Case For -2% Rates, Banning Cash? Jim Grant Blasts Lunatic Proposals

Tyler Durden's picture

Submitte dby Michael Shedlock via KMichTalk.com,

Looking for group think, extrapolation of extreme silliness, linear thinking, and belief in absurd models?

Then look no further than Fed presidents, their advisors, and academia loaded charlatan professors.

Today’s spotlight is on Marvin Goodfriend, a former economist and policy advisor at the Federal Reserve’s Bank of Richmond, and Ken Rogoff, a chaired Harvard economics professor, a one-time chief economist at the International Monetary Fund.

Case for Minus 2% Rates

Goodfriend says the Fed Might Need to Cut Rates to Minus 2 Percent.

The U.S. Federal Reserve might need to cut interest rates to as low as negative 2 percent, far lower than levels other global central banks have tested, a former Fed economist said.

 

That’s what would likely be needed to engineer a recovery if the U.S. economy were to fall into a recession in the next couple of years, Marvin Goodfriend, who was an economist and policy advisor at the Federal Reserve’s Bank of Richmond from 1993-2005, told CNBC’s “Squawk Box” on Thursday.

 

Goodfriend, who is currently a professor of economics at Carnegie Mellon University, pointed to data on the eight recessions in the U.S. since 1960.

 

“In eight of those recessions, the Fed had to push the short rate 2.5 percentage points below the long term rate. Today, the 10-year rate in the U.S. is 1.5 percent,” he noted, saying that would indicate that during the next recession, the Fed would need to cut rates as low as minus 1 percent at a minimum.

 

“In five of those recessions, the Fed had to push the federal funds rate 3.5 percentage points below the 10-year bond rate,” he said. “So if that happens this time around, we would have to push the federal funds rate to minus 2 percent.”

Linear Thinking Idiocy

Goodfriend extrapolates what the Fed did in the past with what the Fed might need to do in the future. Not once did this mentally-challenge wizard stop to ask:

  1. Did the Fed really “need” to do what it did before?
  2. Did excessively low rates create any bubbles?
  3. Why do we need a Fed in the first place?
  4. Who does the Fed serve?
  5. Can the economy be managed like a cook following a recipe to bake a cake?
  6. Isn’t the fact that the Fed “needed” to do this eight times indicative of a major problem in and of itself?

James Grant Blasts Ken Rogoff in Wall Street Journal Op-Ed

Please consider Hostage to a Bull Market by James Grant.

If there is a curse between the covers of this thin, self-satisfied volume, it doesn’t have to do with cash, the title to the contrary notwithstanding. Freedom is rather the subject of the author’s malediction. He’s not against it in principle, only in practice.

 

Ken Rogoff is a chaired Harvard economics professor, a one-time chief economist at the International Monetary Fund and (to boot) a chess grandmaster. He laid out his case against cash in a Saturday essay in this newspaper two weeks ago. By abolishing large-denomination bills, he said there, the government could strike a blow against sin and perfect the Federal Reserve’s control of interest rates.

 

In a deep recession, Mr. Rogoff proposes, the Fed ought not to stop cutting rates when it comes to zero. It should plunge right ahead, to minus 1%, minus 2%, minus 3% and so forth. At one negative rate or another, the theory goes, despoiled bank depositors will stop saving and start spending. According to the worldview of the people who constitute what Mr. Rogoff fraternally calls the “policy community” (who elected them?), the spending will buttress “aggregate demand,” thus restore prosperity.

 

This is a big can of worms that the author has pried open. He assumes, first and foremost, that falling prices are a calamity. It is not such a calamity that many Americans don’t spend most of the weekend seeking them out. Still, the policy community wants nothing to do with them.

 

And the policy community, especially in Europe, has had its way. More than $13 trillion of sovereign debt (German, Japanese, Swiss) is quoted at a yield of less than nothing. In Denmark, the banks pay homeowners to take out a mortgage. In Switzerland, depositors pay the bank to accept their francs.

 

Negative rates? You rub your eyes and search your memory. You can recall no precedent. And if you consult the latest edition of “A History of Interest Rates” (2005) by Sidney Homer and Richard Sylla, you will find none. A recent check with Mr. Sylla confirms the impression. Today’s negative bond yields, he says, are the first in at least 5,000 years.

 

As for the campaign for zero cash in the service of negative interest rates, Mr. Rogoff’s brief is best seen not as detached scientific analysis but as a kind of left-wing crotchet. Strip away the technical pretense and what you have is politics. The author wants the government to control your money. It’s as simple as that.

