Guest Post by Simon Black
And just like that, it seems we’re headed back to quantitative easing…
After cutting interest rates to nearly zero following the 2008 crisis, the Federal Reserve starting raising rates near the end of 2015 (from 0.25% to 2.5% today).
Following the most recent hike in December 2018, Chairman Powell seemed hell bent on further tightening, saying “some further gradual increases” were in the cards.
Then the stock market promptly fell nearly 20%.
Investors were in panic mode and calling for the end of the world.
The pain was too much…
Last month, the Fed left rates unchanged… and Powell removed any language about further hikes.
Already Powell is capitulating.
The new chief economist for the International Monetary Fund praised the move, saying she sees “considerable and rising risks” to the global economy.
And no surprise here, but Paul Krugman also supported the Fed’s policy. He’s also worried about a possible recession… but more worried the Fed won’t be able to cut rates low enough.
Central banks tried raising interest rates, but the market wouldn’t take it.
Now, the market is putting the likelihood of a rate hike this year at ZERO… and it’s expecting a rate cut next year.
Both the European Central Bank and the Bank of Japan were supposed to start tightening policy and raising rates… now, they are both considering cutting interest rates even deeper into negative territory.
And after a 20% drop in US stocks, the Fed has taken its foot off the pedal. But the people still want more…
The President of the Federal Reserve Bank of St. Louis thinks current interest rates are “too restrictive.” He too wants lower rates.
The San Francisco Fed agrees – they were singing the praises of negative interest rates in a recent research paper, saying they would have helped the economy recover even faster after 2008.
And SocGen economist Albert Edwards thinks the US will see negative interest rates and helicopter money (meaning central banks will print money and give it directly to the people) during the next recession.
When you’ve got Fed banks publicly praising negative interest rates, get ready… because it means they’re considering bringing negative rates to the US.
And that’s incredibly bullish for gold.
We’re not the only ones who think so…
The price of the yellow metal is trading at an eight-month high above $1,300 an ounce.
And central banks are buying hand over first. In fact, the folks that control the world’s money supply, are buying gold at the fastest pace since World War II.
Oh, and they’re lightening up on Treasurys at the same time (foreign purchases of Treasurys through October of last year were down by 50%).
The controllers of the printing press are trading their fiat for gold – and its 5,000 year history as the risk-free asset.
I guess people no longer want to lend money to a government that has no chance of ever paying it back.
But that’s just one reason (albeit a big one) that we’re bullish on gold today…
Another is that we’re not finding any new gold.
Gold and gold stocks have been out of favor for years, so mining companies slashed exploration budgets to 11-year lows to tighten their belts.
As a result, they’re finding less and less gold. So when demand really starts to heat up, the gold probably won’t be there…
Lots of the biggest players in the gold space have been warning about this set up.
This lack of new deposits is no doubt partly responsible for the mega gold mergers we’ve recently seen…
Just a month ago, Newmont Mining, one of the biggest players in the industry, acquired Goldcorp for $10 billion.
And in September of last year, Barrick Gold bought Rangold Resouces for $6 billion.
I wouldn’t be surprised to see a lot more deals in the sector (especially if the Fed does cut rates again, making money cheaper).
So we may see negative interest rates in the US, meaning you earn more holding gold (nothing) than you do losing money in cash.
And some of the biggest players in the gold sector are warning we’ve seen peak gold production.
Also, the biggest pools of money on the planet – central banks – are loading up on gold.
Dwindling supply met with tons of demand means higher prices.
Historically, gold has been a fantastic leading indicator of central bank policy…
The metal ran from under $1,200 an ounce to nearly $1,300 an ounce prior to the Fed’s reversal in January.
And if it runs higher from here, which we fully expect, it means all hell is about to break loose.
I’d recommend adding to your position while you still can.
With global tensions spiking, thousands of Americans are moving their IRA or 401(k) into an IRA backed by physical gold. Now, thanks to a little-known IRS Tax Law, you can too. Learn how with a free info kit on gold from Birch Gold Group. It reveals how physical precious metals can protect your savings, and how to open a Gold IRA. Click here to get your free Info Kit on Gold.
