Negative Interest Rates Mean Your Government Is Betraying You

Nearly 500 million people now live in countries with official negative interest rate policies, and the United States may be next.

I say “may be” because Janet Yellen is talking out of both sides of her mouth. In one breath, she’s trying to reassure us that she expects “continued” economic growth – and then in the next, she acknowledges that she wouldn’t rule out lowering interest rates to negative territory. Meanwhile it’s left to the public to try to sort out just how bad things are, and it is my job, as always, to help. The fact that none of this is openly discussed in the mainstream media is outrageous. Someone needs to take a two-by-four and smack the people at CNBC and Bloomberg Television and The Wall Street Journal over the head and knock some sense into them.

Negative interest rates policy (NIRP) is not merely some technical monetary policy tool; it is a tactic with profound political and moral consequences that must be exposed as a betrayal of the social compact between governments and citizens.

Seven years of zero interest rates have already severely punished savers; negative interest rates will finish the job by confiscating their capital for the mere privilege of depositing it in a federally licensed banking institution.

Make no mistake. NIRP is a desperate, last-ditch measure, and it couldn’t come at a worse time.

Here’s the deal.

Negative Rates Do Not Generate Growth

A government that can’t provide a positive return on capital is failing.

You might think these over-educated professors in the central banks would see that their policies aren’t working and make adjustments, but they simply keep doubling down on failure. And in their latest leap into the unknown, they are taking rates below zero in Europe and Japan and contemplating doing so in the U.S.

More Central Bank Meddling for No Return

Already global central bankers have cut interest rates 637 times since the financial crisis. They have purchased $12.3 trillion of bonds over the past eight years. What do they have to show for all of this huffing and puffing? Not a whole hell of a lot.

There is more than $8 trillion of government debt yielding less than zero. Economic growth around the world is awful – over the last 26 quarters, the nominal GDP of advanced countries has grown by a mere 11%. The markets are crashing too. The Dow, S&P 500, and Nasdaq are all solidly in the red for the year, and “pop” rallies certainly won’t make any difference. I still expect a Super Crash by the summer, if not before, and I’ll have more for you soon about exactly what that will look like.