A Simple as This

Grant says it’s as simple as politics. Rogoff wants the government to control your money.

Clearly Rogoff wants government to have control of your money. But it’s not as simple as that. These guys are economic lunatics who actually believe negative interest rates will help the economy.

Negative Interest Rate Theory

 

  negative-theory

 

 

A currency crisis awaits.

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Coldcall's picture

The worst thing is their supposed motivations for banning cash, like Rogoff´s absurd distraction about it being a way to eradicate the black market and tax evasion. Of course they wont come out and admit that the real motivation is based upon enforcing NIRP so one cant even remove one´s own money from a bank in order to escape being fucking robbed. 

little_fish's picture
little_fish (not verified) Coldcall Sep 11, 2016 10:10 AM

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... www.14earnpath.com

VD's picture

if you believe that you have a right to transact in cash and that you have a right to privacy (in that which you transact in said cash), then The Fed, the gov and these ne0-keynesian crazies want you to stopped and stripped of your basic rights.

who is really insane here?

 

the constitution stated expressly that gov would not steal the fruits of anyone's labors, and it was the law of the land until 1913 when income tax law was passed as TEMPORARY MEASURE that of course would become permanent, expansive and expansionary. 1913 was also the year of The Federal Reserve Act and that is no coincidence, for too many reasons; but, lest we ignore that fact that if one's disposable income were dinged by income taxes, then one's propensity to borrow from Fed Reserve owners (the banks, Rothchilds, et al.) would increase at first in direct proportion to said loss of income and then when the habit were to be formed, like any good addict, one's propensity to borrow beyond the income gap would only be a matter of time: look at 2016 consumer debt loads vs 1913: that is the singular true Fed mandate. (of course, inflation "mandate" at 2% compounded is also a powerful tool to rob one of their fruits of labor...)

 

i hope this helps anyone figure out one of many pieces of the monetary/enslavement puzzle.

 

y3maxx's picture

-2% sounds like a cool, calm and efficient "Bail In"

Leveraged Algorithm's picture

It it fact does sound like a bail in and also a good way to eliminate private gun sales.....

Stuck on Zero's picture

When rates go negative everyone worries about retirement. They therefore save more and spend less thereby achieving the opposite of what the government desires.  Is that so hard to understand?

CorporateCongress's picture

Fuck you and your supposed sisters friend. Also fuck your mother for giving you birth and fuck your father for putting it in her in the first place. O yeah and fuck your dog for not killing you in your sleep.

new game's picture

and one big fuck you to each and every academic dr degreed cocksucker sipping the keynsian water.

the bastards...(as dad would say (with disdain in his voice))

jmeyer's picture

The Fed, most of the other central banks, the IMF, the World Bank, and the BIS are all in this together. The goal is to establish total control of of the world's financial system. There's going to be hell to pay for" we the people" but their end justifies the means. I can see dead people.

El Vaquero's picture

Yeah, and a lot of them will be bankers too.  Since you probably don't know the drop height vs weight tables for a good'ole hangin', steel yourself against being squeamish and just make sure the drop is extra long so that it pops their heads off, just like it did with Blackjack Ketchum.  

new game's picture

life without cash will not happen w/o revolt. just sold a trailer for 4digits cash. couldn't happen any other way. checks are bullshit. cashiers can be fraud. trust is all tyme low. thieves everywhere. scammers trying every angle to swindle honest people, or dumb fucks. the world we live in. without cash i venture to say we the people will all be heading underground with our own economy. barter town usa, everywhere. so they can all go fuck them selves...

TradingTroll's picture

Suddenly making a deposit at a bank will be grounds for for a psychiatric evaluation on suspicion of insanity

pitz's picture

Isn't it already?  Why would anyone make an unsecured loan to a bank without receiving a premium rate of interest?  The definition of insanity.

new game's picture

they will be driving cash out of the banks and people will still use it, even if illegal...

Here2Go's picture
Here2Go (not verified) Sep 11, 2016 10:09 AM

Cue the Wagner...

https://www.youtube.com/watch?v=g6gcz4hdLA8

 

FFS ~ How do 'helicopter money' & 'banning cash' go together?

Arnold's picture
Wilhelm Richard Wagner-Flight of the Valkyries

 

https://www.youtube.com/watch?v=3YOYlgvI1uE

NotApplicable's picture

Prepaid Visa, of course. I bet they pay out a bonus if you get the chip inserted under your skin.