-----------------------------------------------------
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis.
So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
-----------------------------------------------------
To donate via Stripe,
click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)
Click to visit the TBP Store for Great TBP Merchandise
As an Amazon Associate I Earn from Qualifying Purchases
I know this whole thing was a disguised goldbug commercial but still, after 10 years under ‘crisis’ conditions for the FED ….. and even though the economy is supposedly booming……we have to go to even lower interest rates (to negative)….for what reason???
Does this mean I will be required to pay them to keep my money in a bank? (BS to that!!)
I am so ready for the Storm to start!
Exactly. Savers have been raped every which way in the last decade.
TPTB has been saving the best for last: yuppers, ya now gots to pay us to safeguard your money; trust us. Smokescreen for what they’d ruther we do: spend, spend, spend, then borrow to spend some more.
Not too hard to break the code on that one.
Fornig, what part of the country thinks it’s ok to say ‘yuppers’? TIA
Part of the “deplorable” dialect.
Okie’dokie?
Right-ee-oh!
In order to implement N.I.R.P. in the U.S. they will have to go to a totally cashless economy. You cannot have negative interest rates on depositors in banks without a run on the banks to withdraw the cash. People are simply not going to stand for paying a bank to hold their money. So to prevent this the central planners have to eliminate physical cash. This way you have no choice but to keep your money, (which now only consist of ones and zeros stored on a computer server) in a mandatory clearing house, i.e. a bank.
Recently former Treasury Secretary Larry Summers is calling for the elimination of the $100 dollar bill and other cashless measures. Japan, Sweden, and other Eurozone countries are now cashless. Get ready for the all powerful tattoo in your hand. (Revelations ???)
Also comes with this is forced bail-ins, whereas to stave off the collapse of your bank they will use your deposit/money to prevent it’s collapse. The F.D.I.C. fund cannot cover it. In addition F.D.I.C. rules state that it does not have to give you cash back on the banks losses, it only has to give you bank stocks in lieu of your cash, which at that point the banks stocks will be worthless as the institution has failed.
Elimination of physical cash has nothing to do with preventing a run on the banks; we would be mucho lucky if that were to be the only thing it is about. It matters not whether we have bills or ones and zeros when they slam the window down on us-we are screwed nonetheless.
The lady yesterday who spoke of going Galt is really on to something. I close my eyes and dream of the day when we get people like her in congress.
Riddle: How will the Clinton Foundation continue to exist without the $100 bill?
Elimination of physical cash has nothing to do with preventing a run on the banks…..
Physical cash is controllable in the hands of the person possessing it. This is in contrast to digital cash, which is in the control of the institution that controls the server. The banking institution that has only ones and zeros cannot control the people that have the cash stuffed under their mattress.
This is the whole point of why the central planners are advocating a cashless society/economy. So they can control our asses. This is also how NIRP sets the stage for economic totalitarianism. This is why the author advises to get some gold. Because it’s outside the banking system and thus the mark of the beast.
Negative interest rates (NIR) exist elsewhere; have those countries eliminated their physical cash? I don’t think so, but do not know for sure. According to this list, there are at least 4 countries presently with negatives, Japan being one and 3 others in Europe.
https://en.wikipedia.org/wiki/List_of_countries_by_central_bank_interest_rates
The intent of having an NIR is twofold:
For the bank it is to get us to spend more and not to save as much. In order to stay in business, the bank needs deposits (because of our fractional reserve system) so it can lend and profit from the interest rate spread. But they can get those much needed deposits in other ways, especially if we spend, spend, spend. The recipients of our spending maintain at least some of those funds as transactional balances in the banking system; the spend, spend, spend in fact increases the velocity of money which almost always has the net effect of increasing bank deposits (due to capital formation) over and above what the banks would have if we had just saved our money and left it with the bank. In that case the velocity of money decreases and even if we pay the bank for holding our money, in the aggregate, the bank gets less overall revenue because they can no longer lend as heavily.
