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Europe's "Monetary Twilight Zone" Neutron Bomb: NIRP

Tyler Durden's picture





 

Just because ZIRP is so 2009 (and will be until the end of central planning as the Fed can not afford to hike rates ever again), the ECB is now contemplating something far more drastic: charging depositors for the privilege of holding money. Enter NIRP, aka Negative Interest Rate Policy.

Bloomberg reports that "European Central Bank President Mario Draghi is contemplating taking interest rates into a twilight zone shunned by the Federal Reserve. while cutting ECB rates may boost confidence, stimulate lending and foster growth, it could also involve reducing the bank’s deposit rate to zero or even lower. Once an obstacle for policy makers because it risks hurting the money markets they’re trying to revive, cutting the deposit rate from 0.25 percent is no longer a taboo, two euro-area central bank officials said on June 15... “The European recession is worsening, the ECB has to do more,” said Julian Callow, chief European economist at Barclays Capital in London, who forecasts rates will be cut at the ECB’s next policy meeting on July 5. “A negative deposit rate is something they need to consider but taking it to zero as a first step is more likely.” Should Draghi elect to cut the deposit rate to zero or lower, he’ll be entering territory few policy makers have dared to venture. Sweden’s Riksbank in July 2009 became the world’s first central bank to charge financial institutions for the money they deposited with it overnight."

There is only one problem when comparing the Riksbank with the ECB: at €747 billion in deposits parked at the ECB as of yesterday, the ECB is currently paying out 0.25% on this balance, a move which may or may not be a reason for the depositor banks, primarily of North European extraction, to keep their money parked in Frankfurt. However, once this money has to pay to stay, it is certain that nearly $1 trillion in deposit cash, currently in electronic format, would flood the market. What happens next is unknown: the ECB hopes that this liquidity flood will be contained. The reality will be vastly different. One thing is certain: inflating the debt is the only way out for the status quo. The only question is what format it will take.

More from Bloomberg:

“It won’t help the prospect of a functioning money market because banks won’t be compensated for the risk they’re taking,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. It would make more sense to lower the benchmark rate, thus reducing the interest banks pay on ECB loans, and keep the deposit rate where it is, Green said.

 

The ECB has lent banks more than 1 trillion euros in three- year loans, with the interest determined by the average of the benchmark rate over that period. Societe Generale SA estimates that cutting the key rate by 50 basis points would save banks 5 billion euros a year.

 

The deposit rate traditionally moves in tandem with the benchmark, which policy makers kept at a record low of 1 percent on June 6. Draghi said “a few” officials called for a cut, fueling speculation the bank could act next month.

Sadly, because all this is merely operating in the confines of a broken system, just as the LTRO provides a brief respite only to commence crushing banks such as Monte Paschi, so any further intervention by the ECB will only lead to a faster unwind of an unstable system.

Other institutions have opted against such a move. The Fed started paying interest on deposits to help keep the federal funds rate near its target in October 2008 and has reimbursed banks with 0.25 percent on required and excess reserve balances since December that year.

 

Some Fed policy makers last August argued that reducing the rate could be helpful in easing financial conditions. While they discussed doing so in September, many expressed concern that such a move “risked costly disruptions to money markets and to the intermediation of credit,” the Fed said in minutes published on Oct. 12.

 

The Bank of Japan (8301) introduced a Complementary Deposit Facility in October 2008 to provide financial institutions with liquidity and stabilize markets, and has kept the interest it pays for the funds at 0.1 percent since then. Governor Masaaki Shirakawa told reporters on May 23 there would be “large demerits” to reducing the deposit rate because it could lead to a decline in money-market trading.

It gets worse: by trying to help banks, the ECB will actually be impairng them:

“If the ECB cut the deposit rate, it would take an important profit opportunity away from banks,” said Tobias Blattner, an economist at Daiwa Capital Markets Europe in London. By doing so, the ECB would also be “encouraging banks to lend to the real economy” even though “there’s hardly any demand for credit,” he said. Blattner predicts the ECB will cut its benchmark and leave the deposit rate at 0.25 percent.

 

ECB Executive Board member Benoit Coeure said on Feb. 19 that market interest rates of zero or lower “can result in a credit contraction.”

 

That’s because banks, trying to preserve their deposit bases by paying customers a reasonable interest rate, may reduce lending to companies and households because the return is too low and invest in higher-yielding assets instead.

Finally kiss money markets - which together with Repos are one of the core components of shadow banking - goodbye:

“A deposit rate at zero will be of particular support to banks in southern Europe because it could help encourage some flow of credit,” said Callow. “A negative deposit rate can be damaging for money markets.”

 

Negative rates would destroy the business model for money- market funds, which would face the prospect of paying to invest, said Societe Generale economist Klaus Baader.

 

“But the ECB doesn’t set policy to keep alive certain parts of the financial sector,” he said. “Policy makers want to show that they haven’t exhausted their options yet.”

