Central Banks Have Sailed Us Where We Shouldn't Be [NEGATIVE RATES HERE TO STAY!!]

TCW ^ | July 12, 2016 | Tad Rivelle

[expat_panama]

What got my eye was the list of rates for various nation's bonds at negative interest.

[PGR88]

Its all done in support of the status quo and the massive, progressive, leftist nanny-state.

The battle lines, in my view, are clear.

If you are conservative and for limited government - you either support a return to free-market currencies and the elimination of the Federal Reserve, or you prepare your mind to be completely dominated by statists, the left, and their various social-engineering programs.

[palmer]

Good article.

[Mouton]

If the fed reverses course and begins a realistic pricing of interest rates, the federal budget would have such a high interest burden the entire economy would collapse IMO. When the government decided to make the fed responsible for our economic stability some time ago, they signed our death warrant.

[expat_panama]

 

Happy Mid-week and IBD's headline is Market Uptrend Gains Traction; New Milestones For S&P 500, Dow & NASDAQ.  Volume rose, indexes gave us another %, while precious metals consolidated.  Futures right now have stock indexes +0.82% and metals +0.09%.

--and this week's econ stat flood is beginning:

7:00 AM MBA Mortgage Index
8:30 AM Export Prices ex-ag.
8:30 AM Import Prices ex-oil
10:30 AM Crude Inventories
2:00 PM Fed's Beige Book
2:00 PM Treasury Budget

Also:

Working Classes v Smirking Classes - Daniel Hannan, Washington Examiner
Competition in Tatters, Rip of Inequality Widens - Eduardo Porter, NYT
National Debt Is on Track to Reach 141% of GDP - John Merline, Investor's
Can 'Helicopter Ben' Save Japan? - Anthony Mirhaydari, The Fiscal Times
The Look of Racial Injustice In Economy - Jared Bernstein,Washington Post
Can Tech Innovation Stop Nuclear Terrorism? - Clifton Leaf, Fortune
Congress Should Watch 'Regulatory Dark Matter' - Wayne Crews, Forbes

[expat_panama]

tx! My speed reading doesn’t work here, I may have to actually read every word 8P

[expat_panama]

If the fed reverses course and begins a realistic pricing of interest rates...

Why on earth would that be necessary?   What I mean is that the vast majority of interest rates are set by folks like you and me that borrow and lend.  We are the 'free market'.  OK so the Fed does overnight bank rates but their goal is controlling inflation --reason has nothing to do w/ that rate.

These negative rates (which also incidentally have nothing to do w/ the Fed) are what foreign central banks are finding when they borrow --there are people who want to loan their money soooo bad that they're willing to pay those gov'ts to borrow from them.

Weird.

[Paine in the Neck]

Banksters must be protected from their own folly at all costs. You can’t expect them to take losses on their own stupid actions when they have easy access to other people’s money.

[Mouton]

The fed USED to only be charged with supporting the stability of the US system and by extension the dollar. That changed in 77 when the fed was directed to promote maximum sustainable output and employment along with the other charge.

If the rates were set by my and you as you suggest, I would be receiving about 3-4% on time deposits, not .25%.

The monetary and fiscal policy of all nations now is so out of whack, they are all stuck. The banks don’t want any “cash”, they are bribing people to borrow it with virtually free loans. The “cash” is floating around due to the trillions of dollars in deficits run up each year.

[Organic Panic]

Only until a progressive leaves the white house. If Trump is elected the entire system will be allowed to crash. They can’t let it happen on Obama’s watch. Progressivism must NEVER be shown to fail. It will be used to clobber Trump by saying “you see! republicans are bad for the world economy. You need to vote for more Marxists.”

[bert]

you are right

the next president has been set up to fail.

Obama’s revenge for the “bush’s fault” allegations

meanwhile, should I need to, I can borrow at 4%, same as in say 1970 something

[Boomer One]

Until government’s seek to balance their budgets, low or negative rates are here to stay. An increase in rates would quickly bankrupt most nations or lead to heavy taxation and/or confiscation of private assets. All of these nations need to curtail government spending and control but, politicians being politicians, I doubt this will happen. They will indulge themselves at the expense of the masses.

[Rurudyne]

They say that a lot of the kids today don’t even know how to handle basic tools. If so they are truly screwed if they ever have to do for themselves.

And you know what: I’m okay if the snowflakes suffer a bit of swim or sink.

[Mouton]

Yeah, my wife complains about my supply of non battery powered or electric driven tools. I ask her when she complains about it, what happens if the power does not come on and you need cut a tree or drive a screw?

[Senator_Blutarski]

Negative interest rates are by definition absurd. When you see this kind of widespread absurdity in important institutions you know they are obscuring the truth while the truth is in plain sight. Government debt and the stock markets are unsupported and world institutions have created an elaborate illusion to prop them up.

The only thing surprising about this situation is how long they have been able to maintain the ruse.

[Rurudyne]

Never mind that, do you have an old style fire heated iron for her to use to get your collars crisp the day after next Tuesday? /runsaway

[expat_panama]

Negative interest rates are by definition absurd

While that may be what you say, most folks who borrow and lend for a living say neg-rates are not absurd at all.  

What I'm seeing here is that you don't understand neg-rates and your response to what you don't understand is calling it absurd.  Many people do that --it's easy and it inflates the old ego but I try to avoid that easy way out; whenever I see something I don't understand I first accept reality as it is and then I see if I can figure out the 'why' part.

[Jim Pelosi]

The only major country with an armed populace is still in positive territory. Coincidence? I think not.....

[expat_panama]

Until government’s seek to balance their budgets, low or negative rates are here to stay.

Lots of folks say that and imho it's a dumb thing to say.  

Lots and lots of governments are out there borrowing more and more money --they're out renting all the other-people's-money in sight.   What that should mean is that all the low rent money should be all snatched up and we should be left w/ just expensive money.    iow, gov't borrowing should drive rates up.  They're not. What makes more sense to me is that lenders are out loaning money to any gov't in sight making better and better offers for lower cost money --and governments are willing to pick up a good deal when they see it.  The result should be low rates w/ more gov't borrowing --this is what we got.

I say the low rates are causing the borrowing, not the other way around.

[factoryrat]

The end result is predictable: Confiscation of real wealth and physical assets by the government, up to and including the take over and nationalization of industries deemed valuable to the government and their crony interests.

US businesses are so leveraged out right now it isn’t even funny. When the credit-stock-bond bubble pops, it’s gonna make the great depression look like the good old days.