Government wants us to spend, spend, spend too, because the increased velocity of money makes it look like their policies are working. Plus, the increased velocity of money creates more tax revenue all up and down the food chain. So, government wins and the banks win. However, we trade our net worth in highly liquid assets for stuff-SUVs, vacations, clothes, and such when we go on a spending spree.
Or, if we choose we can physically take the money out of the bank (assuming it is not merely a digital entry) and stuff it under the mattress.
Whatever it is that we leave at the bank for them to hold-cash or digital entry-we will likely not make a run on the bank as long as the asset the bank holds maintains a store of value AND we trust that the bank has the ability to honor our request for a withdrawal. Bear in mind: our trust is subjective and the store of value may someday become shaky on short notice. In that case it is a lot like the frog in boiling water: we are the frog and just when do we decide that the store of value is no longer acceptable to us? Would a 50% plunge in the US equity markets impact the value of our dollar-whatever form it is in?
If the Fed implements NIR and the stock market craters there will be stress on the banking system; it is above my pay grade to know how much stress there will be. If done clumsily, there may be panic; we will storm the banks whether they have our cash or merely a digital entry. Our hope will be to get some of the cash; if all we have is the digital entry we will still be there, raise hell, and get exactly nothing of value.
Maybe my statement to which you object is ackward. In normal times a bank run will not occur. If either value or liquidity vanishes then there will be a run. The only way cash can be eliminated is if we have a high level of confidence that its replacement-in whatever form-has equal or more value than cash. The occasional cry for return to the gold standard theoretically has merit, though is sadly only a wet dream.
These are unusual times. Regardless, as long as foreign entities choose to buy our debt and deposit their money here-rather than elsewhere-this will be the last place for negative interest rates to be mandated. Otherwise, the whole house of cards collapses. Look at it like the old bear joke: when the bear chases two hunters all you have to do is run faster than your buddy; for the time being the U.S. is still running faster than the other guys.
Thanks for keeping me honest.
Exactly correct. The motive for NIRP is to keep people spending and discourage saving in order to keep an economy going that would otherwise be recessionary. 2/3rds of GDP is consumer spending, so to keep things going they must implement NIRP as people have began already to cut back. While some countries may still have physical cash and a small amount of NIRP, it may have to decrease interest rates to cause a run on the bank. These things are slowly implemented anyway. To prevent panic you must boil the frog slowly, not all at once. So give it time. Also many of those banks you mention may be better capitalized than U.S. banks.
Yeah right, and that’s why many central banks are stacking the shit out of gold, right?
Merely having a different understanding does not imply honesty nor dishonesty. However, you do make some good points Fornicator. Keep in mind much of what we read is someones opinion. Nobody can predict the future, and nobody knows everything. Here is an interesting article about the FDIC and NIRP. https://www.sovereignman.com/trends/negative-interest-rates-in-the-us-just-ask-the-fdic-18723/
Good points you make. I will be brief:
Fed is out of ammo, they know it and their puppet-masters know it. Going negative-especially for America, the safe haven-is total capitulation. Sort of like when one side pushes the red button and the other side does the same:outcome is not good. It is kind of hard to know for sure what the reaction of the unwashed masses who have a few tokens in the bank may be.
When the political elites claim that deficits no longer matter we are truly hosed; what are they smoking? Sure, they can keep the wheels on for a while, as long as the printing press keeps working, but how did that work for the Weimar Republic a hundred years ago?
Pragmatically, what would it be like if jobs that have a high multiplier effect were again common and the economy could stand on it own two feet without the need for financial trickery by leadership? Better to worry about moderate price inflation than stew about what we might not know about negative interest rates.
Thanks for the link; will check it out as time available.
Not sure what the lesson is from sovereignman, so have little comment but will offer that FDIC is at times the smaller kid on the block relative to the Fed, the Treasury, and even a few of the more cunning and smaller alphabet money agencies.
Sheila Bair, former FDIC chairwoman during the ’08 crash gives fascinating details of its operation during the darkest days; she comes across as one of the few honest people in the room and tells of her dealings with Geitner (he, the guy who “forgot” to file his income tax returns for a couple of years), Paulson, and others when in full crisis mode. They listened, sometimes they smiled, but when the chips were down they lied and reneged on their promises.