Regardless of what the actual outcome is, one person who will be delighted however, is Hugh Hendry. As a reminder, 'He’s made bets that he says will deliver a 40-to-1 return if the ECB cuts rates below 1% next year." Because in the end nothing pays off quite like levered bets on the stupidity and hubris of central planners.

 


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Wed, 06/27/2012 - 09:14 | Link to Comment vmromk
vmromk's picture

Lend my money to a criminal banker at a cool 0.25% interest ?  Just point to the the line so I can sign up.

 

Wed, 06/27/2012 - 09:18 | Link to Comment Harlequin001
Harlequin001's picture

Someone's going to sue their pension fund manager over this...

Why pay someone to owe you money, not hold your money for safekeeping but 'owe' you money when you can just buy gold.

Eventually the penny will drop, and the lawsuits will begin.

I know I would, if I had a pension, but sadly I stupidly tied all my money up in gold and silver.

Thick as fuck me...

Wed, 06/27/2012 - 09:19 | Link to Comment Short Memories
Short Memories's picture

Cool, so govt's can pay me to lend me money and pay me more to keep it longer!

I'll vote for that too!

Wed, 06/27/2012 - 09:35 | Link to Comment BLOTTO
BLOTTO's picture

Can someone please fan the fire faster...

 

This limbo bimbo state is the worst fuckin shit.

Wed, 06/27/2012 - 09:42 | Link to Comment nope-1004
nope-1004's picture

Aaaaaaaaaaaaaaaaaand..................... it's gone!

 http://www.youtube.com/watch?v=NmFo-LKHGY0

 

Wed, 06/27/2012 - 11:02 | Link to Comment fockewulf190
fockewulf190's picture

Thing is, the "Great Reset", when it comes, is going to demand tribute, and it will be a human killer. Stackers may survive the event horizon, probably by breaking upcoming new laws demanding they turn over their stacks, but the vast majority of the unprepared will be destitute, unemployed, and starving. Zero Hedge will be the place to come to too watch this beast emerge. Hope you Durdens got enough stack to keep this place open.

Wed, 06/27/2012 - 12:22 | Link to Comment CPL
CPL's picture

Running a web service in that situation is easy.

 

It's whether or not your customers have power to turn on a PC, the infrastructure has power to run the layer 3 infrastructure to deliver the content.

If it gets that bad, most people will be dead of thirst by that point anyways.  It's how all water comes out of a tap if you are on central city water systems.  Need power to make water pressure.  Need power to run filtration and processing.  I believe Pakistan is now serving as a good example of the ineffectiveness of military, business and government intervention in broke assed economies and water management

 

Wed, 06/27/2012 - 13:36 | Link to Comment Carl Spackler
Carl Spackler's picture

If they're going to charge for the privelege of holding and using my deposits, they I want them to pay me to BORROW money.

GAME ON !

Wed, 06/27/2012 - 10:30 | Link to Comment vast-dom
vast-dom's picture

this is all very unreal. not only are banks no longer in the banking business, they are headed for anti-banking business. and the central planners are completely out of control. maybe they rationilized that bank-runs will never occur since they are after all dealing with THE SHEEPLE.

they should increase interest rates and let this marketplace reset itself asap!

Wed, 06/27/2012 - 10:12 | Link to Comment battle axe
battle axe's picture

I did not think it was possible, but we have blown past "Full Blown Retard"....

Wed, 06/27/2012 - 10:43 | Link to Comment The Gooch
The Gooch's picture

"Full blown NEGATIVE retard"!

Wed, 06/27/2012 - 12:38 | Link to Comment cocoablini
cocoablini's picture

Go cash under mattress or.senior.debt markets. Put a fork in it

Wed, 06/27/2012 - 09:14 | Link to Comment SheepDog-One
SheepDog-One's picture

Thats OK, I definitely dont need to pay someone to 'hold my money' I can do that myself just fine.

Wed, 06/27/2012 - 09:33 | Link to Comment DeadFred
DeadFred's picture

That may work for you but where do you stash a few billion. There's an enormous amount of fiat out there and it has to be somewhere, mattresses don't come that big. Think of it as if the Fed et al. have been trying to save the world by printing cars, supply and demand says safe parking garages would be in high demand. How long will it be before some smart Swiss businesman starts the the first store-it-yourself cash storage unit. After that comes some entertaining episodes of Storage Wars.

Wed, 06/27/2012 - 09:40 | Link to Comment SheepDog-One
SheepDog-One's picture

Well that sounds like a Central Bankster problem, not mine. Hell Central Banksters can pay 50% to hold their piles of money I dont care.

Wed, 06/27/2012 - 10:00 | Link to Comment kridkrid
kridkrid's picture

I may have this all wrong... but... I think you hit on the eventual problem, no?  And it was mentioned in the entry above.  At some point this worthless money will no longer end up parked for zirp or nirp... that will be the "unleash the Kraken" moment.  Prices haven't "inflated" the way the hyper-inflationists have predicted because, quite simply, we continue to teeter on cusp of a deflationary depression.  That fake money sloshing around can't be "loaned" because there is no demand for it... so where does it go? 