We'll make great pets..

Smerf's picture

Everybody should get an EBT card for $500 a month for groceries.

Quinvarius's picture

They can only ban their own cash.  The dynamic they would create by banning cash would be unstoppable.  All through history, cash shortages have been met with non-government cash solutions.  There are examples from Roman times all the way to South America today.

Rich Stoehner's picture

They can ban cash, coins, guns, strait dudes and logic.

Here2Go's picture
Here2Go (not verified) Quinvarius Sep 11, 2016 10:23 AM

Let's try and figure this out from an operational standpoint:

 

1. THE FED (created and managed by jews, not just in the US, but worldwide)

2. Prints money out of thin air

3. Loans it out to people (but mainly 'governments that have the power of taxation') ~ AT INTEREST

4. Artificially pegs a 2% inflation rate and tries to keep it all, more or less, a steady path (except for the dark government initiatives, from time to time), to cull all investment & savings in the process, essentially, bankrupting the populace).

5. More often than not, these 'faux' economists #FAIL miserably, and end up bankrupting themselves, whereby, they hijack the faux political process & install (((more of their own representatives))) into the system, which, essentially leads to the taxed populace to paying even higher taxes and bailing out the banks ~ aka known as 'TAKING ONE FOR THE TEAM' (that they're not part of because they're not one of the chosen 2%)...

6. So then, at some point, it becomes necessary to even cannibalize their own system of counterfeit currency.

7. To do this, they must first make sure as much of that currency is tied up (& gated), in vaults THEY control (digital accounts, etc.)... Then, to be sure that succeeds, they put a ban on transactions which are outside that system...

