
Execute the fucking bankers and financiers already, they are in fact nothing more than useless, over compensated middlemen between the computer/printer and the producer/consumer in the real economy.
Time to execute the middlemen and let real investment, risk, innovation and price discovery return.
Yes. They want to take your capital because they ran out of their own (which was also ours to begin with) a couple decades back.
there is no "11th marble", never has been. If you don't do real work, eventually you don't eat.
Fuck em. Put that nailgun to work!
It's become easier to feed off of other human beings than actually work for food in the traditional way. It's a form of cannibalism.
"101 ways to serve man", soon to be a bestseller......
https://en.wikipedia.org/wiki/To_Serve_Man_%28The_Twilight_Zone%29
I've got the original series on DVD and I wish Serling was still around.....
Oh yeah!!! Well you didn't print those dollars. Sorry you forgot to read the contract when you agreed to use the scrip of a private corporation. You also didn't read the contract when you opened a deposit account at a bank in the Federal Reserve System. The Fed only lent you those debt obligations to use where they were accepted. It's their debt. They lent it to you. Now they want back what is theirs.
Ha ha ha ha ha ha ha ha ha!!!! Biggest damn joke of the century! Yup, the joke's on us. It is not money of the United States of America. It is scrip with interest attached to it to use under supervision of the holders of US debt when the US went bankrupt in 1933. The Federal Reserve is merely acting as an agent of the hidden holders of the debt in administering the on going bankruptcy.
How many different civil wars do they want?
Depends on who is making the weapons. Remember, all wars are bankers/financiers wars...
No, they aren't.
El Salvador and Honduras went to war over a soccer game.
Germany kicked off WWII in a search for lebensraum.
North Korea did not invade South Korea in order to fatten its banking sector.
Hungary did not revolt against the USSR because it wasn't allow to cash a check.
Speaking of Czechs, the USSR invaded them not because they weren't making their student loan payments on time but because they wanted to stop taking orders from a repressive empire.
Rome did not crush Carthage because it was a center of offshore banking but because it was a rival to Roman hegemony.
The list of non-banker's wars is endless, as opposed to your premise that they are non-existent.
Bullshit. Those were the "triggers" you stupid fuck.
Go back to sleep.
wars throughout history were fought over resources (and religion, which is a control mechanism over people and their resources) , it was only after that banking took over control of said resorces did all wars become bankers wars.
It seems to me that a not unreasonable thing for a nation to do, once its controlled economy is no longer capable of providing sustenance for its reproducing masses, is to involve itself into contentious foreign policy, get into a conflict which kills "X" numbers of its primarily male citizens without affecting to any significant degree future reproduction (women do the heavy lifting there). Resources per capita increase, employment in rebuilding infrastructure gets everyone busy, and the established national hierarchy survives another generation. What could possibly go wrong?
nirp would be a krugman wet dream. the vending machine retool alone would be great for the eCONoME. /s
Haha, it's already started. All the vending machines at my workplace now take plastic and Apple pay($0.25 fee of course)
Negative rates are just another name for a hair cut.
More Gubmint Cheese please!
The Federal Reserve's "make it up as we go along" is a disaster.
Negative rates is a desperation move to get their end result.
Leads to massive printing and epic failures.
Last ditch effort.
NIRP=Full Retard
To speak this on CNBC? Now THAT'S a crack in the impending market collapse.
yeah - it was interesting how long the discussion lasted once the idea of 'calling in the cash' popped up.
yeah,i noticed that also....a 5 min interview cut down to 4 on a few "'taboo" words....Classic.
Let's just gloss over the fact that real rates are already negative.
Negative for Ze Banksters....
It's not negative enough. Must. Go, Moar. Negativer.
Someday they'll make rates -100%. What do you need money for anyway? The government provideth for every need.
Even ESPN?
this would be the last straw - obama republicans and democrats would fall - people cannot comprehend negative rates and would deem it to be theft by the government.
i hope they do it - this would be a giant enema for the corrupt system
Yeah I say go for it , ban cash and guns. Tired of this bs. Time to spill some lattes
Blood Lattes.
Fascinating. NIRP is on the way. Wow.
Just ... Wow.
