Friday, August 12, 2016

Confusion Over Negative Interest Rates; 
What About Safekeeping Fees,
Are Negative Interest Rates Acting Like That?
Mish Shedlock* emphasizes not to confused negative interest rates with "storage fees" (or the idea of paying a safe-keeping fee to store your money in so-called "safe and risk-free government bonds" .. the storage fee is only applicable if the banking system is 100% reserved, which almost no bank is - this has nothing to do with the move of bonds into negative yield territory, that is a function of the fiat money system & what it enables the authorities to do .. Shedlock references a comment: "What we have now is just the latest modern innovation in finance, which not only enabled the inflation of a credit bubble over the past 40 years, but has also created the perceived need for negative interest rates to just keep the whole thing from collapsing. Incredible." .. Shedlock: "In absence of central bank or government manipulation of fiat monetary systems, it is impossible for interest rates or time preferences to be negative. Don’t confuse negative interest rates in a fiat world with safekeeping fees in a 100% reserve system. In Japan, the threat of negative interest rates on savings accounts did not spur spending except on safes to hoard cash. Anyone with an ounce of common sense knows that negative interest rates cannot occur naturally, can only occur with government or central bank intervention, have nothing to do with free markets, and must fail eventually."
LINK HERE to the commentary
LINK HERE to related commentary

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