Negative Interest Rates
by Peter Leeds on February 2nd, 2016
You might have heard a lot more about negative interest rates lately. Put simply, instead of paying customers a bit of interest on their savings, banks take a little bit away over time.
Stash $500 into your bank account, and a year later it may only be worth $490. Depending how deeply the banks go with their negative rates, the more they will take from you. A 5% negative rate means you are having 5% of your savings stolen each year.
The logic of punishing savers is absolutely flawed, but goes something like this:
- if people realize their money is being stolen by the banks, they are more likely to take it out and spend it
- the increase in consumer activity will help the economy
- the faulty and flawed mistakes of bureaucrats (all failures to get the economy growing) can be swept under the rug
For the bankers, thefts from the people is a better solution than fiscal responsibility. The next step in this artificially-forced consumption would literally need to involve government troops with guns pointed at the people.
Europe recently imposed negative interest rates. They do not and will not work, but most bankers and politicians are morons who rose to their station for all the wrong reasons.
The world watched, mainly to see if negative interest rates would incite a run on the banks, whereby people cashed out en masse. There were no bank runs.
So Japan decided to join the negative interest rate camp. Twenty-five years now of stagflation, and they think the answer is more theft than they have already done through money-printing.
The middle class is going more and more broke, while wealth is being artificially pushed over to the bankers and decision-makers. Just remember, politicians will do what is best for them (no matter how they try to appear), and anyone who would be great at being a politician would never put themselves into that bureaucratic mess.
Anyway, this is the part where we get to the unhappy ending. America will see negative interest rates next.
After 3 rounds of quantitative easing, and trillions in brand new money being "printed," plus historically-unprecedented near-zero interest rates for a decade, the Federal Reserve now realizes that they can not have any impact. The economy will do what it will do, regardless of all their noise and incredible acting skills.
The FED keeps getting in the way of free market capitalism. The very force that built this great country is being sabotaged by the economists who have decided that they will call the shots.
They do not have a clue what they are doing. Alan Greenspan admitted as much in his latest book.
Although, I would argue that they know exactly what they are doing. Since the formation of the FED, the American dollar has lost 95% of its purchasing power - there is still the other 5% to wipe out, and the FED is all over it.
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