Negative interest anyone?

[alaska55]

The Fed's next move? Negative interest rates—commentary

 

[Tadpole]

Is it tax deductible if your money market starts out at $1000 and ends up at $998? If so, it lowers taxes and people should love it.

 

[Senator]

Or they may raise rates anyway, hoping to start inflation. Raising rates might push people and companies to start purchasing items that were on hold. Or more money to be earned in savings accounts that can be spent.

Or raising rates might make the dollar way too strong. Our 10 year note yield is higher than Japan and Germany by ~1.5% now. Higher rates would force more jobs overseas.

The Fed is in a bind. They need wages to go up, not interest.

Outsourcing labor has been great for manufacturers in order to get cheap labor. Immigration (all types) to the USA has kept wages in the USA down. There is a huge surplus of labor in the USA. Without wage inflation, there is no inflation. Adding another $10 an hour to the minimum wage doesn't do anything if it causes less workers to be working, or less hours worked.

We need more jobs for unskilled labor in this country, the Fed is in a confusion on how to get that started.

 

[Totoro]

Negative interest rates for consumers won't happen. That would push savings out of the banking system into tangible cash.

Negative interest rates for banks, sure. Several countries have done that or are doing it.

 

[MichaelB]

The Fed's next move? Negative interest rates—commentary

A snippet or short explanation is helpful to members so they don't have to click on an external link just to see what the article is about.

The last paragraph from the link

What central bankers are creating is a perfect recipe for massive money supply growth and economic chaos. Therefore, if these strategies are followed, it will inevitably lead to a worldwide inflationary depression. And this is why having a gold allocation in your portfolio is becoming increasingly necessary.

 

[M Paquette]

Please bear in mind that the article is commentary, reflecting the opinions of someone who has something to sell to you.

What central bankers are creating is a perfect recipe for massive money supply growth and economic chaos. Therefore, if these strategies are followed, it will inevitably lead to a worldwide inflationary depression. And this is why having a gold allocation in your portfolio is becoming increasingly necessary.

Oh, massive money supply growth? And a worldwide inflationary depression? Haven't we been listening to this same old tune for several years now? Money supply doesn't affect inflation if it's all stuffed in mattresses/banks/Treasuries and not flowing through the economy. Velocity of money is a more significant factor.

By an odd coincidence the author just happens to run a portfolio management company that claims to guard against the ravages of inflation and deflation. He puts investors into equities (including gold miners, of course), a heap of cash (WTF?), and some lovely (expensive) options. He's only down 13.7% since June 1, 2012 on his Inflation/Deflation Dynamic Portfolio, not including his management fees and trading costs.

So, what safe withdrawal rate do you think you can get with that portfolio? You really want to follow his advice?