The US Fed recently admitted contemplating it, now half of Europe is doing it, and bets are firm for Tuesday that Australia will head towards it. NIRP (negative interest rates policy) is the new ZIRP (zero interest rates policy). The US has been on ZIRP now since soon after the GFC, desperately trying to dissuade saving and promote debt fuelled risk ‘investment’. It has done a wonderful job of driving up financial assets (shares, bonds, property) enriching the rich, but left retirees and other savers with nothing. Wall Street wins, Main Street suffers. But it’s also not working for the broader economy. So what does a desperate central bank do to force growth and inflation? ZIRP it. That’s right, you PAY for the right to hold Government Debt. Negative yield. The table below should be nothing short of alarming, showing over half of all European issued sovereign 2 year debt yielding negative returns, and as we reported in today’s Weekly Wrap, Sweden is taking it to a whole new level. So if you have to pay the bank to hold your money it would see people not banking cash right? Denmark are one step ahead and proposing banning cash – forcing it’s citizens to bank their money so they can purchase on cards etc. Extraordinary stuff, and clear signs of a financial system in disarray. As we reported a couple of weeks ago, a Fed spokesman said they had discussed NIRP in the past but were afraid of what might happen. That it has been implemented for some time now in Europe and nothing has broken means they are no longer afraid of it if they need to. He seemed to gloss over the fact even NIRP is not working in Europe as just last week the ECB flagged even more QE (money printing) to try and spur on growth and inflation. There has never in history been a clearer difference between currency and money. Gold and silver are money, the rest is pretend MUSIC.
I just love the sound of zirp and nirp. It sounds like zombies gargling. God preserve the Zombie Fulfillment Centers!
Ok, so just for kicks... Let's say this plays out. How do we see this unwinding when the rent comes due? Comments, theories, crackpot ideas and conspiracies all welcome. To be honest, it seems the best thing to do is keep acquiring assets and leveraging them to create cash flow until it falls out - and then ask the government for bailout on the ones we haven't paid off yet (sound familiar?) I just don't see how anyone recognizes the fact that we're seeing massive inflation or maybe they're just trying to mask it and keep it going while everyone is distracted with oil prices and elections. Of course not in fuel prices - but everywhere else. Seen any dollar value prices left at the fast food joint? Seen the price increases at grocery store and restaurants? Seen the tax increases? Isn't this inflation? Moreover, how would or could this affect PM holdings? Physical - not paper.
I see Milk still about $3.00 a Gallon for the last 10 some years, I see veg's about the same prices. Salmon about the same pound price forever. Candy Bars etc garbage yes, fast food is garbage yes and people should not support fast food as they do again supply and demand is all that is. To be honest household items are about the same. More supply and demand houses yes, up in price overall from 20-30 years ago, cars up but this is supply and demand issues. The bottom line unless The Dow drops in points(1000's) over, this that and the other which it will at some PM's will get beat down from 2011 Trade Levels.
But not because of inflation. Beef would be up even in a deflationary environment. On the flip side 60" TV's are down, and again, that is not evidence of deflation. They would be down even if inflation was at 10%. Not all rises in prices are a result of inflation.
TV's, tablets and phones are in a saturated market. The big jump was to HD over the last 10 years and flat screens from CRT's. From now on it's business as usual and a few upgrades as the years go on. I've got a 46" that is going on 8 years. Still works fine and has a bright clear picture. The biggest cost is the human factor. Labor rates, healthcare and government are all up substantially. This is the inflation that nobody is paying attention to. This is why I continue to call it "Stealth Inflation"
But not all that stuff is inflation. Just as an example, let's take government since you mentioned it. Gov spending continues to rise and sooner or later the tax payers pick up the tab. It will come out of your pocket and mine. No argument there. Now that is problem, but it is not inflation. You have to ask why the spending goes up. If it was going up because bridges and roads cost more to build, now that would be inflation, but that is not the case. The reason is Washington simply has a spending problem and it is not related to inflation. It would be similar to your wife going out and buying a new pair of Louboutin's every other week. Yes there is more money coming out of your pocket, yes you are paying much more for shoes, but the reason is Not inflation even though the net result for you is the same.(Less money in your pocket)
Buying a more expensive item is not inflation. Government charging more for the same service - or anyone charging more for the same service or item is inflation - by definition.
You are incorrect, I will just give you one example, but I could give you hundreds. Remember cash for clunkers. Perfect example of wasteful spending. For those who took advantage of that, they received an increase of government services, for the rest of us, well we just got the bill. The cost went up for us because of a wasteful NEW service, NOT because of inflation. The fact that you didn't receive the increase of service does not mean it didn't exist. When you can prove to me the SAME bridge cost more to build and that is why Gov costs are going up, then we can talk inflation. Until then, Wasteful spending does not equal inflation. It is also very important to understand this difference if you want to tackle the problem. If you incorrectly assumed that you were dealing with an inflation problem, the fix you apply would most likely be wrong. Standard "inflation fixing " methods like raising interest rates would do little good, in fact it would be harmful, when the correct fix is simply to stop running up the master card on thing you don't need and can't afford.
It appears that David Stockman is seeing deflation ahead. At least that's how it reads to me. . http://davidstockmanscontracorner.com/powdering-the-gdp-pig-there-was-no-escape-velocity-inside/
The Oakland San Francisco Bay Bridge was completed 10 years late and $5billion over budget - after drastic "cost cutting" measures. At the end of the day, this is inflation. Whether it's wasteful or not is subjective.
REALLY 10 YEARS LATE...WOW .. That was not the bridge they was shaken in the earth quake was it Brett? The Oakland San Francisco Bay Bridge was completed 10 years late and $5billion over budget - after drastic "cost cutting" measures. At the end of the day, this is inflation. Whether it's wasteful or not is subjective
Two things, first, there was certainly inflation over the last 10 years, Ten years ago we were running at 2.5% clip. The disagreement is about current day inflation which I believe is very low. The second thing is you argument makes little sense. What does being over budget have to do with inflation? They may have budgeted for X amount of dollars, but just because they bridge cost more than they WANTED to pay, does not mean inflation was involved. It is just like if you are buying a car. You may say your budget is $18,000, and that is all you want to pay, but if you select the Buick instead of the Hyundai and go over budget by $10,000, that has little to do with inflation.
You said show you the same bridge that costs more than it did before. I did. In all seriousness, The inflation I see is in the service industry, and definitely in restaurants. All restaurants raised prices by about 15% in the last 3 years to cover the new healthcare mandates and mandatory wage increases. This is inflation. Exact same items going up in price due to increases in production and labor cost. The bridge, well... California Government was in charge. Need I say more.
It goes deeper than that. Annual "cost of living" increases are nothing but inflation. