With over $13 trillion in global bond yields trading in negative territory as a result of central banks' negative rates policies, leading bank profits to tumble and forcing savers in both Japan and now Germany to pull their money out banks and put into safe deposit boxes in their homes, there is little doubt that NIRP has been a failure: even such establishment financial outlets as the WSJ admit as much. Which is why when listening to today's Stanley Fischer interview on Bloomberg TV with Tom Keene, one particular section caught our attention, namely the Fed Vice Chairman's attempt to justify negative rates and how, despite all the evidence to the contrary, "negative rates seem to work in today's world."
We found the following exchange fascinating:
KEENE: What did you learn about negative rates in the crucible of the markets? What have you learned in the last number of months?
FISCHER: Well, we’ve learned that the central banks which are implementing them -- there were four or five of them -- basically think they’re quite successful and are staying with their approach, possibly with the exception of Japan. They’re thinking it through and they have said they’ll come back to try and make negative rates work better. So we’re in a world where they seem to work. I think one of the most interesting developments I’ve seen in theory is a paper that says, yes, they work up to a certain point and then they become counterproductive.
KEENE: Precisely. Yes, that’s a critical point. I mean we have within the interviews of Bloomberg Surveillance that Francine Lacqua and I have had Olivier Blanchard calls them an outright scam. Granted, he’s not a public official anymore, I understand that. There is a raging debate about the efficacy of negative interest rates for central banks, for governments, and again for banking itself. What about the efficacy of negative rates for savers and the people of these different nations?
To which, Fischer's answer was frankly shocking:
FISCHER: Well, clearly there are different responses to negative rates. If you’re a saver, they’re very difficult to deal with and to accept, although typically they go along with quite decent equity prices. But we consider all that and we have to make trade-offs in economics all the time and the idea is the lower the interest rate the better it is for investors.
And there you have it: ignore the economy, it's all about "decent equity prices" and whatever is "better for investors." We point this bizarre justification for the central banks' latest failure, just in case there was still any confusion why they keep pushing the same failed policies day after day: it's all about keeping stocks artificially inflated.