Wed, 06/27/2012 - 10:35 | Link to Comment unununium
unununium's picture

> so where does it go?

Certainly not into precious metals.  There isn't enough to go around, remember?

Wed, 06/27/2012 - 10:48 | Link to Comment Ghordius
Ghordius's picture

well, Tyler has posted articles saying that in the US, most of it going into deleveraging the mountain of shadow banking liabilities.

I have not read it yet, but econmatters has here on ZH an article hinting that the deleveraging process "just got started in Europe".

Meanwhile, it's two officials speculating. And this talk is targeted at money market fund managers which are supposed to go into Timmy's USTs.

Wed, 06/27/2012 - 11:01 | Link to Comment kridkrid
kridkrid's picture

IF we get to an "unleash the Kraken" moment, then sure... metals are likely the first to pop, I would think.  And I do expect this to happen, at some point.  But the real value in owning metals is that you might have a chance to trade if for whatever the new currency will be, after all of the existing currencies die (Edit: or, of course, use it as money, which it is).  Of course that is a society changing experience, and most likely not ushered in without out some sort of global military conflict... so it's really hard to say what things might look like after the transition.

Difficult to see.  Always in motion is the future. - Yoda

Wed, 06/27/2012 - 11:39 | Link to Comment Lucius Corneliu...
Lucius Cornelius Sulla's picture

It goes into the black hole known as debt default.  Defaults make money disappear as in poof!  Money printing is only filling in the great void by transfering the liability to the public.

Wed, 06/27/2012 - 13:29 | Link to Comment robertocarlos
robertocarlos's picture

If it wasn't loaned then it doesn't exist except as fake entries on the books. It can't be used to buy anything.

Wed, 06/27/2012 - 10:03 | Link to Comment Poor Grogman
Poor Grogman's picture

This just proves that the zombie economy is actually dead,

More heroin will just make it rot quicker.

It's time to start the funeral arrangements.

Wed, 06/27/2012 - 10:24 | Link to Comment Overfed
Overfed's picture

For most regular and even fairly well to do folks, self storage is a workable idea. A million dollars worth of gold only weighs about 43 pounds.

Wed, 06/27/2012 - 14:57 | Link to Comment bloostar
bloostar's picture

My 100 trillion zim dollar note fits just fine under the mattress.. Wait a while and you'll get your usd under there too.. Won't be worth shit but it'll help with the bedding comfort.

Wed, 06/27/2012 - 11:31 | Link to Comment agent default
agent default's picture

Yes you could, hence the drive for the cashless economy.  Then you cannot get your money out, and they can charge you negative interest rates.  Plus you cannot buy anything of value like gold without them knowing.

Wed, 06/27/2012 - 09:15 | Link to Comment Aziz
Aziz's picture

Dear Benny,

I would like to borrow $20 trillion at this NIRP please! 

I promise I will use this money to stimulate aggregate demand, and thus produce a recovery.

Thanks!

Sincerely,

Aziz. 

Wed, 06/27/2012 - 09:15 | Link to Comment Dr. Engali
Dr. Engali's picture

Time to pull the deposits and put it under the mattress. This certainly won't end in a deflationary spiral.

Wed, 06/27/2012 - 09:21 | Link to Comment valley chick
valley chick's picture

cue bank runs....

Wed, 06/27/2012 - 09:43 | Link to Comment machineh
machineh's picture

'Negative rates would destroy the business model for money-market funds.'

Oops, there goes another big chunk of the Shadow Banking System!

Deleveraging, bItcHEz! It's what's for dinner.

Wed, 06/27/2012 - 09:39 | Link to Comment Cursive
Cursive's picture

@Dr. Engali

Spot on.  This would be the end for bank deposits and the rise of National Mattress Savings & Loan.  Utter fail attempt, Mario.  It's one thing to debase the currency, but it's entirely another to charge people for the honor of being in the system.

Wed, 06/27/2012 - 09:51 | Link to Comment rufusbird
rufusbird's picture

"May you live in interesting times" has arrived...

Wed, 06/27/2012 - 09:50 | Link to Comment tonyw
tonyw's picture

Please let me know where you live and how much is under that mattress?

 

Wed, 06/27/2012 - 09:52 | Link to Comment fonzannoon
fonzannoon's picture

Or pull deposits and buy real shit.

Wed, 06/27/2012 - 10:06 | Link to Comment Harlequin001
Harlequin001's picture

like a wheel barrow...

Wed, 06/27/2012 - 10:23 | Link to Comment Captain Kink
Captain Kink's picture

This is how the (hyper) inflation begins... buy now, before your "money" is taken away from you.  The institutional cash, where does it go?  eurodollars for now ?.... only if London is outside the scope of such actions.  Asian banks? Corporate bonds?  there is money to be made on this flight, but where?  UST? Really?  where thereafter?

Wed, 06/27/2012 - 10:25 | Link to Comment Harbanger
Harbanger's picture

I never understood the point of stashing soon to be useless banknotes in your mattress.  Especially in an inflationary spiral.