Bernanke acted more like a gentleman but chose expediency in favor of the big banks instead of what Bair was advocating (getting fair treatment for smaller banks and their depositors); he too smiled when he lied but was quiet a lot of the time. At times there were lots of people in the discussion but when crunch time came there were just a few decision makers, and Sheila found herself essentially on the outside, looking in through the window while the guys did it their way. Then again, I wasn’t there but still feel she is more of a straight shooter than not.
Her book is “Bull by the Horns……”. If you want to learn about how thin the ice was for the FDIC and the whole banking system give it a read. She shares information about the agency’s mandates, goals, and how big or small their safety net was at different times during the crisis. The big question: have needed improvements been made or are we worse off than when she wrote the book in 2013?
It would not surprise me to find the FDIC has NIR bonds, but would wonder if they were forced to somehow “take one for the team” just like in 2008 when a lot of interagency arm twisting happened. Then again, how investments are managed at the agency level probably are quite a bit different than you and I do with our portfolios. For what it is worth I was told by an economist who worked at the KC Fed and a finance professor who interned at a couple of regional branches that what they saw in Fed operations was like nothing they had ever seen outside. Operationally, things like budgets are often a don’t care-“we have more important things to worry about”. The explanation was along the lines of “hey, we are sitting on a huge pile of money, we are integral to the process of creating money (not to be confused with printing the stuff) and we are in full control of our books”. Besides, the Fed has a long history of remitting their”profits” to the Treasury at the end of the year; though they are a “non-profit” entity. Billions these days to them are small change.
Should the SHTF I wonder if all the dominoes will stay upright.
An interesting piece on the Fed and its balance sheet in these unusual times:
https://www.nysun.com/editorials/is-the-fed-insolvent/90575/
What?
Gold is the mark of the beast?
When they implant a bank microchip in my forehead that’ll be hunky dory.
Got it
Hi,
Krugman is a socialist and has zero credibility. If he is in favor of zero rates, it’s just another way to soak the savers to pay for their socialist agenda. Steal wealth by any means possible.
Switzerland pulled it off so we need to be careful.
Best regards,
Dennis Miller
http://www.milleronthemoney.com
Krugman “is what he is”.
Another Jewish atheist childless elite for whom the universe ends in 20-25 years.
Dennis,
Are you still selling all your subcribers and responders info to insurance agents and brokers so they can sell them annuities?
If this is what they are going to do then why not vote for free shit? Seriously? Tax the rich and give me my Universal Basic Income.
See how seductive it can be to even consider joining the Free Shit Army. AOC didn’t even have to take off her blouse or do a pole dance and D.B. is seriously considering enlisting.
(At 10,000 Swiss Francs a month plus B.A.Q. and even I would consider joining the F.S.A. but only as a Major or Lt. Col.)
Pequiste,
It blows my mind. Everything I ever thought from a young age was to save, stay out of debt, start a business and live beneath my means has been turned upside down.
Now it’s, borrow as much as possible and wait for daddy government to bail you out.
I’m telling you, it’s baked into the cake. Not long from now a person will have 2 choices ONLY. 1) work for daddy government or 2) work for a corporation.
I did a job for a client today (a lawyer for Cisco). She agreed with me that the people getting the richest are those who are putting other people out of work via tech. Even she is worried about lawyers losing out because of all the automation coming down the pike.
There is a story that’s told of the power of gold and it’s lure on the unsuspecting ! It glitters and shines , it badgers the mind with thoughts that it needs protecting . Balance the cost of the soul you lost …. tell me are you free from the power of gold ??
Invest in lead & brass and food !
When the shit hits the fan this time your wheel barrow full of gold won’t get a loaf of bread !
The Central Planners are doing this ( cashless economy) so they can control us and bring in their One world government which will be Satanic to the core. If you read the Occult writings the secret societies have been planning this for centuries. All these secret Societies come out of Freemasonry . Freemasonry is the foundation . The lower members have been decived . They don’t know the end game.I really Fear for our nation .