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.
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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 are allowed to purchase property? Try translating those policies into North America’s property-bubble, where our real estate market is primarily composed of foreign buyers, speculators, and “sub-prime mortgages”.
The Bloomberg article attempts to construct the lie that negative (i.e. criminalized) interest rates have virtually no harmful repercussions, and thus we in North America should find this criminality “tempting.” What Bloomberg has actually demonstrated is that it is impossible to sustain such monetary criminality over the longer term, and it would never be possible to use “the Danish approach” in North America – where our real estate bubbles would instantly and violently implode, should our governments attempt to “regulate” the market in such an ultra-extreme manner.
The reason why it could never be sustainable or even sane for a central bank to push interest rates to extreme lows over an extended period of time can be summarized in two words: easy money. As a matter of the most elementary logic (and arithmetic), if you reduce the cost of capital to zero (or less) you will see real estate bubbles, market bubbles, and other forms of speculative malinvestment – in epic proportions.
Compounding this arithmetic, we have “fractional-reserve banking”: the monetary multiplier of insanity. Looking at just the U.S. system, every one of the $4 trillion which B.S. Bernanke helicopter-dropped onto the U.S. economy as the U.S. began monetizing its debt has been multiplied by the ratio-of-criminality of our “fractional-reserve system”: 35-to-1. Suddenly, that $4 trillion mushrooms to over $100 trillion, an amount equal to roughly double global GDP, and this is even without factoring in any interbank lending.
As was explained and demonstrated in previous commentaries , thanks to the combination of a 0% interest rate and fractional-reserve banking, U.S. Big Banks have been able to counterfeit literally infinite quantities of U.S. dollar funny-money . “Easy money” is a serious danger to any economy. Infinite easy money is a guarantee of complete economic Armageddon.
To summarize: everything that the puppet politicians, criminal bankers, and media drones have told us about near-zero, 0%, and below-zero interest rates is a lie. All of the “evidence” they have manufactured to supposedly show that these ultra-extreme interest rates are not destroying our economies is a lie. This leaves one, last point for discussion. Why?
Why have our Traitor Governments permitted the Big Bank crime syndicate (and their central bank lackeys) to impose these ultra-extreme interest rates on our economies – permanently – when it has always been completely obvious and absolutely inevitable that such a monetary policy would lead to the total destruction of our economies?
Here the answer to the question is the same as with most questions we ask about our corrupted economic policies. It is to facilitate the theft of all of our wealth by the Banking Oligarchs . The primary mechanism by which the central banks enable the theft of all our wealth is the financial crime they call “inflation.” This is not an assertion. Rather, it is an elementary fact, backed up the famous confession of the worst of these monetary thieves.
In the absence of the gold standard, there is no way to prevent confiscation of savings through inflation. – Alan Greenspan , 1966
There is no way to protect ourselves from the financial crime that the central bankers call “inflation”, as they steal from us on behalf of their Masters. The lower the interest rate, the higher the inflation rate – i.e. the faster the Banking Oligarchs can steal all our wealth. First it was near-zero rates, then 0% interest, now “negative” rates.
Faster and faster the Thieves steal our wealth. Bigger and bigger are the lies which our puppet politicians and central bank criminals engage in, in order to conceal the systematic looting of all the wealth from all of our economies. It is the single, largest economic crime-against-humanity in the history of our species.