Make Banks pay Negative Fees for cash they sit on and do not LEND!
QUESTION: Marty, thank you so much for your article on Larry Summers. I am starting to understand why you do what you do. You actually care. This is obviously not about money for you. I never thought rates could go negative. You have opened my eyes to the way these people actually think. They are greedy people who only think about money and will sell their soul to save a dime. Thank you so much for your honesty and work. There are a lot of us out here who you have helped so much. So does Summer’s Solution have any traction?
ANSWER: Unfortunately, yes. My phone has been ringing ever since I landed back in the States. The Fed cannot control anything despite what the conspiracy theorists argue. The Fed has only indirect tools being raising or lowering rates. If they really wanted to force banks to lend, they should impose a NEGATIVE rate of return on their reserves. Makes rates negative for people is pointless unless you want the banks to make more money. Charge banks for funds they do not lend rather than penalize people for saving.
I do what I do because I am trying to give back. What I have learned came from my clients – not books. So many people try to steal whatever they can from me be it money or technology. They will sell their soul for a dime. They can roll around in their money, but what will they do when the money becomes worthless? I feel sad who people who are so cheap they are afraid to live because it might cost them something. This is the sad part of humanity. No ethics.
Can Rates Rise in Deflation?
QUESTION: Hi Marty
Can interest rates go higher during a deflationary period. You mentioned in your posts, deflation is gripping Europe and im assuming the same for Asia. Once velocity falls and growth rates contract, is there a possibility of rates going higher, because of taxation and investor demand for higher yields?
Thanks
ANSWER: Yes. It is strangely a bell curve. Hyperinflation takes place in new governments because they have nothing and can only print. In a mature government, interest rates can rise (1) booming economy with rising demand, or (2) a collapsing economy where nobody is willing to but their paper so they are forced to pay higher rates due to the collapse in confidence. The former is normally aligned with a rising currency whereas the latter is associated with a collapsing currency. Every fundamental has two sides depending upon the capital flows.
This illustration shows it is really a bell curve. At some point rates take off as the economy turns down because confidence collapses.
Global Market Watch for November 18, 2013
The Global Market Watch has been posted for the close of November 18, 2013.
Civil Unrest in Saudi Arabia
Perhaps because they were unable to orchestrate the invasion of Syria, the Saudis are turning now against the very people they have been using. They are now seeking to throw out of their country any undocumented person fearing that they will rise up against the government and monarchy for religiously they support no separation of state and religion.
Many of the people being thrown out are simply workers. But the sudden turn against all undocumented people is a cover for trying purge the very terrorist sympathizers they have exploited in Syria to get the pipeline. This could lead to an all out war between the Sunni and Shiite sects.
Maternity Leave for Men
COMMENT: Martin,
Your latest blog had me pissing my pants in laughter as my business partner in Texas had his Blue Cross insurance cancelled because he didn’t have ” maternity leave”…..
He’s a 59 year old man…
JG
REPLY: This whole thing is a total disaster. This is what happens when the government gets involved.
Teddy Roosevelt – Words of Wisdom
Snowden would have been a Hero in the 19th Century
Negative Interest Rates & Eliminating Cash – The Summers’ Solution
A speech delivered by Larry Summers at the IMF Research Conference on Nov. 8, has caused a real stir and is being hailed as brilliant, succinct, and a ground-breaking presentation that explained what many say is the most pressing economic matter of our time. The speech is being widely praised of course by Paul Krugman who never saw other people’s money as their property but really just a toy of the state for their manipulating pleasure.
As it is being now argued, over the past 50 years, the Federal Reserve has cut short-term interest rates during recessions to spur economic growth. However, the new problem has arisen where the government (Fed) has lost its power to control society. Summers has now argued that if another recession were to hit in the next couple of years, the Fed will have even less power to combat such a decline since rates are already at zero. This is what Summers warned of in his speech at the IMF that the “real” interest rate should be NEGATIVE.
Summers is trapped in this idea that the Fed/Government can even play a roll in this Marxist/Keynesian world manipulating society like mice in a maze. He claims the problem is that the natural interest rate — where investment and savings bring about full employment — is now NEGATIVE! He grasps the problem that the Fed cannot cut the nominal rate BELOW zero because people will choose to hoard money instead of putting it in the bank. This he calls the zero lower boundary and has reduced the power of Fed policy.
To offset this zero lower boundary, the Fed has employed unconventional programs such as quantitative easing (QE) to push long-term rates down to try to bring about greater investment. However, QE at the Fed buying billions of dollars of Treasuries failed to stimulate because of the international money supply that did not take into account that buying in 30 year bonds did not offset the deflation when the seller was foreign. Insofar as the buying the mortgage-backed securities, the Fed again is only praying the banks will lower rates and lend and has no direct control over any stimulating policy.
According to Summer, the natural interest rate remains BELOW zero even with the QE measures sterilizing any action of the Fed. Reducing short-term interest rates is the Fed’s greatest power according to Summers under Monetarism to bring about full employment during recessions. However, the Fed has been hamstrung by this zero-lower boundary resulting in a weaker recovery thus far. Consequently, Summer sees the larger problem is that this is not a short-term issue but systemic. He argues that should another recession hit right now, the Fed will be impudent. This is what Summers warned of in his speech at the IMF.
