Posted on 04/29/2015 5:13:17 AM PDT by MeneMeneTekelUpharsin
Here’s an astonishing statistic; more than 30pc of all government debt in the eurozone – around €2 trillion of securities in total – is trading on a negative interest rate. With the advent of European Central Bank quantitative easing, what began four months ago when 10-year Swiss yields turned negative for the first time has snowballed into a veritable avalanche of negative rates across European government bond markets. In the hunt for apparently “safe assets”, investors have thrown caution to the wind, and collectively determined to pay governments for the privilege of lending to them.
On a country by country basis, the statistics are even more startling. According to investment bank Jefferies, some 70pc of all German bunds now trade on a negative yield. In France, it's 50pc, and even in Spain, which was widely thought insolvent only a few years ago, it's 17pc. Not only has this never happened before on such a scale, but it marks a scarcely believable turnaround on the situation at the height of the eurozone crisis just a little while back, when some European bond markets traded on yields that reflected the very real possibility of default. Yet far from being a welcome sign of returning economic confidence, this almost surreal state of affairs actually signals the very reverse. How did we get here, and what does it mean for the future? Whichever way you come at it, the answer to this second question is not good, not good at all.
(Excerpt) Read more at telegraph.co.uk ...
Everything is fine. /S
Perhaps the handwriting is on the wall (cough).
Nonetheless, there are folks that believe all is peachy.
It’s been Depression II for me for several years but obviously not everyone. But more than the gov’t admits.
Basically, if you deposit 100 dollars in a European bank, instead of PAYING you annual interest on the deposited cash, they will CHARGE you a specific amount for the privilege of keeping your money in their vaults. At the end of the year, you will have less money in your account than what you started with.
We in Freeper finacial threads have been arguing since 2008, whether we should have taken our medicine then rather than postponing it. It was my opnion then that we should havelet it play out, and rebuild from there.
In my 35 yrs. of investing experience, I have never seen such a quandary of the lack of anything decent to invest to get decent safe returns. This house of cards is going to crumble, the only really question is how bad is it goinng to get. I have prepared my portfolio for a 50-75% correction.
I have no idea. I just know I can’t get one percent on my money and I refuse to get in a stock market that is propped up by the Fed. I would if I were younger, as I could dollar cost average but I’m long past retirement age and need instant liquidity. I think this perverse in the extreme. But no matter, that sorry old lecher Bill Clinton can get $700,000 for a speech full of nothing but feces. What happened to the days of a nice three or four percent return compounded daily with instant liquidity? We’re awash in a sea of debt and they mean to keep it that way.
Kinda like inflation.
mark for later reading
Potemkin Economy.
This is really hard to explain (I’m having a lot of trouble with it myself), but a few things are coming into focus.
Debt looks a lot like money. Schemes to use debt as money, in the past, have usually collapsed rather quickly (like blowing out a credit card), for obvious reasons.
If the mint coins a $20 coin, and you perform a service, getting it in return, you have $20 and no one is indebted thereby. Of course, you have that coin and no one else also has it.
Paper money is not like that. A lot of it exists as ledger entries, or electrons, and a lot of the positive balances represent someone else’s debt to the issuer (which debt, in the beginning of a paper system, is usually paid back with interest).
But men are not angels, as the saying goes, and debt-as-money requires strong regulation to make it work, because when you have $20 as a ledger entry as opposed to a $20 double eagle, a lot of people have the same $20 at the same time.
What’s new under the sun (the underlying concepts are not new) is that the powerful producer countries have entered into various compacts to ALL use paper as money, and to maintain the fiction of someone’s future productivity as “backing”, or assurance that the hundreds of trillions of obligations allowing the printing presses to roll are good.
But they’re not good, they’re just postponed.
The 102 year run of debt (or credit) as money is coming to an end. When, where, and how has not been revealed. But end it will.
Every bond (debt) market on earth is distorted, to the point where deflation has been institutionally created. In a short 4 months we have gone from all German bonds trading at a positive rate to 70% of them trading at negative rates. How long before they are all negative? A few more weeks?
This is a tectonic shift that no one is talking about. This is destruction of capital and wealth on a global scale.
Here is the real bad news, not only is there is no theoretical limit to negative rates, the rates don't have to go that far negative before the whole system is kaput.
Other than that, there is no problem in the foreseeable future.
Ping
John Maynard Keynes once responded to criticism that “in the long run” deficit spending as a monetary policy would lead to calamity by noting the “in the long run” we are all dead.
Doesn’t the very term “negative interest rates” indicate something is very, very wrong?
The worldwide controlling politicians and financial leaders had a choice after the financial meltdown (as well as the run up to it because their derivatives, etc, caused the meltdown):
1) Repair the damage, over time and at great costs to all, by letting the losers (them) take their lumps and bear their huge losses which would have further wrecked the economy but then it could start anew on a sound footing.
2) Continue to rig the game with continued zero interest rates, QE forever, even more derivatives, etc. to further rob Main Street (that’s you and me) and enrich themselves. Not just in the USA but in all developed countries and financial systems.
Which did they choose? Hah, we know the answer to that. But now they don’t seem to know how to stop the madness they have wrought.
John Maynard Keynes once responded to criticism that “in the long run” deficit spending as a monetary policy would lead to calamity by noting the “in the long run” we are all dead.
~~~~~~~~~~~~~~~~~~~~~~~~~~~
And as we say now: Keynes is dead and we are stuck living in the long run.
GREAT movie.
Its nearly common sense - how long can governments expect people to PAY THEM (negative interest rates) for the pleasure of holding their debt.
It would be like the bank paying me to take a mortgage from them.
How sustainable is that?
Also, the US Government now pays about $250 billion per year on interest on old debt alone. And interest rates are at historical lows. If interest rates went to normal levels of 10-15 years ago - that debt cost would rise to $750-800 billion. Where will the US Government find money for that?
You can thank the corrupting effects of Central Banks for this, supporting the spending addiction of politicians.
And Keynes was a confirmed pederast who also trolled the back-alleys of London for gay sex.
Here is the practical:
Take all of your wealth denominated in “paper” and turn it into tangible assets.
Prepare to go through a tumultuous period of multiple months where no financial instruments work at any level.
On the other side of the crisis, turn some of your tangible assets into the new coin of the realm, whatever it may be.
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