www.NegativeInterestRates.com

Jyske Bank: Danish bank launches world’s first negative interest rate mortgage

Negative interest rates have already arrived at your friendly Danish mortgage lenders. They pay you .5% to borrow money to own your home. You’re still on the hook for amortization, but hey, as long as home values don’t decline that’s a good thing– at least in concept.

An inverted treasury yield curve usually doesn’t end well if history is any indicator. But coupled with $15 trillion of negative interests rates on government bond across the globe and a Texas Death Match trade war with China, strap on your seat belts.

see more https://tinyurl.com/y5vx8j7j

The Yield Curve Inverts; Negative Rates Far Behind?

It all depends. Listening to soothsayers Alan Greenspan and Janet Yellen is probably not the best idea given how wrong they have been in the past. Flawed ideology is just the beginning. Public and private markets disconnect. Bond and equities disconnect. Confusion between correlation and causality muddle along daily. The world’s central banks have run out of quivers. But the man with the flawed ideology has admitted negative interests are a real, potent and admittedly bizarre possibility. There is no lower bound.

So just how weird exactly are negative interest rates? Perhaps for those who know just enough about quantum mechanics to be dangerous, think of the completely mind blowing double slit experiment bombarding one atom at a time at a two different slits and the resulting vertical bands that result. Can atoms actually have consciousness. Just watch Dr. Quantum’s little animation.

WSJ: Pushing a String

In Japan years of trying to spur consumers to spend rather than save through negative interest rate policy has turned out to be completely ineffective.  The Japanese apparently love to save rather than spend.  Anybody got any other good ideas?

https://www.wsj.com/articles/the-worlds-most-radical-experiment-in-monetary-policy-isnt-working-1488135495

A Nobel Prize-winning economist is back in the spotlight. Christopher Sims is challenging a widely accepted claim. It was the speech he made at the Jackson Hole meeting last summer where central bankers from around the world gathered which caught attention. He argued that in times of low or negative interest rates, monetary easing alone may not be enough to spur inflation. And his theory is inspiring policymakers around the world, especially here in Japan.

https://www3.nhk.or.jp/nhkworld/nhknewsline/inconversation/interviewwwithnobelprizelaureatechrissims/

History will probably show that central banks’ monetary policies were akin to bloodletting– long discredited as an effective form of medical treatment for the sick and dying.  As easy cheap money floods a particular banking system, the currency becomes less desirable on a relative basis; investors convert into other currencies with higher yielding investment returns (even if negative).

As the Fed has held the line against moving to a negative interest rate policy,  the Trump rally has locked in the expectation of higher growth and higher yields for U.S. investment. Investors rush in to buy the higher yield dollar causing significant appreciation relative to other currencies. Dislocations will occur and some people will make a lot of money and others will be on the other side of the trade.

How Does Negative Interest Rate Affect Currency Prices

WSJ: Era of Low Interest Rates Hammers Millions of Pensions Around World

It took long enough but the main stream media has finally caught on. Negative interest rates policy across the globe has created devastating effects on investors and savers.  Retail and institutional expectations for investment returns since the mid-nineties  have ranged from 6-10%.

Treasuries in non-U.S. economies are at zero and below with the U.S. 10-year benchmark bouncing around in the 1.5-2% range.  Pension funds will not meet their actuarial assumptions.  As a package, negative rates will create potentially disastrous dislocations in the financial markets-equity, bond and currency alike.  The world’s largest and most knowledgeable bond players such as Larry Fink and Bill Gross have been sounding the alarm for some time to no avail  But now it sounds like folks are starting to get the message.  Check out this article from the Wall St. Journal…

http://www.wsj.com/articles/era-of-low-interest-rates-hammers-millions-of-pensions-around-world-1479067408

[Editor’s Note: Is one of the unintended consequences of NIRP that the ECB is about to run out of eligible collateral to support their global carpet remnant purchases of junk bonds and other detritus? This is what happens when the system is flooded with too much liquidity.  Even central banks can drown. ]

From The Telegraph:  Euro ‘house of cards’ to collapse, warns ECB prophet

The European Central Bank is becoming dangerously over-extended and the whole euro project is unworkable in its current form, the founding architect of the monetary union has warned.

 “One day, the house of cards will collapse,” said Professor Otmar Issing, the ECB’s first chief economist and a towering figure in the construction of the single currency.

http://www.telegraph.co.uk/business/2016/10/16/euro-house-of-cards-to-collapse-warns-ecb-prophet/

From Ken Rogoff’s October 11, Financial Times Op-Ed

“It would be wrong to abandon the policy of negative rates The alternatives are deeply unattractive” writes Kenneth Rogoff.  But here’s the real rub.

The mixed results from experiments with negative interest rate policy in Europe and Japan have led many to conclude that the idea is ill begotten and should be abandoned. To do so would be a serious mistake.

The word “experiment”  and “central banking” never belongs in the same thought or sentence. Ever.

Here’s his Op-Ed

Like daylight savings and Columbus Day some things exist just because they do.John Oliver’s

John Oliver’s Last Week’s News Tonight  features a segment called How is this still a thing? The Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model is used for estimating stochastic volatility and optionality.

The real question is: How was this ever a thing? If one CEO could pronounce it, there might be a ray of hope the global financial system isn’t doomed.