The Big Lie About Ultra-Low Interest Rates by Jeff Nielson, Sprott Money
A normal, benchmark interest rate for a national economy is between 3 – 5%. Indeed, if we go back a little further in history , a normal rate was significantly higher than that range. This fact is mentioned because after eight years of monetary madness in the West, many (most?) people have completely forgotten what “normal” is with respect to interest rates.
The title of this article is something of a misnomer. There are, in fact, numerous big lies being disseminated concerning the Western world’s utterly insane, totally criminal, near-zero interest rates (and now “negative” rates). However, all these Big Lies are then piled on top of each other, in order to create an even Bigger Lie.
When Japan introduced the world to the “0% interest rate”, it was universally castigated for this monetary voodoo. But when the Western world copied Japan (after Japan’s policy had already failed for more than 20 years), suddenly near-zero interest rates became normal and acceptable. This brings us to the 21 st Century Principle of Monetary Policy. If one nation institutes a really crazy monetary policy, by itself, it is labeled as “insanity”. But if everyone engages in that same, really crazy monetary policy ( after it has been proven to be a failure) then it becomes “normal” and acceptable.
To deceive our Zombie populations into believing that these Criminalized Interest Rates are “normal”, the mainstream media has turned up its propaganda machine to maximum decibels, broadcasting an endless series of lies and half-truths, as our governments pretend that they are not perpetrating the complete destruction of our economies. A particularly obvious-and-nauseating example of such lying comes from (where else?) Bloomberg News .
People have come up with a lot of reasons to worry about zero interest rates. At first they worried about inflation, and later about financial instability and bubbles caused by a reach for yield. But the years passed, and there was no inflation, no bubble or instability in financial markets . [emphasis mine]
Clearly the remarks above represent such audacious lies that no sane writer could possibly believe them to be true. “No inflation”? Food costs have more than doubled over the past eight years. Housing costs (in many markets) have also more than doubled.
“No bubble”? U.S. equity markets are at all-time bubble-highs. The U.S. bond markets is also at an all-time bubble-high – and it isn’t even supposed to be theoretically possible to have a stock bubble and a bond bubble, simultaneously. There are obvious real estate bubbles throughout all Western regimes.
“No instability”? We see daily headlines from Europe, across various jurisdictions of Big Banks in grave, financial peril . Indeed, more “bank bail-outs” have already begun. However, for the moment, let’s pretend that all of the pathetically obvious lies above were actually true – for the moment – and simply examine the reasoning behind the lies.
But the years passed, and there was no inflation, no bubble or instability in financial markets.
More generally, this reasoning translates as follows: our economies haven’t been destroyed yet, so this means there is no problem with near-zero interest rates. The ‘logic’ behind this assertion is so infantile that we have a joke/cliché which exposes such stupidity.
A man jumps off the roof of a 100-storey building. As he sails past an open window on the 50 th floor, someone inside the building hears him remark, “So far, so good.”
Here we have a liar/apologist hired by Bloomberg to pretend that near-zero interest rates are not destroying our economies, and this is the best fiction the writer could produce. Near-zero interest rates haven’t destroyed our economies yet, so they are OK. And (as already noted) every facet of the “evidence” used by the writer was a bald-faced lie. We do have raging inflation. We do have extreme asset bubbles. We do have massive, financial instability.
Using the allegory above, what we see is that the man who “jumps off the roof” is about to hit bottom, and be splattered all over the pavement. However, we have the propagandists still pretending that he is merely sailing past the 50 th floor, without a care in the world.
Meanwhile, as these criminal central banks push their criminal interest rates lower and lower, we now have several corrupt regimes in the West with negative interest rates – and the rest of these Traitor Governments will obviously soon follow. “Negative” interest rates represent open criminality: borrowers literally stealing from lenders/savers. Yet even here we have the liars of the Corporate media attempting to deceive us into believing that such criminality is not merely acceptable, but actually “normal”. The example used is Denmark, and the propaganda comes from (once again) Bloomberg.
The Land Below Zero: Where Negative Interest Rates Are Normal
Once again, we are tortured with the same, infantile pseudo-logic: negative interest rates haven’t destroyed Denmark’s economy yet, so this means they are OK.
Although some dovish economists have advocated negative interest rates as a salve for deflation and anemic growth, if Econ 101 is to be believed they should have stomach-churning consequences: asset bubbles, capital flight, and the frenetic manufacture of very heavy vaults to hold money pulled from banks.
Central bankers looking to Denmark for evidence of such trauma aren’t likely to see much. If anything, they might find the Danes’ approach tempting.
Really? Look at the economic policies which Denmark’s government has been forced to enact, just to keep its economy from completely disintegrating in the four years since its interest rate first began to creep into negative territory:
- While interest rates are officially negative, the banks aren’t allowed to steal “interest payments” from the bank accounts of ordinary depositors. In other words, a large portion of Denmark’s financial system has had to be exempted from this monetary criminality .
- Corporations, which are not exempt from such stealing, began to pre-pay their taxes as a means of reducing their cash-on-hand, so it couldn’t be stolen by the banks. Thus the government had to enact a law limiting corporations from pre-paying their taxes.
- Even the Bloomberg propagandists acknowledge there is a real estate bubble in Denmark. To try to prevent this bubble from spiraling out-of-control, Denmark’s government has imposed the following rules:
i) Virtually no foreign ownership of real estate is permitted.
ii) Buyers can only purchase homes that they intend to live in (i.e. no “speculation”).
iii) Minimum down payments of 5% and rigorous “stress tests” for all buyers, showing that they could afford ownership even if interest rates suddenly rise.
Understand that these draconian policies don’t make negative interest rates sustainable, they are just economic band-aids to reduce the bleeding. Over the long term, it’s impossible to exempt a large portion of the economy from that nation’s official interest rate. Over the long term, it’s impossible for corporations to sustain having their operating capital steadily bled away, stolen via “interest payments” (and remember that these negative interest rates are supposed to stimulate our economies).
Then we have the real estate bubbles. No foreign ownership? No real estate speculators? Only responsible buyers