NIRP Expands

The US Fed recently admitted contemplating it, now half of Europe is doing it, and bets are firm for Tuesday that Australia will head towards it.  NIRP (negative interest rates policy) is the new ZIRP (zero interest rates policy).  The US has been on ZIRP now since soon after the GFC, desperately trying to dissuade saving and promote debt fuelled risk ‘investment’.  It has done a wonderful job of driving up financial assets (shares, bonds, property) enriching the rich, but left retirees and other savers with nothing.  Wall Street wins, Main Street suffers.

But it’s also not working for the broader economy.  So what does a desperate central bank do to force growth and inflation?  ZIRP it.  That’s right, you PAY for the right to hold Government Debt.  Negative yield.  The table below should be nothing short of alarming, showing over half of all European issued sovereign 2 year debt yielding negative returns, and as we reported in today’s Weekly Wrap, Sweden is taking it to a whole new level.

So if you have to pay the bank to hold your money it would see people not banking cash right?  Denmark are one step ahead and proposing banning cash – forcing it’s citizens to bank their money so they can purchase on cards etc.  Extraordinary stuff, and clear signs of a financial system in disarray.

As we reported a couple of weeks ago, a Fed spokesman said they had discussed NIRP in the past but were afraid of what might happen.  That it has been implemented for some time now in Europe and nothing has broken means they are no longer afraid of it if they need to.  He seemed to gloss over the fact even NIRP is not working in Europe as just last week the ECB flagged even more QE (money printing) to try and spur on growth and inflation.  

There has never in history been a clearer difference between currency and money.  Gold and silver are money, the rest is pretend “music”.