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Negative Interest Rates Are the Next Stage in Global Stimulus

Since late 2008, central banks around the world have used unprecedented QE to try and stoke the global economy. Then in June 2014, the ECB took it a step further. They went negative. Zero short-term interest rates apparently weren’t enough. The ECB realized that if they couldn’t get banks to loan or consumers to spend, why not really light a fire under their ass and tell them: “if you’re not going to spend, you have to pay to keep your money in the bank!” The Swiss thought this was a great idea and did the same in December 2014. Later […]

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The trade effect of negative interest rates

Yesterday, HSBC prepared the ground for imposing negative rates on business depositors. This is an excerpt from HSBC’s letter announcing the necessary change to the Terms & Conditions of HSBC business accounts: Now, this requires some explanation. Firstly, the change applies only to BUSINESS accounts. Retail depositors are unaffected. Secondly, it applies only to currency accounts, not sterling accounts. And thirdly, despite HSBC’s mention of “negative rates set by central banks including the European Central Bank”, the relevant “policy or reference rate” at present is still positive everywhere except Sweden, where the policy rate is currently -0.35%. Central banks set […]

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Japan’s negative rates: the China connection

Japan has just introduced negative rates on reserves, following the example of the Riksbank, the Danish National Bank, the ECB and the Swiss National Bank. The Bank of Japan has of course been doing QE in very large amounts for quite some time now, and interest rates have been close to zero for a long time. But this is its first experiment with negative rates. The new negative rate framework is complicated, to say the least. The Bank of Japan has helpfully produced a pretty picture to explain it: The bottom tier is a “basic balance” which is the existing […]

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December 14th To 18th: A Week Of Reckoning For Global Stocks If The Fed Hikes Interest Rates?

Are we about to witness widespread panic in the global financial marketplace?  This week is shaping up to be an absolutely critical week for global stocks.  Coming into December, more than half of the 93 largest stock market indexes in the world were down more than 10 percent year to date, and last week stocks really started to slide all over the world.  Here in the United States, the Dow Jones Industrial Average is down about 600 points over the past week or so, and at this point it is down more than 1000 points from the peak of the […]

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What If the Fed DOESN’T Raise Rates?

We’ve gotten it into our heads that Fed Chair Janet Yellen is on her way down from the mountain top carrying stone tablets etched with the details of a rate hike. We don’t know exactly what form it will take, but let there be no doubt – the financial gods have spoken, so a rate hike there will be! But it’s not that simple. The Federal Open Market Committee (FOMC) is the group that determines monetary policy. This group must reach a consensus on policy changes before anything new can happen. At the last meeting, the vote to keep rates […]

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The Beginning of the End: Rising Long Term Rates

The Fed has delayed a rate hike yet again. It seems convinced the economy isn’t ready to survive on higher short-term rates. So we continue to see zero rates to stimulate more economic activity. But today the market is proving just how limited the Fed’s influence really is! I’ve been warning for years now that there is a limit to how much you can stimulate the economy with free money and zero interest rate policies before the financial drugs no longer work. Eventually, the system breaks down from excessive debt and overexpansion. There are two signs that this is finally happening. No. […]

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Janet Yellen Gives the Green Light, Interest Rates to Remain Unchanged

(Image Source: Wikimedia Commons, the free media repository) “Stay the course”…that’s what Janet Yellen, the ultra dovish FED head is saying to the markets. In the most recent FED meeting, Yellen indicated that interest rates would remain unchanged for the immediate future. The reason for this was a sluggish global economy and stubbornly low inflation, according to the FED. Despite admitting this, stock markets rallied, sending markets to near all time highs. Ironically, all the global uncertainty and unrest around the world is seen as a positive in this upside-down world that we now live in. The reasoning for this, is the […]

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