Wed, 06/27/2012 - 10:40 | Link to Comment Dr. Engali
Dr. Engali's picture

It's not an inflationary event. This would cause us to tip into a deflationary depression.

Wed, 06/27/2012 - 10:53 | Link to Comment Harbanger
Harbanger's picture

I'm not sure how to deal with a deflationary crash.  I haven't given it much thought.  PM's would probably get smacked down pretty hard at first.  I have lines of credit I could withdraw at low interest before the banks change their mind.  I'm really not sure what I'd do.  What do think is a good way to deal with the possibility?

Wed, 06/27/2012 - 11:11 | Link to Comment donsluck
donsluck's picture

Sorry, had to junk you. This phase is the deflationary phase. PMs down, interest rates hitting negative. Remember, deflation is first!

Wed, 06/27/2012 - 11:35 | Link to Comment Harbanger
Harbanger's picture

Negative interest rates, PM's down.  Sounds like an opportunity to borrow money and back up the truck. What do you think?

Wed, 06/27/2012 - 13:37 | Link to Comment robertocarlos
robertocarlos's picture

It will end in a deflationary death spiral. There are not enough trees to print all the money so what are you going to hide under the mattress after the banks close their doors? You will have to wait 10 years for your deposit insurance cheque. Longer than 10 years if you are under 99 years old. I'll be on the street terading my leather shoes for a sandwich. If i'm lucky.

Wed, 06/27/2012 - 13:43 | Link to Comment Carl Spackler
Carl Spackler's picture

Time to pull the deposits and immediately convert into another physical medium of exchange, which acts like a REAL store of value.

Such is often referred to as GOLD !

Wed, 06/27/2012 - 09:16 | Link to Comment Mister Ponzi
Mister Ponzi's picture

(Sufficiently large) negative deposit rates are a sure way to create hyperinflation. At some level, all the hundreds of billions of excess reserves at the central bank will be withdrawn and will flow into capital markets, finally trickling down into the real economy. Think applying the historical money multiplier on today's monetary base. I doubt, though, that the levels of negative interest rates central bankers think about, are sufficiently large to cause this exit.

Wed, 06/27/2012 - 09:24 | Link to Comment Dr. Engali
Dr. Engali's picture

If that money isn't in the capital markets now at these rates , it's not going in at negative rates. More than likely you will see bank runs.

Wed, 06/27/2012 - 09:49 | Link to Comment Mister Ponzi
Mister Ponzi's picture

At the ECB, you currently get 25bp per annum on your money. In 2YR Swiss, German or Danish government bonds you get less (and partly negative rates). If you are charged, say, 2 percent p.a. on central bank deposits, you won't keep any money there.

Wed, 06/27/2012 - 09:30 | Link to Comment tmosley
tmosley's picture

Don't be too sure.  It is likely a tipping point.  Once some start withdrawing, it will be a bank run.  Bank runs are already happening with ZIRP.  NIRP guarantees them.

Wed, 06/27/2012 - 09:45 | Link to Comment valley chick
valley chick's picture

unless of course they offer spiderman towels....

Wed, 06/27/2012 - 10:41 | Link to Comment unununium
unununium's picture

Any mention of rehypothecated spiderman towels = automatic +1 from me.

Wed, 06/27/2012 - 15:53 | Link to Comment Morrotzo
Morrotzo's picture

Fuckin' towels didn't even have Spiderman on them! Goddamned stingy Kike bankers.

 

 

Wed, 06/27/2012 - 09:57 | Link to Comment centerline
centerline's picture

Which implies they want to see bank deposit bases slammed - or at least cash being forced out.  Begs the question of what the real goal is here.  Seems it is the planned response to effects of NIRP that is goal, not NIRP itself.

Wed, 06/27/2012 - 10:26 | Link to Comment StanleyTheManly
StanleyTheManly's picture

 

EXACTLY! What is the real goal? Or goals?

 

Wed, 06/27/2012 - 13:02 | Link to Comment tmosley
tmosley's picture

Remember, these are people who grew up with the Keynesian propoganda.  The simplest answer is that they believe what they learned in school, and think that they can force growth by forcing people to spend money rather than saving it.

Wed, 06/27/2012 - 09:18 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

I was wondering when they would get around to charging us for the privilege of being an economic slave.

Nice to know I'm loved and appreciated for more than my stunning good looks. :>).

Wed, 06/27/2012 - 09:23 | Link to Comment cossack55
cossack55's picture

If you post a photo, I promise to be stunned.

Wed, 06/27/2012 - 09:30 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

My secret is out. Cog is Clooney. :)

Cog

Forgive the beard. Mrs Cog thinks it's sexy. Whom am I to argue?

Wed, 06/27/2012 - 09:35 | Link to Comment Dr. Engali
Dr. Engali's picture

Damn it CD you went and ruined it. I used to have respect for you , but now that I know your true identity.....

Wed, 06/27/2012 - 09:36 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Or as Mrs Cog likes to say..........you ruinit.

