S answers that question in a message originally sent to the Infamous Mogambo Guru (IMG):
I thought I must have misunderstood the radio announcer, but I checked the ECB webpage.
The banksters at the European Central Bank have set a negative interest rate on deposits. The rate was zero, as of June 11 is -0.1%. If a bank leaves money on deposit at the ECB, they will steal some of it every day. This is on top of what is stolen invisibly by creating ever more money; here they actually reduce the balance of the account.
The intention is to force banks to lend their reserves rather than keeping them on deposit with the ECB. Since fractional-reserve bank lending creates money from nothing (this is on top of the new money created from nothing by the central bank) an increase in lending means even more rapid increases in the money supply. More money is available to bid against a shrinking supply of goods and services, causing even higher prices down the road.
Which is exactly what these criminals are conspiring to do. They see a rapidly contracting economy (crippled in no small part by ruinous “green” energy legislation and pricing) with falling demand for goods and services.
In a free market, falling demand causes downward pressure on prices, which is good for consumers. But anything that is good for consumers is bad for criminal banksters, as it interferes with the process of stealing from the poor and transferring wealth to the ultra-rich. So falling prices cannot be tolerated.
Falling prices also means that debts are repaid in money that may be more valuable than when the loan was created. This is good for creditors and bad for debtors. Governments are the largest debtors in human history, and central banks are nothing more than instantiations of government violence, so the interests of debtors will always triumph at central banks.
Consumers be damned. The ECB wants price inflation. Perhaps the precedent of setting negative interest rates will give it to them, good and hard.
Gold jumped $8 an ounce within minutes of the news, and we’ll see where that goes.
Which makes me so very happy that I took the Mogambo Guru’s advice and bought lots of lovely gold and silver coins back when they were so cheap even I could afford to buy them. Wheee! This investing stuff is easy!
Given where gold and silver have been lately, they could use quite a boost. Heck of a way to get one, though.
I post this with the sneaking suspicion (nay, the hard-won knowledge) that the average reader of the Living Freedom blog wouldn’t care if all of Europe fell into a giant volcano crater or was sawed off the planet and transported away by aliens. But trust me, folks, when I say, “Coming soon to a neighborhood near you.”
Well, maybe not soon. But inevitably.
As far as I’m concerned it means “We finally found yet another, better, way to take you for everything you’ve got AND not only keep you poor but make you even poorer than ever before”
I actually felt the hair rise up on the back of my neck when I heard this on the radio this morning. I pulled over and immediately used my phone to make sure I heard right… I did. I feel terribly unprepared for what’s coming. Oh to be rich…
Guys, it only works until the Revolution. Then, being a rich bankster will mean hanging from your heels in the town square. I won’t be cheering this on because mob action tends to be messy, but I won’t be trying to stop it either.
Its an interesting lesson in asset destruction.
Work. Save. Grow a bank balance. Then watch it lose purchasing power thru inflation, watch the balance dwindle thru negative interest rates, and watch the balance be confiscated outright via Cyprus type failures (and GM stocks, etc).
We are in a position where asset accumulation is possible, but maintaining ownership of assets is becoming near as practical to impossible. That is NOT a good general position to put the population at large in, as in, it will prove to be the exact opposite of “recovery”. Not that this surprises anyone unplugged from the mainstream media.
When the IPASS system was gaining popularity around the turn of the century the big talk was about tracking you, and using the system to issue speeding tickets based on average speed between toll booths. I argued, the minute they do that, the shoulder of the road will be littered with IPASS units that are pitched out of car windows.
But then they changed the toll prices. Its now $0.90 for IPASS but twice as much, $1.80 for cash payers. This muddies the waters quite a bit.
And all the efforts to curb cash usage work the same way. Keep up participation in a system which ultimately fails to benefit the participants.
Facebook could not have become the thing it is today, if it started out in its current configuration.
Well Tim, it will just drive people to use gold then, or other hard assets. Not a bad result if you think of it.
Here’s a related point: a Harvard (of course!) economist has proposed eliminating cash, both as a means of combatting crime (right; he should also add that it’s “for the children”) and because it would facilitate negative interest rates. http://www.ft.com/intl/cms/s/0/c47c87ae-e284-11e3-a829-00144feabdc0.html?siteedition=intl#axzz337Ej1h7R This particular flag has been pulled up the pole before, but now people are beginning to salute it.
It’s really a very complicated issue. The ECB claims that it is instituting negative interest rates to force banks to lend more. (Note that this negative rate applies only to deposits by banks at the European Central Bank, not to interest paid by banks to their retail depositors.) I suspect that the volume of commercial lending will indeed increase as a consequence, and as was noted by IMG’s correspondent the result will necessarily be increased inflation. The ECB’s President, Mario Draghi, has already stated that he thinks inflation is too low (!!), so this action is consistent with his belief. (BTW, Draghi is a former Vice Chairman of Goldman Sachs, not that there is any truth whatsoever to the Vampire Squid theory of international banking.)
But on the other side, the US Federal Reserve currently pays 25 basis points (one-quarter of one percent, which is more than you can get on short-term Treasury securities) on bank deposits, including what are called “excess reserves”. Those are reserves which the banks are not required to keep on deposit with the Fed, but they choose to park there anyway for want of anything better to do with them. Paying interest on reserves used to be illegal, but that law was changed in 2008, and once the Fed began paying it in 2009 total excess reserved jumped from essentially zero to over $1 trillion literally overnight; today they stand at around $2 trillion. (Here’s a graph: http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=EXCRESNS. Curiously [not!] now that some people have begun paying attention to the issue of excess reserves the Fed has stopped providing this useful graph, although the raw data is still available for anyone willing to dig for it.) So the Fed is taking precisely the opposite approach to that of the ECB. Why?
I think the answer is the same in both cases: inflation. Draghi and the ECB want more of it, hence their negative interest rate. However, although Janet Yellen and the Fed are a little concerned about our “low” inflation, I think they are much more afraid of unleashing runaway inflation, or even hyperinflation. Which is what would happen should those excess reserves begin “leaking” out into the general economy. Right now they are safely bottled up in the Fed’s (virtual) vault, but if banks begin lending them out, and with the added impact of fractional-reserve lending, it will be Katie-bar-the-door.
Hyperinflation isn’t a top concern for the ECB because most European economies are moribund, and inflation seems to be non-existent at the moment. Also, European delusions of relevance notwithstanding, the euro is nowhere near as important internationally as is the dollar; they can afford to be a little cavalier about it. But the dollar is still the world’s reserve currency (although that’s just beginning to change), and the Fed has to be mindful of international inflation fears.
If I were the treasurer of a European bank I wouldn’t accept negative interest rates from the ECB (beyond any reserves I was required to hold there); I would be depositing my excess cash in American banks for re-deposit with the Fed, and splitting the interest with them. It’s an arbitrage play on the Fed. But it will end up effectively transferring deposits from the ECB to the Fed, costing the American taxpayers and increasing the internal pressures within the global banking system. That can’t be sustained forever, and when it blows the result will be catastrophic world-wide.
This will end badly. (Apologies for the length of this post.)
They screwed up, and did this in the wrong order.
In order to give everyone a financial haircut, they needed to first ban cash, or set strict limits on withdraws, like they did in Cypress.
People will spend their money, alright. They’ll spend it on gold and silver. The dumber ones will stuff Euros in the mattress.
They’ll spend it on gold and silver.
Or food and lead.