Negative Interest Rates

This idiot, like that loser Peter Schiff who has been wrong about the economy and stock market for years, is predicting pandemonium if the fed embarks on negative interest rates.

The last hurrah of central banks is the negative interest rate policy–NIRP. The basic idea of NIRP is to punish savers so severely that households and businesses will be compelled to go blow whatever money they have on something–what the money is squandered on is of no importance to central banks.

All that matters is that people and enterprises are forced to spend whatever cash they have rather than “hoard” it, i.e. preserve and conserve their capital.

The innocent ‘saver’ that is being punished by the fed, is mostly myth – the vast majority people have very little savings: Most Americans have less than $1,000 in savings

For the average person, a negative interest rate of a quarter point (assuming it ever happens, which it probably won’t) amounts to a pack of gum over a period of year. People who have wealth seldom keep it in the bank. They tend invest it. A negative interest rate isn’t much different than a bank ‘fee’, and is much less than the annual fee charged by your typical investment adviser, yet there’s no outrage over that. Peter Schiff’s investment ‘ideas’ are down 30% or more since 2008 in a market that is otherwise up 150%. Your much more likely to lose all your money listening to idiots like him than from negative interest rates. Credit cards typically charge double digit interest; again, little outrage or crisis over that.

Negative interest rares will flatten the yield curve, as money flows into longer-dated treasuries that still have positive yield. It will also boost corporate bonds. Low interest rates also makes stocks more attractive. Although the PE ratio of the S&P 500 is around 15, when adjusted for 0% interest rates it’s really around 14.

Japan and many European countries have had negative interest rates for awhile, and there hasn’t been any upheaval or unrest. The reality is, the typical individual has very little to save, as most money is immediately spent. Most people live paycheck to paycheck; others are parasitically on welfare.

We can’t let facts get in the way of a sensationalist narrative.

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