Posts Tagged ‘NIRP’

Notes From Underground: Authorities Reveal Their Intentions To Financially Repress the Germans

May 9, 2016

There were two articles today that exist in direct contradiction to each other in substance, but when taken together reveal how ECB President Draghi and IMF Director Lagarde HOPE to punish and repress the German saving class in an effort to salvage the EU via the alleviation of debt owed by the so-called peripheral nations. The first article of significance is an op-ed piece by the FT’s Wolfgang Munchau titled, “Draghi, Schauble and the high cost of Germany’s savings culture.” The article lays it on the line that the Germans bear a great deal of responsibility for the ECB’s negative interest rate policy because of Chancellor Merkel’s push for austerity budgets to correct the massive deficits of the heavily indebted “peripheral” nations of the EU. The Germans were pushing themselves into AUSTERITY simultaneously by pushing forward a law on its own BALANCED BUDGET RULE. The battle cry from Germany was growth through austerity. In July 2012, when the debt plagued EU was on the verge of financial collapse, the profligate peripherals were willing to accept any demands put forward by the Germans in an effort to gain access to the Berlin credit card. As Munchau notes: “If German fiscal policy had been neutral during that period, the ECB’s job would have been easier. It would have been able to achieve its inflation target and would not have had to cut rates by as much.”

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Notes From Underground: Where Are We?

March 28, 2016

First quarter is winding down and after a great deal of volatility it is time to reflect on the markets. The SPOOS are virtually unchanged  while the Nasdaq 100 is down 5%, the Nikkei is down 10% and the German Dax is down 8%. The global equity markets have been riding a wave of liquidity for a long while but with the aggressive QE programs from the ECB and BOJ the first quarter one would expect the German and Japanese stock markets to have been the star performers. Maybe more QE is losing its power to impact the markets? The DOLLAR INDEX is lower by 3.2%, which is also in contravention of conventional wisdom as QE is done to weaken one’s currency in an effort to aid the domestic economy. In examining the individual currencies the euro is +3%, Swiss franc +3%, yen +8%, Canadian dollar +5% and Aussie dollar +3%. Yes, the easing banks have seen their currencies strengthen against the DOLLAR.

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Notes From Underground: The RBNZ Didn’t LET IT BE. Will Mario Draghi Lean on the Taxman?

March 9, 2016

Two central banks announced interest rate decisions today: the Bank of Canada (BOC) and the Reserve Bank of New Zealand (RBNZ). The BOC left rates at 0.50% while the RBNZ SURPRISED markets by lowing its official cash rate by 0.25% to 2.25% as Governor Graeme Wheeler revealed concerns about a slowing Chinese economy and the ever-increasing global financial risks. There was no specific mention about the KIWI but Wheeler voiced concerns about the downward pressure on DAIRY EXPORT PRICES. The KIWI dropped 2 percent against the U.S. and Australian dollars following the surprise move but the explicit notation of slowing Chinese growth should be an alarm for those concerned about the impact of China on global commodity prices.

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Notes From Underground: Come In, She Said, I will Give You Shelter From The Storm (Bob Dylan)

February 16, 2016

It seems that Janet Yellen and Angela Merkel are both under attack for offering to provide shelter. Yellen, for offering to shelter investors, and Chancellor Merkel refugees from war-torn countries. Chair Yellen has sparked a heated discussion about the possibility of negative rates in the U.S. as the Fed tries, yet again, to provide a calm port for debtors being tossed about by the lack of any inflation to relieve the burdens of too much debt. Nothing like a good currency debasement to ease the pressure of debt on a society’s balance sheets. The longer the central banks repress savers without igniting the flames of inflation the more detrimental the ZIRP and possibly NIRP (negative interest rate policy). If savers are receiving nothing on their earnings and inflation is not providing debt relief, the entire financial system seems to stagnate and that is apparently what is happening worldwide. This is the ultimate liquidity trap and the fear of central banks having no answers is at the top of the list of investor concerns. I warned about  this possible outcome for many years and now it seems the possibility is becoming reality.

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