There are theoretically 3 options; keep rates at 0, raise rates, or lower rates. How does anyone think that rates will be raised when there is talk of negative rates? That being said, rates going negative will finally wake the sheep up so I don't think it is highly probable.
There's no other option if you're in the Krugman camp. Lower rates = prosperity so negative rates = utopia! Havn't you been paying attention? There's no waking the sheep. They're dead men walking and they couldn't be happier. Zombies!
remember that fed chart with negative rates those rates were in the immediate future, but a few years out then rates would be normal. NIRP may be a tool to jumpstart the rate hike inflation (you have to pay to keep your money in the bank thats inflation)
NIRP part of the destruction of the world that is going according to plan.
NIRP will enable by jacking up transaction fees. It will become a stealth Gross Profit mechanism to loot without being caught red handed.
Lacy Hunt? We would of had a field day tormenting you in grade school.
Lacy, lacy / give me your answer, do
something you would HAVE learned in grade school if you hadn't been too busy tormenting people with silly names, is that it's not 'would OF'
Past tense of will.. Assclown
We grew up in a different era. Pussy boys were picked on, especially if they had a womens name. Sandy is another good example.
Of is a preposition...
You may not be a pussy but you sure sound like a fucking idiot.
Of is a preposition...
You may not be a pussy but you sure sound like a fucking idiot.
lol. Lets,try and force people to spend more money that they already don't have, to buy all the shit we overproduced because we misallocated $4-5 trillion into the hands of .001% of the population.
Does anyone actually think the banks are going to lend out those excess reserves when they are going to have to pay interest on them to borrowers? If anything banks will adjust their lending rates higher to offset the negative rate differential.
Hunt was right also in that it will destroy pension and retirement funds beyond anything ZIRP has done. The whole reason we're in this bubble is because banks have been chasing yield in risky investments. What do you think NIRP would do?
Time to crack out the rat tail file and sharpen your pitchforks Bitchez.
Exactly Yen. NIRP is illegal just as theft is illegal.
NIRP along with severe cash withdrawal limits and restrictions....
You can't make this stuff up. Insanity!!
http://investmentresearchdynamics.com/a-liquidity-crisis-hit-the-banking...
the Fed uses reverse repo to place money on banks balance sheets, (then pays them 25 basis point, so no hard no foul if you're bank watching your balance sheet expand) can thebaks refuse the revrepo, who knows?
FF to Lacy, what happens if the fed instead of paying the banks money to hold their revrepo injections actually charges them the same amount or more, maybe they are having trouble at auction selling paper (though the last auction was pristine, they still have to pay if the bond goes at less than par, which who would pay par for a bond that had negative yields?)
somebody referred to Jim Willie first noting this huge revrepo, which probably coincides with the rally in the market, because its just QE by another name (and not being announced publically)
http://www.marketplace.org/topics/economy/fed-explainer-whats-reverse-repo
the only way i see that the Fed could enforce rate compliance through Rev Repo is if rates were likely to fall further than they would normally, (of there was some danger that banks holding MM on account could not meet the $1 NAV) otherwise the institutions have no incentive to pay to take Fed collateral (which is the definition by which the Fed sets rates lower than zero) seem to me there is NIR, but not NIRP, the fed would never target negative rates they might feel they have to do this to keep the system liquid (due to their own failed policy of QE and in that event more QE)
Reverse repos, under Dudley's evil tenure, are leverage enablers. You can't rehypothecate cash, but you can treasuries. Banks should pay for reverse repos, not the opposite. Collusion.
if NIRP take effect the banks will pay for Reverse Repos, that's the kernel of the piece here, Lacy telling you the Fed could charge the banks 25 basis points rather than paying them. but it wont be a policy as such, so much as a reactionary policy to provide liquidity. pay 25 basis points or risk collapse, not a hard choice
The Fed is the banks. They can "adjust" regulations to suit their stock holders.
i disagree. the definition of Reverse Repo supports my view that the Fed is the government agency, and not the banks. because RR is used to enforce rates on institutions other than charter banks, hedge funds etc. the fed lost its independence. now they must do a massive policy cramdown on lenders, this is nothing short of price controls on interest rates.
No. Reverse repos drain reserves, the opposite.
