Negative Interest Rates Coming?

Discussion in 'Retirement Planning Forum' started by Justin Bilyj, Aug 28, 2015.

  1. Justin Bilyj
    Offline

    Justin Bilyj Well-Known Member

    Posts:
    4,855
    Likes Received:
    4
    State:
    Ohio
    [​IMG]

    Minneapolis Fed President Narayana Kocherlakota says "there are ways to lower interest rates further", gold surges on comments.
     
  2. xrac
    Offline

    xrac Well-Known Member

    Posts:
    11,461
    Likes Received:
    21
    State:
    Indiana
    Is that the same thing as inflation?
     
  3. HealthGuy
    Offline

    HealthGuy Well-Known Member

    Posts:
    3,180
    Likes Received:
    3
    State:
    Texas
    Justin what are these pictoral charts you are posting? Please provide some explanation...
     
  4. Justin Bilyj
    Offline

    Justin Bilyj Well-Known Member

    Posts:
    4,855
    Likes Received:
    4
    State:
    Ohio
    That's Comex Gold (futures), a 1 minute chart, showing a spike. The chart is reactionary to what the FED said. How can you cut past nothing? You go negative.

    The reason they have announced NIRP the way they have is they want to drive the currency lower. I think they feel that if they can have a lower currency, then that will stop prices falling and indeed hopefully perk them up a little bit. But this whole idea is killing savings. I mean, central banks have been trying to do this ever since they have bought into the Keynesian theories. It has got us into a cycle of just worse and worse credit defaults. They are giving the medicine which historically has been proven to kill us. They are just doubling the doses.


    With Fed mouthpiece Jon Hilsenrath warning - in no lesser status-quo narrative-deliverer than The Wall Street Journal - that The ECB's actions (and pre-emptive collapse in the EUR) means the U.S. economy must deal with a rapidly strengthening dollar that will make American goods more expensive abroad, potentially slowing both U.S. growth and inflation; and Treasury Secretary Lew coming out his crypt to mention "unfair FX moves," it appears The Fed (and powers that be) are worrying about King Dollar. This suggests, as Mises Canada's Patrick Barron predicts, the Fed will start charging negative interest rates on bank reserve accounts as the final tool in the war on savings and wealth in order to spur the Keynesian goal of increasing “aggregate demand”. If savers won’t spend their money, the government will take it from them.
    http://www.zerohedge.com/news/2015-01-24/get-ready-negative-interest-rates-us


    Harvard economist Kenneth Rogoff even argues in the daily paper FAZ that cash currency should be banned altogether. Central banks could impose negative interest rates more easily that way, he explained. Tax evaders and criminals would also find life more difficult. From this perspective, banknotes and coins appear superfluous, he said at a presentation at the IFO institute in Munich. Measures to spur the economy could be implemented more easily that way.”


    They want a top to bottom control over the markets, spending etc.

    ----------

    » Financial Times Calls For Abolishing Cash Alex Jones' Infowars: There's a war on for your mind!

    Entitled The case for retiring another ‘barbarous relic’, the article laments the fact that people are stockpiling cash in anticipation of another economic collapse, a factor which is causing, “a lot of distortion to the economic system.”

    “The existence of cash — a bearer instrument with a zero interest rate — limits central banks’ ability to stimulate a depressed economy. The worry is that people will change their deposits for cash if a central bank moves rates into negative territory,” states the article.

    Complaining that cash cannot be tracked and traced, the writer argues that its abolition would, “make life easier for a government set on squeezing the informal economy out of existence.”

    Abolishing cash would also give governments more power to lift taxes directly from people’s bank accounts, the author argues, noting how “Value added tax, for example, could be automatically levied — and reimbursed — in real time on transactions between liable bank accounts.”

    The writer also calls for punishing people who use cash by making users “pay for the privilege of anonymity” so they will, “remain affected by monetary policy.” Dated bank notes would lose their value over time, while people would also be charged by banks for swapping electronic reserves for physical cash and vice versa.


    “Of course, if cash were involuntarily “ended,” there would be a surge in demand for physical gold and silver, which would then necessitate a ban on those items. Then the cycle of economic and financial tyranny would be complete, and crawling our way out of it, nearly impossible.”

    Where will retirement savings be safe at?
     
