If
there is one thing you need to bear in mind regarding the global
economy in general and the US economy in particular, it's the fact
that since the beginning of the Great Recession and the intervention
of the central banks, we have walked in uncharted territory.
Never
before has the world been ruled by central banks. And never before
have central banks commanded so much influence on the global economy.
In
the US, the Federal Reserve has held some sway as more and more
people bought into the stock market. As pensions disappeared (and
pension managers) and raided by bad management or buyout firms, and
more workers were forced into 401(k) plans, the more workers began to
care about what the Fed chairman had to say about interest rates.
Bear
in mind, most nations in the world don't have the 'investing class'
that we do in America. Most retirement funds aren't in the hands of
individuals in most nations.
This
puts US citizens in a unique position in a very unique period.
But
the problem only begins there. Because now, as more nations start to
move to what's called a negative interest rate policy (NIRP) things
are getting curiouser and curiouser.
Let's
go back to the beginning. When the banksters nearly destroyed the
world financial system with their newest round of schemes, the
central banks were put in a position to either sit idly by and allow
market forces to sort things out - likely gruesome amounts of wealth
destruction, foreclosures and massive bankruptcies – or try to save
what was left of the system with the institutions that were barely
standing.
Most
regulators now talk about how they couldn't sit idly by when such an
event of such enormity was taking place. But now we look back and
wonder if it would have been the better course of action.
Now,
the entire financial system is as dependent on the generosity of the
central banks' monetary policy as a heroin addict is to his dealer.
But
after almost a decade of easy money, it looks like there's no end in
sight and the central banks have fewer options to prime their
economies.
So,
they invent things. First it was quantitative easing (QE).
And
now it's NIRP.
QE
basically amounted to letting the banksters who started the mess
borrow for nothing and ostensibly lend it to businesses and
individuals, so they could get back on their feet and grow the
economy.
The
banksters instead, just bought ultra-safe US Treasuries and lent
money to only their best customers at similarly low interest rates.
That's why the economy has failed to achieve consciousness in 8
years.
Now,
other countries' central banks are turing to NIRP. Basically, banks
are required to keep a certain percentage of reserves in case
something bad happens and there's a run.
Banks
could also keep extra reserves in these accounts and just pile up the
interest they received.
So,
central bankers now want to encourage the banks to start lending this
new way – charge the banksters for keeping extra reserves in the
system.
The
problem is, like QE before it, no one knows how the banksters and
their cohorts will react to this. This is uncharted territory and we
playing as we go.
More
than likely the central banks that have implemented NIRP –
according to Barron's, 30%
of the value of stocks in the MSCI World Index are now represented by
companies in NIRP countries -
are trying to get more money into the economy. As of this month, the
Bank of Japan, the European Central Bank, Switzerland, Sweden and
Denmark are all running NIRP.
Even
Fed Chairman Janet Yellen recently discussed NIRP for the US at a
recent Congressional hearing.
But
don't worry, there are laws – for now – that prevent the Fed from
going negative.
Regardless,
with Europe and Japan in NIRP economies, that's a lot of
gravitational pull. And while the goal may be to spur bank lending,
it's also likely to get the banksters to prop up the floundering
stock markets.
It's
anyone's guess if it's going to work. If the past is prologue, it
will only spur another mess.
