Has anyone in Europe been watching what the banks have been doing lately? There are several major nations where the banks have negative interest rates. How are the people not revolting in the streets over this?
http://www.zerohedge.com/news/2016-01-29...tral-banks
Japan has joined the EU, Denmark, Switzerland and Sweden in imposing negative interest rates.
Indeed, more than a fifth of the world's GDP is now covered by a central bank with negative interest rates.
TOKYO—Japan’s central bank stunned the markets Friday by setting the country’s first negative interest rates, in a desperate attempt to keep the economy from sliding back into the stagnation that has dogged it for much of the last two decades.
BBC writes:
The country is desperate to increase spending and investment.
Japan has been desperate to boost consumer spending for years. At one point it even issued shopping vouchers to stimulate demand.
Moving to negative rates reflects a measure of desperation on the part of central banks. Their traditional tools have been largely exhausted, as most countries’ interest rates have been pushed to almost nothing.
MarketWatch’s senior markets writer, William Watts, notes:
This might not be the sort of capitulation stock-market investors were anticipating.
The Bank of Japan’s surprise decision Friday to start charging depositors for parking excess reserves at the central bank triggered a global equity rally. But several monetary policy watchers and market strategists worried that the move was an acknowledgment that the world’s central banks are running out of ammunition in the battle against deflation.
“This is an interesting move that looks a lot more like desperation or novelty than it looks like a program meant to make a real difference,” said Robert Brusca, chief economist at FAO Economics.
Kit Juckes, global macro strategist at Société Générale, underlined the moment in a note to clients:
“First of all, forget the details, feed on the symbolism. Germany, Switzerland and Japan, the three great current account powers of the post-Bretton Woods era, whose surpluses have financed the frivolity of baby boomer Anglo-Saxons, are being told in no uncertain terms to stop saving.”
Whether the strategy works or not is less important than what the decision says about global disinflationary forces, he said, which have forced the central banks to “set off on this path…following a trail of breadcrumbs as they head for the gingerbread house.”
But others worry that the move underlines a degree of desperation and a sense that the asset purchases at the heart of global quantitative-easing strategies are running up against some important limits.
Daiwa economists and others expect the Bank of Japan to remain under pressure to ease further. And when push comes to shove, the bank will be likely to push rates further into negative territory rather than ramp up asset purchases.
“Ultimately, negative interest rates from a veteran of monetary expansion such as the BOJ mark a capitulation about the effectiveness of QE alone as an inflation-targeting tool in world of lingering growth-debt imbalances and commodity price wars,” said Lena Komileva, economist at G-plus Economics, in emailed comments.
Banks will presumably move their deposit rates below zero in response ….
Likewise, Bloomberg previously noted of the initiation of negative rates in the EU:
Negative interest rates are a sign of desperation, a signal that traditional policy options have proved ineffective and new limits need to be explored. They punish banks that hoard cash instead of extending loans to businesses or to weaker lenders.
And negative rates will eventually come to America.
Central bankers are implementing negative interest rates to force savers to buy assets … so as to artificially stimulate the economy. Specifically:
A negative interest rate means the central bank and perhaps private banks will charge negative interest: instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank. This is intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe.
Next up: The war on cash.
Postscript: Ironically, the Fed has gone to great lengths to DISCOURAGE banks from lending to Main Street.
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How insane is this getting over there now? Well if I follow the money, I'm starting to see what's going on here.
Helicopter Money Arrives: Switzerland To Hand Out $2500 Monthly To All Citizens
http://www.zerohedge.com/news/2016-01-29...l-citizens
With Citi's chief economist proclaiming "only helicopter money can save the world now," and the Bank of England pre-empting paradropping money concerns, it appears that Australia's largest investment bank's forecast that money-drops were 12-18 months away was too conservative. While The Finns consider a "basic monthly income" for the entire population, Swiss residents are to vote on a countrywide referendum about a radical plan to pay every single adult a guaranteed income of around $2500 per month, with authorities insisting that people will still want to find a job.
The plan, as The Daily Mail reports, proposed by a group of intellectuals, could make the country the first in the world to pay all of its citizens a monthly basic income regardless if they work or not. But the initiative has not gained much traction among politicians from left and right despite the fact that a referendum on it was approved by the federal government for the ballot box on June 5.
Under the proposed initiative, each adult would receive $2,500 per months, and each child would also receive 625 francs ($750) a month.
The federal government estimates the cost of the proposal at 208 billion francs ($215 billion) a year.
Around 153 billion francs ($155 bn) would have to be levied from taxes, while 55 billion francs ($60 bn) would be transferred from social insurance and social assistance spending.
That is 30% of GDP!!!
The action committee pushing the initiative consists of artists, writers and intellectuals, including publicist Daniel Straub, former federal government spokesman Oswald Sigg and Zurich rapper Franziska Schläpfer (known as “Big Zis”), the SDA news agency reported. Personalities supporting the bid include writers Adolf Muschg and Ruth Schweikert, philosopher Hans Saner and communications expert Beatrice Tschanz. The group said a new survey showed that the majority of Swiss residents would continue working if the guaranteed income proposal was approved.
'The argument of opponents that a guaranteed income would reduce the incentive of people to work is therefore largely contradicted,' it said in a statement quoted by The Local.
However, a third of the 1,076 people interviewed for the survey by the Demoscope Institute believed that 'others would stop working'.
And more than half of those surveyed (56 percent) believe the guaranteed income proposal will never see the light of day.
The initiative’s backers say it aims to break the link between employment and income, with people entitled to guaranteed income regardless of whether they work.
Or put another way - break the link between actually having to work for anything ever again... but maybe this "group of itellentuals" should hark Margaret Thatcher's words that "eventually you run out of other people's money!!"