BTW she dislikes Clooney as well. In spite of that she puts up with me. :)

Wed, 06/27/2012 - 09:42 | Link to Comment Cursive
Cursive's picture

@Cog Dis

You make much more sense than Clooney.  IIRC, his father was a newspaper man.

Wed, 06/27/2012 - 09:54 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

You are correct. And I can't believe I just wasted 5 minutes reading his Wiki. :)

 

Clooney was born in Lexington, Kentucky. His mother, Nina Bruce, is a former beauty pageant queen. His father, Nick Clooney, is a former anchorman, as well as a game show and American Movie Classics host.

 

http://en.wikipedia.org/wiki/George_Clooney

The good news is that both George and I will pay for the privilege of being an economic slave. However, he can blame the Republicans (or whatever boogie man he hates this week) and I'll be left blaming all of us for accepting a "reality" not of our own making.

Wed, 06/27/2012 - 09:36 | Link to Comment CommunityStandard
CommunityStandard's picture

Dear George.  Can you NOT throw lavish Obama fundraisers anymore?  Sincerely, ZH.

Wed, 06/27/2012 - 10:07 | Link to Comment falak pema
falak pema's picture

You will not be appreciated by TD; Clooney n Pitt on the same blog, this is not OCean's twelve! This is flight club from reality. Fright club from mortality; we are time bombed on our time line full of doom gloom dynamite! 

Wed, 06/27/2012 - 10:36 | Link to Comment Hermann
Hermann's picture

Cog, you are the dream of every young secretary

Wed, 06/27/2012 - 09:21 | Link to Comment Sudden Debt
Sudden Debt's picture

first hyperinflation where 1 cup of coffee costs 100 euro...

beat down silver to stay at 26$...

loading up ON THE BARGAIN 1 MILLION OUNCES WITH ONE PAYCHECK!

and wait... a few months...

 

Wed, 06/27/2012 - 09:24 | Link to Comment SeverinSlade
SeverinSlade's picture

At this point, how can anyone with cash NOT buy physical PMs?

I mean specifically silver, when adjusted for the ACTUAL inflation rate, should be closer to $100 per ounce.  Throw in the fact that silver is a consumable metal...I mean come on.  I love gold but I love silver too.

We've been below $40 per ounce for a long ass time.  THANK YOU BIS/BLYTHE MASTERS!!!

Wed, 06/27/2012 - 09:25 | Link to Comment Overflow-admin
Overflow-admin's picture

Very funny, but (sad to say) unlikely.

Wed, 06/27/2012 - 09:25 | Link to Comment cossack55
cossack55's picture

Do you work with that "woman who makes $86k per day on the internet without leaving her basement"?

Wed, 06/27/2012 - 09:46 | Link to Comment machineh
machineh's picture

'Work with her,' hell! I'd marry her ass.

Wed, 06/27/2012 - 09:57 | Link to Comment Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

What about the rest of her?

Wed, 06/27/2012 - 10:28 | Link to Comment Overfed
Overfed's picture

$86K per day out of her basement? The rest of her doesn't matter!  :-)

Wed, 06/27/2012 - 10:40 | Link to Comment disabledvet
disabledvet's picture

I told you gold and was right. NOW do your dollar play (which you probably already have.)

Wed, 06/27/2012 - 09:21 | Link to Comment cossack55
cossack55's picture

Cool. Now you can be upside down in your house and your portfolio.

Wed, 06/27/2012 - 09:25 | Link to Comment dwdollar
dwdollar's picture

Is this one of the "tools" Bernanke talks about still having? Or does he use the term "ammunition"? I can't fucking remember.

Wed, 06/27/2012 - 09:22 | Link to Comment SeverinSlade
SeverinSlade's picture

So where would that $1 trillion flow to?  I doubt the European stock markets...Can someone say PMs?

Wed, 06/27/2012 - 09:23 | Link to Comment ZippyBananaPants
ZippyBananaPants's picture

Question?  During the delivery of the durable goods number this morning Santelli on CNBC spoke about an event on Monday which no one is talking about.  Any ideas?

Wed, 06/27/2012 - 09:27 | Link to Comment cossack55
cossack55's picture

Initial end of 2Q data?

Wed, 06/27/2012 - 11:31 | Link to Comment viahj
viahj's picture

post end-of-the-quater-window-dressing in equities?

Wed, 06/27/2012 - 09:23 | Link to Comment Sudden Debt
Sudden Debt's picture

It's not because COMMON SENCE tells you not to do it that you shouldn't be doing it!

 

Wed, 06/27/2012 - 09:25 | Link to Comment Overflow-admin
Overflow-admin's picture

It's not because COMMON SENSE tells you it's impossible to happen that it won't.

Wed, 06/27/2012 - 10:09 | Link to Comment MsCreant
MsCreant's picture

Non native speaker. I could not do as well as he does in a second language. I have made your error before.

