Chicago Boyz

                 
 
 
What Are Chicago Boyz Readers Reading?
 

 
  •   Enter your email to be notified of new posts:
  •   Problem? Question?
  •   Contact Authors:

  • CB Twitter Feed
  • Blog Posts (RSS 2.0)
  • Blog Posts (Atom 0.3)
  • Incoming Links
  • Recent Comments

    • Loading...
  • Authors

  • Notable Discussions

  • Recent Posts

  • Blogroll

  • Categories

  • Archives

  • Negative Interest Rates! What A Great Idea!

    Posted by Jonathan on February 23rd, 2016 (All posts by )

    Japanese Seeking a Place to Stash Cash Start Snapping Up Safes (WSJ, subscription required):

    TOKYO—Look no further than Japan’s hardware stores for a worrying new sign that consumers are hoarding cash—the opposite of what the Bank of Japan had hoped when it recently introduced negative interest rates.
     
    Signs are emerging of higher demand for safes—a place where the interest rate on cash is always zero, no matter what the central bank does. Cash languishing in safes could thwart the Bank of Japan’s move to get money circulating more vigorously in the economy.
     
    Shimachu Co., which operates a chain of stores selling hardware and home products, said Monday that sales of safes in the week that ended Sunday were 2½ times higher than in the same period a year earlier.

    Of course the Fed would never be so foolish as to institute a negative-rates policy in the hope of getting investors to prop up weakening securities markets. Right?

    (Via T. Greer on Twitter)

     

    12 Responses to “Negative Interest Rates! What A Great Idea!”

    1. Bill Brandt Says:

      Everybody have their safes?

    2. dearieme Says:

      The Canadian who runs the Bank of England says that negative interest rates here are not currently an option. Rather a cagey remark, I’d say.

    3. Jonathan Says:

      Uh oh:

      Senate Majority Leader Mitch McConnell told a group of staunch House conservatives there isn’t “a snowball’s chance in hell” that he will back down from his opposition to confirming a Supreme Court justice before a new president is elected.

    4. Michael Hiteshew Says:

      Possibly related are the trial balloons being floated regarding the elimination of cash and moving to an all-electronic monetary system. Ostensibly to allow law enforcement to better monitor criminal & terrorist funding and money laundering, the opportunities this presents the state for complete economic control, graft, theft and blackmail are enormous. There’s a reason all dictatorships are national security states, it creates boundless opportunities for those at the helm.

    5. Grurray Says:

      “According to the BOJ theory, they should have moved their funds into riskier but higher-earning assets. Instead, they moved into pure cash that earned nothing,” wrote the newsletter’s author, Richard Katz.

      NIRP signals that the economy is in desperate, dire straits, which then makes people move into safer assets. If they’re obstructed from putting their life savings in banks, the time tested alternative is gold. I wouldn’t be surprised to see it at $1400/oz by summer.

    6. Jonathan Says:

      The pols and central bankers seem to think that doubling down on low rates will convince investors to become less risk-averse and buy stocks. In reality stock prices have been declining because investors think valuations have been driven to unsustainable levels by bad govt policies and excessively easy credit. Pushing interest rates into negative territory is not likely to get investors to change their minds, at least not for long. If anything, a NIRP may convince investors that the Fed is out of ideas and it might be a good idea to shift more money out of risky securities and into cash and hard assets.

    7. Michael Hiteshew Says:

      I wonder if the long predicted national bankruptcy and haircut are on the way.
      Pilot: Ladies and gentlemen, please stow any loose items and be sure your seat belts are secure, we could be in for some severe turbulence.

    8. GFV Says:

      Americans are buying up safes as well. I know because I have been selling them at a rapid pace for the past five years.

      And they ain’t buying theirs to hold currency or gold.

    9. Mike K Says:

      ” I wouldn’t be surprised to see it at $1400/oz by summer.”

      My latest gold coin arrived today.

      “investors think valuations have been driven to unsustainable levels by bad govt policies and excessively easy credit”

      Benjamin Strong Jr could not be reached for comment. Neither could Murray Rothbard.

      One common guiding assumption characterized the Keynesians, socialists, and fascists of the 1930s: that laissez-faire, free-market capitalism had been the touchstone of the US economy during the 1920s, and that this old-fashioned form of capitalism had manifestly failed us by generating, or at least allowing, the most catastrophic depression in history to strike at the United States and the entire Western world.

      Bernie Sanders agrees.

      One point is undisputed: the autocratic ruler of the Federal Reserve System, from its inception in 1914 to his death in 1928, was Benjamin Strong, a New York banker who had been named governor of the Federal Reserve Bank of New York. Strong consistently and repeatedly used his power to force an inflationary increase of money and bank credit in the American economy, thereby driving prices higher than they would have been and stimulating disastrous booms in the stock and real-estate markets. In 1927, Strong gaily told a French central banker that he was going to give “a little coup de whiskey to the stock market.” What was the point? Why did Strong pursue a policy that now can seem only heedless, dangerous, and recklessly extravagant?

      I don’t agree completely here with Rothbard but Strong was also being treated for tuberculosis as he kept interest rates very low. In 1928, he died and the crash followed a year later.

      when the Great Crash hit, America had recently elected a new kind of president. Until the past decade, historians have regarded Herbert Clark Hoover as the last of the laissez-faire presidents. Instead, he was the first New Dealer.

      I think we are about October 1928.

    10. ErisGuy Says:

      Signs are emerging of higher demand for safes—a place where the interest rate on cash is always zero, no matter what the central bank does

      The purpose of inflation is to ruin cash hoarders.

    11. Phil Ossiferz Stone Says:

      Buy silver.

      And ammunition.

    12. Whitehall Says:

      Saw an interesting headline to the effect that negative interest rates would have the Japanese government MAKE money on their sovereign debt.

      I’ll have to noodle that one a bit but it is an interesting twist.