Posted on 02/04/2016 9:57:02 AM PST by Former Proud Canadian
The Fed may "seriously consider" negative rates after moving rates back to zero, reintroducing forward guidance and making "stronger pleas" to Congress for fiscal policy action as there are complications for money markets, according to BofAML strategist Mark Cabana.
This would not be a total surprise as Mises Institute's Joseph Salerno warns recent Fed commentary suggests they want to test-drive negative interest rates...
In 2016, the Fed's annual stress test on banks will include a scenario in which the interest rate on the three-month U.S. Treasury bill becomes negative in the second quarter of 2016 and then declines to -0.5%, remaining at that level until the first quarter of 2019. According to the Fed, "The severely adverse scenario is characterized by a severe global recession, accompanied by a period of heightened corporate financial stress and negative yields for short-term U.S. Treasury securities." In other words, including this scenario in its stress test is not supposed to signal that the Fed is contemplating adopting a deliberate policy of negative interest rates. It is simply testing the resilience of big banks in the face of a severe recession that precipitates a "flight to safety" which spontaneously drives rates on short-term Treasury securities into negative territory. Or so they would have us believe.
Recent remarks by those associated with the Fed, however, seem to suggest otherwise. For example, former Fed official Roberto Perli, now a partner at Cornerstone Macro LLC, commented "It doesn’t signal anything" about future monetary policy, but then added, it is "another sign that the Fed would not be entirely adverse" to reducing its target rate below zero if economic conditions should warrant.
(Excerpt) Read more at zerohedge.com ...
This would be a disaster.
Comments?
It would be a major policy reversal, and hence a major loss of face, for Janet Yellen. So, I don’t expect it to happen, at least not this year.
Didn’t Japan start doing this just last week?
Maybe we need to wait a few fiscal cycles to see how it works for them. But that would be ‘long term thinking’, something many American investors are reluctant to do.
They’ll follow Norways action of banning cash first. Even Germany is looking to limit cash transactions.
Eliminate cash. Force everyone to use banks. Negative interest rates and govt monitoring of every penny.
Just more Big Gov wealth redistribution.
What they don't seem to understand is that negative interest rates mean the death of currency.
Now, what happens when a government HAS TO SELL BONDS to finance a budget deficit and to roll over maturing bonds AND, they can't sell their bonds because no one will accept the negative rates?
And they wonder why people are not saving money – spending it instead.
Well, if a modest rise in interest rates can cause the market to tank, then negative interest rates should make it go up. N’est-ce pas?
obama may be feelig regret that there’s so little left of the economy to destroy, coupled with an overpowering desire to render fresh, new havoc.
Before he’s out of office, you’ll be living in a packing crate and wearing an empty barrel to work.
Savings? Why bother! If you’ve got anything put aside, the inflation of printing up money to finance obama’s Marxism will deflate the value of savings to zero. You might just as well stack it beside the porcelain facility and use it for personal hygiene.
Pension? Hahahahahaha....
Healthcare? Wait in line to see the untrained and unqualified Health Flunkey.
The good news is that you can wait in line to pick up a new pair of shoes free of charge every two years, courtesy of The State. The bad news is that they’re made from cardboard and only last six months, provided you DON’T wear ‘em.
Hope you like Spam - luncheon meat is all there is, comrade, and you’ll wait for hours to get your weekly ration.
Not to worry, though - obama and the family get away from all the mental strain with taxpayer-funded holidays for two or three weeks every six months, and stay at the world’s most luxurious hostelries with the money you thought you’d earned to feed your family.
Taxes, inflation, money printing still not enough to steal the sheep’s money.
Is negative interest rate really the term.
Interest is positive by nature. Never supposed to go below zero.
They are charging you to put money in the bank or wherever.
Doesn’t sound like “negative” interest, sounds like a fee
My first thought was that negative interest rates would drive money from banks into the stock market, equities being the only means of capital appreciation. I don’t see any disaster there.
In the case of Japan, where corporations buy each other’s stocks, a phenomenon known as keiretsu, selling these stocks is sort of insulting to the boards of the companies being sold. As a result there aren’t that many stocks to buy and the markets are extremely volatile. Japan makes for a hard case study.
Perversely, it seems negative rates, per the article, have boosted savings, not driven spending. Worried about making it through retirement, people of a certain age began to spend less, not more. The demographics would be important here as an aging society might be bad grounds for negative interest rates, but a youthful one might be just right.
Yes, yes they are. Because you see, the little people, the citizens, are too stupid to be trusted with their finances. Therefore, the government, along with the wise financial class, will take that money from you, for the common good of course.
The banksters and their cronies in government are just salivating at the prospect of turning the US into their version of chinese communism.
And of course, the FRee traitors will be along shortly to tell us how exporting all of our industry and commerce to a communist nation is so good for their bottom line.
Well, hear this: if you deal with the chinese, you should be slapped with tarriffs until you crumble. If your’re one of the assholes that sold out to communist slave labor, and totally fucked over the domestic market and stacked it in your favor, I have no sympathy for you.
My idea, if you do business with china, pack up your business and move their, and let you be subject to their laws. Yes, I mean literally kicking out and making ex-pats of Americans who choose to deal with the communist chinese. You want your third world slave labor, we’ll make you choke on it.
It is a fee. They don’t want to call it that.
That’s what the monetary authorities are hoping. It won’t work out that way.
Exactly!!!
Their remaining options are limited and not very good. They include: default, (hyper)inflation, devaluation of the currency, or crushing tax increases.
“Their remaining options are limited and not very good. They include: default, (hyper)inflation, devaluation of the currency, or crushing tax increases.’
Or sharply curtailing government.
Yet the 30 year mortgage rate is above 3.5%.....
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