Wed, 06/27/2012 - 09:23 | Link to Comment Sweet Chicken
Sweet Chicken's picture

This doesn't make any sense. How the fuck will this NOT cause a flight away?!?

When the hell are they going to let gold correct itself.

Wed, 06/27/2012 - 09:23 | Link to Comment GMadScientist
GMadScientist's picture

"may reduce lending to companies and households because the return is too low and invest in higher-yielding assets instead."

"Spanish bond yields rose on Tuesday after demand at a bill sale fell despite the significantly higher returns on offer to investors"

"Well isn't that conveeeenient" - The Church Lady


Wed, 06/27/2012 - 09:36 | Link to Comment Spastica Rex
Spastica Rex's picture

And Satan is surely involved.

Wed, 06/27/2012 - 09:39 | Link to Comment GMadScientist
GMadScientist's picture

If you "trickle up" is it still golden showers?

Wed, 06/27/2012 - 09:48 | Link to Comment machineh
machineh's picture

Golden fountains, my man.

Wed, 06/27/2012 - 09:24 | Link to Comment Zaydac
Zaydac's picture

Of course negative interest rates simply destroy even more money, as if money were not being destroyed at enormous speed already.

In other news my retail customers in the UK seem to have stopped using plastic. Like turning off a tap, the flow of plastic at the payments desk has dried up and been replaced by cash. 

Wed, 06/27/2012 - 09:27 | Link to Comment Overflow-admin
Overflow-admin's picture

OHSHI- **************

Wed, 06/27/2012 - 09:46 | Link to Comment Cursive
Cursive's picture

@Zaydac

We should welcome the NIRP because it makes obvious the stealth fall in value from other means of debasing the currency.  If the man on the street is upset about NIRP, he should be made to understand that central bankers have shaved 95% of the value of the FRN away since it's introduction.  Now that's criminal.

Wed, 06/27/2012 - 09:57 | Link to Comment rufusbird
rufusbird's picture

Hey! Good Idea! Maybe the credit card companies will start paying interest to their customers for using their credit cards to make purchases!

Wed, 06/27/2012 - 10:37 | Link to Comment post turtle saver
post turtle saver's picture

What, you don't have a cash-back card already?

Wed, 06/27/2012 - 09:50 | Link to Comment magpie
magpie's picture

Sure sign that credit has already seized up, and the 0,25 % interest have no bearing on reality what so ever...

Wed, 06/27/2012 - 09:26 | Link to Comment bob_dabolina
bob_dabolina's picture

If only Europe would embrace multiculturalism and capture the notion of sharing with one another this could all be fixed

Wed, 06/27/2012 - 09:27 | Link to Comment GMadScientist
GMadScientist's picture

It's clearly worked wonders for their financial sector.

Wed, 06/27/2012 - 09:31 | Link to Comment bob_dabolina
bob_dabolina's picture

You're just looking at it like a racist would look at it.

Wed, 06/27/2012 - 09:39 | Link to Comment CommunityStandard
CommunityStandard's picture

False flag.

Wed, 06/27/2012 - 09:57 | Link to Comment GMadScientist
GMadScientist's picture

From under a hood?

Wed, 06/27/2012 - 09:56 | Link to Comment LongSoupLine
LongSoupLine's picture

A "racist"?? Try a "realist".

Bob, what's your idea of "sharing"? Germany paying for everything?...'cause that's the only version of sharing that would work for the EU. (for a very short time mind you).

Wed, 06/27/2012 - 10:12 | Link to Comment MsCreant
MsCreant's picture

Bob b trollin'.

Wed, 06/27/2012 - 09:39 | Link to Comment Beam Me Up Scotty
Beam Me Up Scotty's picture

Yes.  As long as the Germans agree to work until they die, so the Greeks can retire at 55 and drink cocktails on the beach for the rest of their days.

Wed, 06/27/2012 - 09:52 | Link to Comment magpie
magpie's picture

After the failure of carbon climate derivatives, i present to you 'diversity bonds' as the next politically correct scam. Don't buy them, be racis.

Wed, 06/27/2012 - 09:25 | Link to Comment zorba THE GREEK
zorba THE GREEK's picture

Off subject. Something must have just happened.

Gold jumped +$10 in 30 seconds.

Wed, 06/27/2012 - 09:27 | Link to Comment bob_dabolina
bob_dabolina's picture

OMG something happened.

Wed, 06/27/2012 - 09:42 | Link to Comment DOT
DOT's picture

That was me; sorry.  Got funded today. Stupid bank bought my paper. 

Hope this canoe doesn't sink !

Wed, 06/27/2012 - 10:00 | Link to Comment rufusbird
rufusbird's picture

I had a margin call and they liquidated my short position...

Wed, 06/27/2012 - 09:40 | Link to Comment Winston Churchill
Winston Churchill's picture

Just wait until the LME takes settlement in Yuan.

Coming soon.

Wed, 06/27/2012 - 09:25 | Link to Comment midgetrannyporn
midgetrannyporn's picture

suk it bernank. suk it long, suk it hard.