Reverse Repos transfer Fed collateral to banks balance sheets. the fed becomes the lender of first and last resort, so how they could charge banks to assume the position seems dubious unless there is a crisis of confidence (or a looming devaluation) and note that the most recent 7year auction got hammered, investors really want government paper and with the debt ceiling slowdown they cant print enough. so they open the window and throw money out.
But how would the CIA pay the cartels?
How would politicians take bribes?
How did Obama pay for ISIS rebels operating in Syria? That should attract attention.
"Calling in the currency" means precious metals very rapidly re-monitize in an uncontrollable way -- how else are the banking execs going to pay for their cocaine? This might be the real reason it hasn't happened already.
When the negative rate offsets the premium = free wealth.
Not going to be as bad as it seems. Who the hell has any money left in their bank accounts anyway?
We are all broke!
An amusing afterthought :
Way back in 2009/2010 (it seems another age) JC Trichet then head of ECB and stout opponent of any QE type monetary shenanigans raised interest rates in ECB, in blatant opposition to Helicopter Ben, getting monkey hammered by the markets and finger pointed at having trigerred the Sovereign Bond Crisis in EU; as even ZH blamed him then for doing the opposite of what Ben proclaimed was required; aka fight deflation pressures.
Exit Trichet; when the Sovereign debt crisis balooned precisely because of Mutti's opposition to Eurobonding that Trichet apparently felt was the proper solution; along with fiscal discipline and alignment by member countries of Eurogroup.
And we got Draghi printing shoed in by the likes of Geithner/Obama convincing Mutti to get rid of Trichet --more aligned to Shaeuble's view of ECB function-- and replace him by the Draghi/Squid "whatever it takes" mantra!
(Remember Mutti's tears at the Cannes Nov 2011 G 20 meeting; where Obama imposed Draghi and also in the aisles planned the Syrian spring thrust having "succeeded" in ousting Q-daffy that summer in Benghazi razmattaz. Greece was beheaded and Berlu was forced to resign in Bunga-Italy. Some game changer Cannes turned out to be! )
Now that all parties agree that QE has failed we hear the IMF and all but the diehard neo-keynesians like Larry Summers saying that to save capital markets interest rates HAVE go up or the banks implode; aka the choice is to let the WS bubble of stocks implode rather than the REAL economy !
Painful choice as its catch 22 time !
And Trichet's ghost now walks in the corridors of power in Lima !
What I want to know is.
How much am I going to get paid to borrow money? };{D>
Inflation is already a hidden tax that too many are too ignorant to realize. Start charging people to store their money and they may begin to notice. Of course, I've recently read that most Americans don't have even $1000 in the bank, so the Fed can get away with ZIRP and few bitch about it. Probably the same for NIRP. It might finally wake up people to the highly positive interest rates they're paying on their credit cards, though, wondering why their rates are so high when the banks pay no interest at all and actually charge to store moeny.
NIR would be a declaration of game over for the US economy. We are thus as fucked as the others, the USD is no longer a place of refuge. So why keep it?
And NIR would not do much for spending, all it would do is see people shift cash to long term assets of some sort, and then just sit there. Meanwhile pensioners and those with Superannuation funds, well lol back to work.
shift cash to long term assets of some sort
Like what, stocks? Bzzzt. Real estate? Bzzzt. Ocean tankers? With asset prices already over-inflated across the board due to artificially cheap debt, this strategy would be no escape from theft, just a switch in frying pans.
Gold is really the only escape route at the moment.
90% of the currency is digital already.
Cash will be worth more than the "paper price", and have a premium. Sound familiar?
I can envision a market that trades paper promises for dollars,
where investors can buy and sell dollars without being encumbered
with the burden of actually taking delivery of said dollars.
Its called the futures market.
It would be nuts. People would start prepaying taxes, phone bills, etc. Anything to get the cash on someone else's books and a prepayment asset on their own. Every dime remaining would go to pay down the mortgage. Cash would disintermediate and force the banking system to contract in the absence of capital controls, another bad idea.
Epic disaster but they aren't smart enough to take that option off the books. The more Bernanke and other Fed people talk, the more you realize that they have no idea the long term consequences of what they are doing. They are only focused on the next few months.