Monday, September 28, 2015

From ZIRP To NIRP - Accelerating The End Of Fiat Currencies.......

From ZIRP To NIRP - Accelerating The End Of Fiat Currencies

What is deeply worrying is the intention to pursue current interest rate policies even beyond a reductio ad absurdum and on top of this idiotic policy they are also considering NIRP.

In considering NIRP, Central bankers are failing to address an even greater potential problem, which could easily become cataclysmic. By forcing people into paying to maintain cash and bank deposits, central bankers are playing fast-and-loose with the public's patient acceptance that state-issued money actually has any value at all. There is a tension between this cavalier macroeconomic attitude and what amounts to a prospective tax on personal liquidity. Furthermore, NIRP makes the hidden tax of monetary inflation, of which the public is generally unaware, suddenly very visible. We should be in no doubt that increasing public awareness of the true cost to ordinary people of monetary policies, by way of the debate that would be created by the introduction of NIRP, could have very dangerous consequences for the currency.

ZIRP = Zero interest-rate policy

NIRP = Negative interest rate policy

The relative stability in the welfare economies appears to be coming to an end. Worryingly for central bankers, with interest rates at the zero bound, their conventional interest rate weapon is out of ammunition. They appear to now believe in only two broad options if a slump is to be avoided: more quantitative easing and NIRP. There is however a market problem with QE, in that it is counterpart to a withdrawal of high quality financial collateral,which raises liquidity issues in the shadow banking system. This leaves NIRP, which central bankers hope will succeed where ZIRP failed.

NIRP is a preposterous concept!

It contravenes the laws of time preference, commanding by diktat that cash is worth less than credit. It forces people into the practical discomfort of treating physical possession of money as worth less than not possessing it. Suddenly, we find ourselves riding the train of macroeconomic fallacies at high speed into the buffers at the end of the line. Of course, some central bankers may sense this, but they are still being compelled towards NIRPthrough lack of other options, in which case holding cash will have to be banned or taxed by one means or another. This would, allow them to force interest rates well below the zero bound and presumably keep them there if necessary.

ARE THEY REALLY THAT STUPID?  THEY ARE DESPERATE AND YES, I THINK THEY ARE THAT STUPID! GREED BLINDS ANYONE AND EVERYONE THAT LOSES SIGHT OF REALITY.

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