Wed, 06/27/2012 - 09:56 | Link to Comment Gavrikon
Gavrikon's picture

Isn't that, "Shuk it long, shuk it hahd?"

Wed, 06/27/2012 - 13:03 | Link to Comment akak
akak's picture

Or, as Bawney Fwank would say: "Suck it wong, suck it hawd".

(Oh, and gladly in his case, too.)

Wed, 06/27/2012 - 09:27 | Link to Comment partimer1
partimer1's picture

if the prudent savers don't pay for the reckless, who will?  if the good guys don't get fucked, who will? 

Wed, 06/27/2012 - 09:28 | Link to Comment GMadScientist
GMadScientist's picture

Truth? Everyone.

Wed, 06/27/2012 - 09:31 | Link to Comment bob_dabolina
bob_dabolina's picture

9/10 libs will tell you the government should pay for it.

9/10 libs don't realize THEY are the government.

Thu, 06/28/2012 - 01:09 | Link to Comment jomama
jomama's picture

somewhere... out there in the world... there is a tree tirelessly producing oxygen for you... i believe you owe it an apology

Wed, 06/27/2012 - 09:38 | Link to Comment Doug_Canada
Doug_Canada's picture

They = Banks and Corporations. Banks are holding the money we gave them and corporations are holding scared. It is the job of the gov to smack them in the head a bit. All saving and no speding make economy a dull boy ;-)

Wed, 06/27/2012 - 10:24 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Right,and debt and defecits don't matter either.  Dick Cheney is that you?  Perhaps another unfunded war to keep spending going, oh wait...

Wed, 06/27/2012 - 11:25 | Link to Comment Doug_Canada
Doug_Canada's picture

Inflation, by definition, ONLY has a positive effect on Debt.

Wed, 06/27/2012 - 09:29 | Link to Comment pods
pods's picture

I had to ask myself if the rabbit hole went deeper.

pods

Wed, 06/27/2012 - 09:32 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

You ain't seen nuttin' yet. I suggest that you climb all the way in, pull the dirt in behind you and wait it out.

Might as well explore while you're down there. :)

Wed, 06/27/2012 - 09:31 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Debt is now paying for itself, sorry bond holders (especially retired ones).

Wed, 06/27/2012 - 09:52 | Link to Comment machineh
machineh's picture

Let the coupon clippers pay!

(They'll make it up in capital gains as the Bond Bubble goes parabolic.)

NIRP me up, Scotty. I gotta pocket full of 100-year zeroes!

Wed, 06/27/2012 - 10:21 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"(They'll make it up in capital gains as the Bond Bubble goes parabolic.)"

Only if Grandma and Grandpa suddenly became bond traders and actually sell before the bond matures.  I thought the whole point of retirement was not working?

Wed, 06/27/2012 - 09:31 | Link to Comment rsnoble
rsnoble's picture

Let's see: worried about bankruns then decides to charge people to keep $ with them?

If that won't cause mass panic I don't know what will.

Wed, 06/27/2012 - 11:28 | Link to Comment Doug_Canada
Doug_Canada's picture

Normal citizens keeping their money in the bank is not the problem. They don't have savings!

Wed, 06/27/2012 - 09:36 | Link to Comment Doug_Canada
Doug_Canada's picture

It is not new - it is called inflation. IN a way it is a kinda neat idea. How do you start a fire without oxygen? How do you get inflation when there is no demand and your government will not create any.

Wed, 06/27/2012 - 09:34 | Link to Comment francis_sawyer
francis_sawyer's picture