 

~~~

 

I don't exactly recall that system having been taught to me in the public school system... Maybe I should have gone to Brandeis...

withglee's picture

which, essentially leads to the taxed populace to paying even higher taxes and bailing out the banks

They're now taking 75% of the fruits of your labor in taxes. I guess if interest rates can go below zero, taxes can go above 100% ... right?

Bemused Observer's picture

Cash isn't necessary for trade at all. Cash and 'price' is a convenience for GOVERNMENTS and taxing authorities, so as to make it easier to steal your wealth. Otherwise, they'd have to cart off all your 'stuff', and that would make it logistically impossible for them to take so much.

So they assign 'values' to things, and introduce their cash. Now they can, via a mathematical formula, steal most or all of it.

Unless you aren't USING their cash. You can only tax that which has a clearly determined 'value', and only if you have a means to capture that value through some kind of currency. Without a currency, you and the taxman will be haggling over the value of chickens, zucchini, etc in relation to other real-world goods...anything of paper value would become worthless, having no real world counterpart. And you can't seize GOODS from in front of a keyboard, you have to go and GET them, then store and protect them.

It would take decades to complete a single years tax collections, and by that time most of the goods will have been consumed, or rotted away.

So, cash isn't for your good. It's for THEIR good, it was meant to facilitate tax collection, I guess they forgot that.. Let them ban it, and see how that totally fucks their plans as they lose the only measuring stick to easily calculate what is "owed" to them...

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) Quinvarius Sep 11, 2016 11:07 AM

They can ban lots of things. Or tax them. If the US decided to ban cash inside the USSA that would show that they have lost control. What about all of those benjamins that are used outside of the USSA, as currency, in other parts of the world? The amazing thing is these ivory-tower types actually believe the shit they are peddling. The unforeseen and unintended consequences will be epic! I say let them do it. The entire thing will collapse and be seen for the fraud that it is.

Long barbarous relics!

Omen IV's picture

Rogoff  - famous for Phony Excel Spread Sheets that prove whatever he is paid for - now has new advocacy  which hasnt happened in 5,000 years but he is smart enough to rationalize the precident

everything is a joke - why not have Comey do an investigation and complete the picture

MASTER OF UNIVERSE's picture

Negative Interest Rates are merely the theoretical extension of Timmy Geithner's Too-BIG-to-Fail, Nail, or Jail. Negative Interest Rates do the same thing as Too-BIG-to-Fail, Nail, or Jail in that they buy moar time for the Timmy Geithners of the World to ringfence their toxic waste off onto the plebe American taxpayers so that they can BUG out with your money. If the CB did not entertain Negative Interest Rates the systemic collapse would manifest sooner rather than later. Geithner bought time to escape. Mr. Yellen is buying time to escape too. Clearly, they fail to realize that we will track them down no matter what island they decide to hide on in the Pacific.

Senor Science's picture

So the theory is, that with NIRP people will stop saving and spend. With NIRP, savers contemplating retirement need to save roughly two to three times more if their nest egg is to see them through their retirment at age 70 through their likely demise at age 85. (rough estimates).

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) Senor Science Sep 11, 2016 11:16 AM

Watched the HBO documentary on obesity in the USSA. All of this cheap food means that the next generation will have shorter life spans than their parents. The costs to treat obesity and related illnesses is exponential.

Living longer without being healthy is torture. I advise against it, strongly.

jfb's picture

I have the feeling that they will try it and it will be a feedback loop. Bailouts+NIRP of -2%--->economic slowdown and more loses for the banks, Bailouts+NIRP of -10%--->economic slowdown and more loses for the banks, Bailouts+NIRP of -50%--->economic slowdown and more loses for the banks, until nobody wants their electronic money

Savvy's picture

E money is the next Weimar dollar.

withglee's picture

Grant says it’s as simple as politics. Rogoff wants the government to control your money.

Capitalists control your money ... and capitalists institute governments and control governments. Are we to believe Grant doesn't know this?

Bemused Observer's picture

"At one negative rate or another, the theory goes, despoiled bank depositors will stop saving and start spending."

See? These guys have ZERO understanding of human nature, or of human history. They are so isolated in their little worlds, aren't they?

These folks need to be laughed at when they come out with crap like this. Laughed at HARD, long and loud.

Ridicule, people. We need to start ridiculing them. Demand to know what EVIDENCE they have that their theories have any basis in reality, as opposed to just pulling them out of their asses. Demand to know WHERE and WHEN this has actually happened. Force them to admit they just made it up.

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) Bemused Observer Sep 11, 2016 11:22 AM

I agree. These fuckwads are clueless and out of touch. Look at what happened when the BOJ went negative, as a real-world example. People bought safes (so many safes that their was a shortage!) in order to safely keep their cash at home!

The big wake up will only happen when the government declares that for the good of the nation they are taking control of IRAs and 401Ks which will be converted into the latest, greatest, shiny new "we are here to save you" fund. At least I hope when that happens people realize they are being conned.

Bemused Observer's picture

We're gonna have to stop using their economy, and withdraw, find other means of transacting.

Only then will we be able to 'quarantine' them and their psychotic little economy. After that, they can do whatever they WANT with it, who cares?

Stupid fiat-worshippers forget that the declaration goes both ways...TPTB declare it to have value, and the people declare that they believe it does.

And it is that second one that really matters.

Boing_Snap's picture

funny these banking idiots think people will spend Fiat for junk products, they won't, they will spend most of that money on hard assets, land, gold, etc., burying the currency deeper down the rabbit hole. Stagnation on steriods....college degrees are the most debiltating of efforts ever invented

Burticus's picture

This technique works great in today's surreal environment.

