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Negative Interest Rates Have Arrived

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“Negative Interest Rates Have Arrived”
by Brian Maher
“We are often warned that negative interest rates are an approaching menace – not an immediate menace. Yet are negative rates already reality in the United States? Has the unholy day already arrived? Today we don the sleuth’s cap, step into our gumshoes… and unearth evidence that negative interest rates are not the future menace… but the present menace. What is the evidence? Answer anon.
Under negative interest rates… Your bank does not compensate you for stabling your money with it. You instead compensate the bank for stabling your money. A man sinks a dollar into his bank. Under standard rules he hauls out a dollar and change on some distant date – perhaps $1.05. These days he is of course fortunate to bring out $1.01.
Yet under negative interest rates he endures a rooking of sorts. He pulls out not a dollar and change – but change alone. The bill itself has vanished. His dollar may be worth 97 cents for example. Thus his dollar – rotting down in his bank – is a sawdust asset, a wasting asset, a minus asset. Would you willingly hand a bank a dollar today to take back 97 cents next year? You are a strange specimen if you would. Yet that is precisely as the Federal Reserve would have it…
The Federal Reserve wants your money eternally up and doing, searching, hunting, grasping… adventuring…It must be forever acquiring, forever chasing rainbows, forever upon the jump. That is, the Federal Reserve would not allow your money one contemplative moment to sit idle upon its hands… and doze. For a dollar in motion is a dollar in service – in service to the economy.
The dollar in motion runs down goods and services. It invests in worthwhile and productive enterprises. The dollar in motion, in turn, sets other dollars in motion… as a careening cue ball sets a rack of billiard balls in motion. That is, the dollar in motion stimulates – unlike the dormant dollar snoozing in its bank. Thus the dollar in motion is an undiluted economic blessing.
So runs the case for negative interest rates. Is this case sound? It is not… as our cold and calculating eye judges it. In these pages we have argued the case to pieces. We maintain that economic growth rises instead from a bedrock foundation of savings. An economy built atop this bedrock is a rugged economy, a durable economy. No passing blow will knock it over. And savings must precede consumption. Consumption is a consequence of savings.
Yet many economists mistake the rider for the horse… and believe consumption is the way to prosperity everlasting. We believe it is not. But let it go for now. Let us instead revisit our question: Is the noiseless thief of negative interest rates already among us?
A certain Vic Lederman – a financial analyst with Agora affiliate Stansberry Research – claims they are in fact among us: “Folks, negative rates are here… in the U.S… today.” But it is a secret jealously guarded: “The biggest banks and money managers have done everything they can to keep this under wraps. They know that seeing negative rates scares people.”
That fright is justified – if you cherish your dollars. But what is the evidence that negative interest rates presently exist? Lederman: “BlackRock. Fidelity Investments. J.P. Morgan Asset Management. These are some of the biggest names in finance. And they all share one thing in common now. These investment managers are all slashing the fees on their money market accounts. But don’t be fooled. They’re not doing this as a kind gesture. They’re cutting fees because if they don’t… their money market accounts would show negative yields.”
There you have your evidence for the existence of negative rates, the freshly fired pistol billowing smoke: “Reduced bank fees.” More: “Simply put, the most basic form of cash savings in the U.S. has effectively turned negative… only to be saved by a cut in fees. That means U.S. rates have, in a practical sense, entered negative territory. Now, the big money managers sure as heck don’t want you to see this. That’s why they’re cutting fees. The goal is to make it look like your account isn’t losing money. But outside of this fee reduction, it is…”
The craziest part of this is that most mom-and-pop investors have no idea this is happening. And most folks believe that keeping a large chunk of their savings in cash is prudent. Yet can their smoke, can their mirrors, can their whimwham con us much longer? Fees can only be cut so far. So given the current trend in rates, actual losses are likely just around the corner. So here you have your negative interest rates – not in the future – but the present. And so there is less joy in heaven this day.
How can you guard your wealth against the corroding acids of negative interest rates? Jim Rickards has the answer below. Read on.”
“Save Your Money From Negative Interest Rates”
By Jim Rickards
“Most people think we have a cash system. But we really don’t. How much cash do you carry in your purse or wallet? Probably not that much. You use your debit card or your online banking account. You might use your iPhone if you have Apple Pay. It’s all digital. Few of us use much cash.
The global elites are using negative interest rates to do the same thing as inflation – make your money disappear. One way to avoid negative interest rates is to go to physical cash. In order to prevent that option, the elites have launched a war on cash. The war on cash has two main thrusts. The first is to make it difficult to obtain cash in the first place. U.S. banks will report anyone taking more than $10,000 in cash as engaging in a “suspicious activity” using Treasury Form SAR (Suspicious Activity Report). When you go down to the bank and actually try to, you’ll be treated like a criminal.