They could just take after the Japanese & build themselves some robots...

~~~

http://now.msn.com/now/0626-giant-japanese-robot.aspx?gt1=50501

Wed, 06/27/2012 - 09:37 | Link to Comment michael_engineer
michael_engineer's picture

What does this imply about the business model?

Anybody care to comment?

Wed, 06/27/2012 - 09:38 | Link to Comment TWSceptic
TWSceptic's picture

Gold has morning wood.

Wed, 06/27/2012 - 09:42 | Link to Comment dwdollar
dwdollar's picture

What comes after NIRP?

NIRP / 2 ?

Is that where we cut the year in half and calculate -4% "APR" on 6 month intervals???

Wed, 06/27/2012 - 09:53 | Link to Comment Gavrikon
Gavrikon's picture

DIRP?

Wed, 06/27/2012 - 10:41 | Link to Comment post turtle saver
post turtle saver's picture

Debt cancellation comes after NIRP.

Wed, 06/27/2012 - 13:12 | Link to Comment akak
akak's picture

 

What comes after NIRP?

IIRP: "Imaginary Interest Rate Policy", wherein the central banks set the rate of interest at i, the square root of -1.  Whereupon a host of angels fly from Ben Bernanke's butt, singing hosannas to his brilliance. 

Not sure what it does for the housing market, though.

Wed, 06/27/2012 - 09:45 | Link to Comment rufusbird
rufusbird's picture

well, "Negative rates would destroy the business model for money- market fund" No shit Sherlock! Duh!

Wed, 06/27/2012 - 09:47 | Link to Comment Dr. Gonzo
Dr. Gonzo's picture

How do I record negative interest on my 1040ez form?

Wed, 06/27/2012 - 09:55 | Link to Comment machineh
machineh's picture

Don't, it will cost you more!

Wed, 06/27/2012 - 09:48 | Link to Comment diana_in_spain
Wed, 06/27/2012 - 09:51 | Link to Comment Jumbotron
Jumbotron's picture

Because in the end nothing pays off quite like levered bets on the stupidity and hubris of central planners.

No it is not stupidity and hubris....

It is outright and abject fear...fear in knowing there is nothing else you can do to stave off the coming disaster such that the history books won't label you a do-nothing.  If these cats were to come out honestly and say NO MORE...things have to collapse....liquidation is the only way to reset the system, they will be tarnished forever in history.

That's what the Central Bankers and most politicians fear for the most....their legacy. 

And they will let the world burn to save their legacy.


Wed, 06/27/2012 - 09:56 | Link to Comment machineh
machineh's picture

Frank Roosevelt was wrong.

We don't need 'freedom from fear.'

We need 'FREEDOM FROM FUBAR.'

Wed, 06/27/2012 - 09:50 | Link to Comment CEOoftheSOFA
CEOoftheSOFA's picture

Geithner is in favor of NIRP. He was quoted as saying that zero is too limiting.

Wed, 06/27/2012 - 09:52 | Link to Comment Jumbotron
Jumbotron's picture

He should know....why limit that asswipe to a rating of 0.....how about a high negative number...say   -35 trillion

Wed, 06/27/2012 - 10:00 | Link to Comment nope-1004
nope-1004's picture

Geithner = dumb dumb.  No other politically correct way to say it.

 

Wed, 06/27/2012 - 10:44 | Link to Comment FeralSerf
FeralSerf's picture

Timmy's job is to separate the Gentiles from their savings and send the cash to the elite members of The Tribe.  So far he's done a damn good job of it.  As a typical thief of his ilk, he has learned to act dumb dumb.  He's done such an exemplary job of acting dumb dumb so far he's stayed out of jail and managed to milk the taxpayers of a rather tidy sum of salary, benefits and future pensions.

There is no politically correct way to say it.

Wed, 06/27/2012 - 09:59 | Link to Comment Duke of Con Dao
Duke of Con Dao's picture

I can imagine Ben Bernanke having this very conversation with Geithner...

https://www.youtube.com/watch?v=5GK_kfR9UBA

it's a classic scene at the end of the Coen's movie Burn after Reading... 

"What'd we learn Palmer?" 

Wed, 06/27/2012 - 10:02 | Link to Comment matterhornclimber
matterhornclimber's picture

To all the people outthere, don't you know, that the Investmentbanksters decide about politics and not the elected¨

or not elected politicians. GS-Chief from Germany just had to lay down its post c'ause of a scam with former

PM of Baden-Württemberg ,Mappus. This is just the famous tip of the iceberg.

Wed, 06/27/2012 - 10:02 | Link to Comment Incubus
Incubus's picture

After ZIRP and NIRP:  DERP

Wed, 06/27/2012 - 10:02 | Link to Comment Lucius Corneliu...
Lucius Cornelius Sulla's picture

I love the smell of deflation in the morning!

Wed, 06/27/2012 - 10:06 | Link to Comment firstdivision
firstdivision's picture

Is Capital One going to offer NIR Credit Cards?

Wed, 06/27/2012 - 10:08 | Link to Comment sudzee
sudzee's picture

NIRP would mean a tax on electronic money. Workers would demand physical cash payment for their labour. The only out for the FED is to ban physical dollar transactions. In Canada businesses have been paying a .025 percent fee on physical cash deposits for the last 3 years. 

Wed, 06/27/2012 - 10:11 | Link to Comment ebworthen
ebworthen's picture

"Your moneys is ours."

Surprise (not).

Wed, 06/27/2012 - 10:12 | Link to Comment max bucket
max bucket's picture

It's like Economic Buckaroo

I'll just load one more tiny bag of debt...........

Sproinggggggg!

Wed, 06/27/2012 - 10:14 | Link to Comment slackrabbit
slackrabbit's picture

" bank’s deposit rate to zero or even lower"

 

Yes if interest rates go negative, customers depost's in the banks will indeed go to Zero or lower.... 

 

Some sentances have double meanings...if they do the former, they will get the latter.

Wed, 06/27/2012 - 10:21 | Link to Comment elwu
elwu's picture

"ECB is now contemplating something far more drastic: charging depositors for the privilege of holding money"

Clever move. The trillion the banks received in the LTROs is stashed away in the ECB, doing no good there whatsoever. If the spread between the interest banks have to pay for the liquidity and what they get for the parking at the ECB gets higher (there is a loss on this already, a fact that seems to missed by bloomberg and Tyler), they will look harder for profitable business and so it will finally find the way into the real economy. Or they give it back asap (which they can after one year).

 

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