“Imagine a situation where natural and equilibrium interest rates have fallen significantly below zero,” Summers said. “Then conventional macroeconomic thinking leaves us in a very serious problem because we all seem to agree that whereas you can keep the federal funds rate at a low level forever, it’s much harder to do extraordinary measures beyond that forever, but the underlying problem may be there forever.”
Now, here is where Summers is dead wrong because quite frankly people like him are career government people and lack the experience of really seeing how the world functions from both sides. Summers, like everyone else in government, has completely ignored what Keynes also said was a vital tool to manipulate society – taxes. Interest rates are only the Monetarist side of the coin where as Keynes was concerned about the fiscal side – government spending. Keynes argued that it was DEMAND that declined during a depression and that could be overcome by government moving into a deficit. But deficits are now systemic and politicians have turned to the Fed to sterilize their fiscal mismanagement using Monetarism since the Fed is incapable of controlling fiscal spending – Keynesianism.
Summers now assumes that the problem is systemic, but not that the deficits are chronic, just that the Fed now needs to go NEGATIVE to stop people from “hoarding” and that will force them to spend. But this is ignoring the rising tax burden that REDUCES disposable income assuming people are just hoarding cash. His solution is to now eliminate cash forcing everyone to use electronic money and that will stop hoarding by penalizing people for saving.
All of this is perfectly logical for the elites who see themselves as manipulating society like a mouse in a maze searching for the cheese. They ignore TAXESentirely, and do not see that their own chronic systemic deficits have eliminated Keynesianism for they never pay anything back and borrow year-after-year competing with the private sector for cash that would otherwise create employment. Now they see the solution as eliminating all cash and then penalizing savers with NEGATIVE interest rates. Ah ha! Brilliant! That will force the bastards to spend money and stop saving for a rainy day. Gee – it’s just genius. So simple any moron could have figure that one out.
Unfortunately, this will merely fail on a grand scale for then the giant 800 pound gorilla in the corner of the room will be national debts. Who will buy government bonds with aNEGATIVE return? How will the Pension funds even survive? What happened to Andrew Mellon’s famous quote – Gentlemen Prefer Bonds?
Summers’ speech is being hailed in government circles as absolutely brilliant. Why? Because it still leaves the reins of power vested in the hands of government. In no way does it suggest that government is the problem. It ignores the entire pension fund crisis and assumes that bankers will now get to charge people for using their money. Brilliant! Absolutely brilliant! The bankers make more money and do not have to lend anything – just trade with your money keeping the profits themselves as always. The government retains the reins of power and both are happy. And the people get penalized for having any savings at all. Gosh – this is so amazing, it beats at last Charles Ponzi’s scheme that was used for Social Security.
The problem is cash, according to Summers. We need a cashless society is his solution. Now government gets all its taxes and can charge you to think you even have money. The die-hard people indoctrinated by the gold promoters cannot see that we are in a MASSIVE deflationary cycle? Come on. Forget hyperinflation. These people are economic strip-miners. There will be nothing standing by the time they are finished. It is not he who has the gold makes the rules – it is he who makes the rules confiscates all the gold.
Cheer up – it can only get worse. You are living the good life right now. Enjoy it while you can! It will not last much longer. When the economy turns down after 2015.75, Summers is right on point about one thing. The Fed has NO power under Monetarism left in its bags of tricks.
Sorry Larry! Negative rates will not work either and then what do you do with the pension funds and national debts? Oh ya – that is Phase II after the Safe Act. Sorry I forget. You then just confiscate the pension funds and retire the national debt so you can invade whoever you desire. Gee. How stupid of me to forget the real agenda here. (see Deutsche-Wrtschafts-Nachrichten)
European Civil Unrest is Now Widely Expected by EU
In France, an internal secret report of the French government warns of nationwide civil unrest as the economy simply implodes with rising taxes and higher unemployment. The French people are reported are simply “full of tension, frustration and anger” all because their purchasing power decreases (deflation) in the face of ever increasing tax burdens reported the Deutsche-Wirtschafts-Nachrichten.
Meanwhile, the World Economic Forum is also warning of a major “social explosion” throughout Europe. The crime rate is jumping off the charts, the economy is spiraling into a deflationary and stagnate trend as unemployment exceeds the US Great Depression high of 25% overall (60%+ for youth) causing the social fabric to tear apart at the seams all because of socialism that failed in China and Russia.The more government thinks it can control society, the worse it is becoming. This scenario described at the World Economic Forum has acknowledged that if the European countries fail to curb youth unemployment, there will be a “social explosion” of civil unrest reports the Deutsche-Wirtschafts-Nachrichten.
Obamacare – Just Brain-dead
NOTICES SENT OUT BY HEALTH INSURERS:
While Obama made it sound like the problem has been insurers not willing to write plans, in truth, many plans that did exist were required to be terminated. Looking at the fine print, maternity insurance had to be provided for everyone. The problem, it is not quite understood how a single man can get pregnant at least without directly engaging in intercourse with the government. The notice sent out in New Jersey read:
We understand you may have many questions about how President Obama’s announcement on the Affordable Care Act may affect you. Horizon Blue Cross Blue Shield of New Jersey is evaluating the President’s statement allowing state regulators and insurers to renew individual and small group health plans for one more year that were required to be cancelled under the Affordable Care Act. Horizon BCBSNJ is actively consulting with state regulators to understand all the implications of this change and how it might be accomplished before the end of the year. Rest assured Horizon BCBSNJ is working diligently to get answers and keep you informed.