  5. thomasm
    Offline

    thomasm Well-Known Member

    Posts:
    1,119
    Likes Received:
    1
    State:
    Nebraska
    I saw a car dealership advertising negative interest financing. What's up with that?
     
  6. Justin Bilyj
    Offline

    Justin Bilyj Well-Known Member

    Posts:
    4,855
    Likes Received:
    4
    State:
    Ohio
    Sweden is no longer offering savings accounts, cash has become so costly, interest rates are negative over there now.

    But deny they apparently will, because "simple" (i.e. probably small) savings accounts are nothing but a cost center, money-losing hassle and because anyone looking to open such an account isn't likely to be an individual with vast economic resources (i.e. is likely to be middle income at best), and because those types of people have a far higher propensity to spend what's in their pocket (see chart below) shutting them out kills two birds with one humiliating denial stone by alleviating the bank of the aggravation of servicing their accounts and by refusing to allow people to save, thereby effectively forcing the issue in terms of M2 velocity.

    So in other words Mr. Landén from Helsingborg, either give the bank enough of your business to matter or else go do your patriotic duty and spend whatever you had planned to save. The Riksbank will thank you for it.
    Article

    China is liquidating UST at an alarming rate which is giving the USA an anti-QE. This is putting even more pressure on the dollar, and in turn will lead the FED to QE4...negative interest rates are coming our way!
     
  7. djs
    Offline

    djs Super Moderator Moderator

    Posts:
    6,610
    Likes Received:
    12
    State:
    California
    Negative interest rates are deflationary in nature and very, very, very bad for the economy.

    Okay, 0% interest long term is bad for the economy so we are already there somewhat, but if you actually say 'negative', you have lost the game.
     
  8. Justin Bilyj
    Offline

    Justin Bilyj Well-Known Member

    Posts:
    4,855
    Likes Received:
    4
    State:
    Ohio
    Chase bank and other larger banks have already told larger clients they can't keep their cash there any longer. It costs too much money to be a bank it turns out...
     
  9. Justin Bilyj
    Offline

    Justin Bilyj Well-Known Member

    Posts:
    4,855
    Likes Received:
    4
    State:
    Ohio
    http://www.zerohedge.com/news/2015-09-17/what-yellen-said-about-negative-rates-coming-us

    As reported earlier, the biggest stunner bar none in today's FOMC announcement, was the emergence of a negative interest rate dot in the Fed's projections.

    ... but the author is ultimately irrelevant: what is very relevant is the "inception" of NIRP in the heads of the FOMC members, which came at a time just when everyone was supposedly gearing up to boost rates by a meager 25 bps, further raising questions if the US economy is already in recession (spoiler alert: yes).

    Of course, this should come as no surprise to our readers: just in January we wrote "Get Ready For Negative Interest Rates In The US", but for the Fed to admit this possibility just when it was widely expected to at least signal a rebound in the economy with the tiniest of rate hikes, or at worst a hawkish statement, was truly a shock.

    So besides a red dot on the dot plot, what else do we have to go on? Not much, though luckily one reporter did ask Yellen what the NIRP dot signaled. This is what she said:

    Let me be clear that negative interest rates was not something that we considered very seriously at all today. It was not one of our main policy options
    The proverbial "we did not seriously consider it today" fluff. Remember when the SNB promised the Euro-Franc peg was safe and sound "today", and the very next day it crushed countless FX traders who were long the EURCHF? Kinda like that.

    And yet...

    I don’t expect that we’re going to be in a path of providing additional accommodation. But if the outlook were to change in a way that most of my colleagues and I do not expect, and we found ourselves with a weak economy that needed additional stimulus, we would look at all of our available tools. And that would be something that we would evaluate in that kind of context.
    And there you have it: not if but when the inevitable inventory accumulation spills over and results in the next recession, we now know the simple choice that is facing the Fed: QE 4 (or 10 if the Fed goes "Windows") or NIRP.

    As for hiking rates, well we leave it to Ben Bernanke who said it best earlier this year: "No Rate Normalization During My Lifetime"
     
  10. Sammm222
    Offline

    Sammm222 Member

    Posts:
    15
    Likes Received:
    0
    japan just went NIRP. Possibly yes in the USA next.
     

Share This Page