The second thrust is to eliminate large-denomination banknotes. The U.S. discontinued the use of large-denomination bills in the late 1960s. Until 1969, $500, $1,000, $5,000 and even $10,000 bills were issued, even though they were printed decades earlier.
Today the largest bill is a $100 bill, but it has lost 80% of its purchasing power since 1968, so it’s really just a $20 bill from those days. With a little more inflation, the $100 bill will be reduced to chump change. Europe has ended the 500-euro note and today the largest note in euros is 200 euros.
Existing 500 euro notes will still be legal tender, but new ones will not be produced. This means that over time, the notes will be in short supply and individuals in need of large denominations may actually bid up the price above face value paying, say, 502 euros in smaller bills for a 500 euro note. The 2 euro premium in this example is like a negative interest rate on cash.
Harvard professor Ken Rogoff has a book called “The Curse of Cash”, which calls for the complete elimination of cash. Many Bitcoin groupies say the same thing. Central banks and the IMF are all working on new digital currencies today. The reasons for this are said to include attacks on tax evasion, terrorism and criminal activity. There’s some truth to these claims. Cash is anonymous, so it can’t be tracked. But governments always use money laundering, drug dealing and terrorism as an excuse to keep tabs on honest citizens and deprive them of the ability to use money alternatives such as physical cash and gold.
The real reason is because the elimination of cash would allow elites to impose negative interest rates, account freezes and confiscation. They can’t do that as long as you can go to your bank and withdraw your cash. That’s the key. In other words, it’s much easier for them to control your money if they first herd you into a digital cattle pen. That’s their true objective and all the other reasons are just a smokescreen.
The whole idea of the war on cash is to force savers into digital bank accounts so their money can be taken from them in the form of negative interest rates. Period. The people are being led like sheep to the slaughter. They’re being herded into digital pens, which are the banks.
An easy solution to this is to go to physical cash. Yet if physical cash becomes scarce (or nearly worthless due to inflation), savers may pay a slight premium for large-denomination notes. Your premium disappears because the note pays no interest. The elites have actually figured out a way to have negative interest rates follow you from digital accounts to paper money.
Negative interest rates are a thinly disguised tax on savers. The traditional way of stealing money from savers is with inflation. You may get a positive interest rate of 2% on your money, but if inflation is 3%, then your real return is negative 1%.
If we take the same $100,000 bank deposit and apply a 2% positive interest rate, you would earn $2,000 in interest, leaving an account balance of $102,000 after one year. But after adjusting for 3% inflation, the purchasing power of the $102,000 balance is only $98,940. This leaves the saver worse off than in the negative interest rate example above (assuming no inflation in that case). In the first case, the banks extracted $500 through negative interest rates. In the second case, they extracted $1,060 in lost purchasing power. Any way you look at it, you lose.
That’s the reality. In theory, negative interest rate policy (NIRP) will stimulate the economy. The combination of lending and spending by consumers and entrepreneurs alike will lead to consumption and investment that will stimulate the economy, especially after the famous Keynesian “multipliers” are piled on top.
But this theory is junk science. The reality is the opposite of what the elite academics project. The reason savers are saving in the first place is to achieve some future goal. It could be for retirement, children’s education or medical expenses. When negative rates are imposed, savers don’t save less; they save more in order to make up the difference and still meet their goals.
The other unintended consequence of NIRP is the signal it sends. Savers rightly conclude that if central banks are using NIRP, they must be worried about deflation. In deflation, prices drop. Consumers defer spending in order to get lower prices in the future.
Instead of inducing savers to save less and spend more, NIRP causes savers to save more and spend less. It’s a perfect example of the law of unintended consequences. When abstract academic theories are applied in the real world by central bankers with no real-world experience, you get the opposite result of what’s intended. These unintended consequences already appeared in Japan and Europe. Serious doubt has been cast on the ability of central bankers to extend NIRP beyond current levels. Banning cash would make those plans much easier to implement.
The time to protect yourself is now. The best way is to keep a portion of your wealth outside of the banking system. I strongly recommend that you own physical gold (and silver). I recommend you allocate 10% of your investable assets to gold. If you really wanted to be aggressive, maybe 20%. But no more. Just make sure you don’t store it in a bank, because it would be subject to confiscation. That defeats the whole purpose of having this sort of protection in the first place.
If you don’t have your gold yet, don’t wait any longer. If you have to pay a bit of a premium for physical gold over the officially listed gold price, don’t worry about that. It means nothing in the long run. I see gold going to at least $10,000 and maybe $15,000 an ounce ultimately, so paying a little more right now is not an issue. It’s just an indication of the skyrocketing demand for physical gold since the pandemic broke out. When the next panic hits, and it will hit, there won’t be any gold available at any price.”



Source: http://coyoteprime-runningcauseicantfly.blogspot.com/2020/09/negative-interest-rates-have-arrived.html



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