Japanese banks may soon pay borrowers to accept loans if they can raise funds at even cheaper rates. Negative interest-rate lending is increasingly becoming a reality since the Bank of Japan started levying charges on idle cash. Lenders can now borrow for three months in the Tokyo interbank market at a record-low 6 basis-point annualized rate, versus 17 basis points since the BOJ move in January. They may eventually be able to be paid to borrow and then profit by paying less to lend, according to Credit Suisse Group AG, JPMorgan Chase & Co. and SMBC Nikko Securities Inc. This is also known as shoving money down people's throats... and then paying them for it.
Negative rates on savings accts., life insurers & banks suffering as central bankers push NIRP/QE, increasing FICC risk. So, what's now more stable than Brazilian real & gold & close to the yen & euro? Hint: Technology will put an end to this nonsense.
... consider mom and pop and other people who read Barron’s. They are saving for retirement and to put their kids through college. They might have depended on a historic 8%-like return from stocks and bonds. Well, sorry. When interest rates get to zero—and that isn’t the endpoint; they could go negative—savers are destroyed. And savers are the bedrock of capitalism. Savers allow investment, and investment produces growth.
Negative interest rates are a tax! Not a traditional tax paid to the government, but an expense paid, on savings. Years of policy designed to encourage spending and discourage savings is likely reaching the end game; the point where those exhibiting prudence must be punished to keep the game going. At some point, and likely soon, central bankers will be forced to realize the efficacy of lowering interest rates is vanishing and is hindering achievement of their goals. When this occurs a paradigm shift in the way monetary policy is conducted will likely occur. Investors that understand this dynamic, and what it portends, will be in a much better position to protect and profit from the asset price adjustments that lie ahead.
“Housing in Vancouver is insane — it was insane when I left and it’s more insane now. If you’re trying to do the startup thing full-time, it would have been really difficult with all the expenses.”
This is Fact, Not Conspiracy.
Fundamentally, Credit is unstable. It is self-reinforcing and prone to excess. Credit Bubbles foment destabilizing price distortions, economic maladjustment, wealth redistribution and financial and economic vulnerability. 'Activist' government intervention and manipulation have pushed protracted Bubbles to the point of precarious systemic fragility.
Unfortunately, we remain stuck in the cleanup phase so long as economists and their ability to direct policy continue to suggest the Great Recession was anything other than systemic revelation along these lines; a permanent rift between what was and what can be. It is and was never about oil; only now that oil projects volatility into the dying days of eurodollar leverage.
NIRP is coming to the US. This is just the start of a much larger strategy of declaring War on Cash.
Now that talking about NIRP in the US is no longer anathema but a matter of survival for market participants for whom frontrunning the Fed's policy failure has emerged as a prerequisite trade, the question is: what are the mechanics of NIRP, what are the implications of negative rates for US markets. Here is the handy answer
In the end we all know that “informal central bank cooperation” doesn’t really amount to anything. That lesson could be applied to the Bundesbank “selling dollars” in 1969, the PBOC “selling UST’s” in 2015 or the worthless, useless Federal Reserve RRP in 2016. They really don’t know what they are doing, they never have and it truly doesn’t matter fixed or floating. Adjust accordingly because we know how this ends; we’ve already seen it.
Make no mistake, the War on Cash is very real. And it’s unfolding before our very eyes.
Bring On 'Operation Switch' - Bill Gross Calls For A Reverse 'Operation Twist' To "Benefit Savers And The Economy"Submitted by Tyler Durden on 11/03/2015 09:49 -0400
"But they won’t, you know. Yellen and Draghi believe in the Taylor model and the Phillips curve. Gresham’s law will be found in the history books, but his corollary has little chance of making it into future economic textbooks. The result will likely be a continued imbalance between savings and investment, a yield curve too flat to support historic business models, and an anemic 1-2% rate of real economic growth in even the most robust developed countries."
AsiaPac Calm Before BoJ Storm, Japanese Household Spending 'Unexpectedly' Drops As China Releveraging ContinuesSubmitted by Tyler Durden on 10/29/2015 21:27 -0400
As all eyes, ears, and noses anxiously await the scantest of dovishness from Kuroda and The BoJ tonight (despite numerous hints that they will not unleash moar for now), the data that was just delivered may have helped the bad-news-is-good-news case. Most notably Japanese household spending dropped 0.4% YoY (with tax hike issues out of the way) missing expectations by a mile as the 'deflationary' mindset remains mired in Japanese heads. AsiaPac stocks are hovering at the week's lows unable to mount any bid as China fixed the Yuan notably stronger and instigated a new central pricing plan for pork prices (which suggests concerns about inflation domestically). Once again Chinese margin debt reaches a new 8-week high as 'stability' has prompted releveraging among the farmers and grandmas.
No, Ben S. Bernanke will be someday remembered as the world’s most destructive battleship admiral. Not only was he fighting the last war, but his whole multi-trillion money printing campaign after September 15, 2008 was aimed at avoiding an historical Fed mistake that had never even happened!