Ask any grumpy old phart if the pathetic 0.5% he gets on his CDs is a "free market" interest rate.

Ask your average run 'o the mill (non-PhD economist) statist to justify NIRP.

SubjectivObject's picture

7:  Does a zero rate represent any kind of singularity for the valuation of capital; beyond which the rules in the positive value regime don't apply anymore?

SubjectivObject's picture

Why do we need a Fed in the first place?
Who does the Fed serve?

In Bright Lights Everywhere

Dark Daze's picture
Dark Daze (not verified) Sep 11, 2016 11:35 AM

So then, what they are proposing is the direct taxation of the citizens of the US, by a private bank, in benefit of the owners of said private bank (the Fed), none of whom are elected and without legislative approval.

That is larceny, theft, racketerring and treason.

saveUSsavers's picture

Mark a lamppost for R on Lunatic Arsewhole Lane

rejected's picture

Racket: A racket is a service that is fraudulently offered to solve a problem, such as for a problem that does not actually exist, that will not be put into effect, or that would not otherwise exist if the racket did not exist. Conducting a racket is racketeering.

What people need to do is read this several times then look at the Federal Reserve. It fits this description to a 'T'. About 90% of government also fits the description. This was why they got rid of the Kennedy's fearing Robert would use the RICO act to dislodge the criminals running government and the central bank.

Now add the word 'Con' and one can understand why most gullible Americans accept and most participate in this criminality. (Wall Street, Corporations, Banks, Financial Institutions etc)  The fact so many are involved gives them cover for their unlawful and immoral actions.  "When so many are doing it, how can it be wrong"?  This particular line of thought is attributable to many illegal, immoral and deviant situations we are being force fed to accept today.

From what I can discern, the word racket can easily be substituted for the word system in just about everything but especially governments, banks and politics.

skitalo's picture

This is where what Nobel Prize winning Economist PREDICTED back in 1999: https://www.youtube.com/watch?v=j2mdYX1nF_Y  ...comes in handy!

Listen to the video and you will realize he is NOT talking about the PUBLIC ledger Bitcoin. 

CASH is not a PUBLIC ledger, it is the OPPOSITE THEREOF.

Monero has already started to capture the DarkNet due to its PRIVACY and UNTRACEABILITY.

Even Bloomberg reported on it: http://www.bloomberg.com/news/articles/2016-08-29/new-digital-currency-spikes-after-giving-criminals-more-secrecy

Monero is about to change the World as we know it yet again... potentially more than the Internet!
It is the natural progression of the evolution of Money and a technological antidote to the Big State oligopoly and the Keynesian / Orwellian Neo-feudalism, which is trying to grip the World.

It is a Revolution based on the ENCRYPTION and transfer of VALUE.

One can transfer VALUE through www.xmr.to  AND MOVE money everywhere on the Planet, where Bitcoin is accepted (did you know you can buy everything from Amazon with Bitcoin through www.purse.io with a 15% discount?!), or cash out at a Bitcoin ATM (https://coinatmradar.com). Or you could keep your earnings in Gold / silver /platinum in a safe vault in your name in Singapore, which accepts BTC as an incoming transfer via xmr.to : www. bullionstar.com, or in www.vaultoro.com

Geographical diversification might well be the name of the game from here on with the idiotic PhDs in Economics in power.

Learn more at the Monero Reddit: https://www.reddit.com/r/Monero

 

 

 

Bam_Man's picture

That would be a minus 2% rate on your Money Market/Savings/CD accounts.

Your Credit Card rate will still be 24.99%

This shit will continue, and only get worse until certain people start swinging from lamp posts.

HenryHall's picture

I would just love to take a loan at -2%pa.

I would use it to buy silver, planning to sell the silver to repay the loan when the time comes.

 

GoldenDonuts's picture

Doesn't this sound like feudalism? 

Joebloinvestor's picture

This is what you get with a FIAT and academics who never had to actually do work for a specimen of trade.

The government continued the facade with the introduction of sandwich coins and zinc pennies.

 

 

the grateful unemployed's picture

its an idiotic comparison, BOJ is doing this right now, and their plan is to step back from the midrange bond market in order to let it rise. watch Japan thats a better comparison its right now, real time. but i dont blame rogoff for stating the obvious that negative yields will make people spend (got gold?) and maybe start a run on the banks, and since the banks which control these things arent necessarily the same banks who actually take deposits, how about the federal reserve opening retail outlets?  so making the rules for someone else, that stinks, but nevermind, a run on the bank we'll outlaw big bills, make those poor bastards stuff their mattresses with one dollar bills. (after they spent a fortune recently to make the safest currency the new hundred dollar bill, lets give it back to the counterfeiters, (which is USG)  maybe its  a good way to stop a bank run, you want 20000, here it is in ones, one two three...

RopeADope's picture

Colonialism is alive and well in the 21st century. However, the political powers tend not to be nation states and are more well insulated from being identified.

The next Paul Revere will have to have the language skills to communicate the warning in such a manner that people will listen and comprehend.

JailBanksters's picture

You paying 2% on your savings is nothing more than paying a royalty fee to the Bank for privelifge of having the Banks devalue the rest of your savings. It does nothing for economy.

It's like filling up a swimming pool with a fire hose (QE) then leaving the drain unplugged at the bottom (Negative Rates).

Fresh Water is continiuosly flowing into the pool,  always full to the brim

 

 

lasvegaspersona's picture

Tell me Oh Great Fed...what will be the price of gold when we have -2%?...-3%...-10%

Yes you can crash the price but there is a limit. In 2013-4 it was crashed and the Chinese bought physical...and at some point physical become important.

If a guy was going to lose $1000 on a $10,000 bond, might he not consider gold instead? Say he buys $10,000 worth, say he sees he can lose 10% and still be even compared to the bond. Can you crash the POG 10%...then can you do it again?...and again?

Don't you have to make gold illegal again?

Last time it was because it was actually money...next time the reason will be wha...that it is better than money?

I'd think this through....

...but you won't. You really do not have a choice here do you. You must keep doing stuff until it breaks. then you can say "hey, we tried...but it broke...pity.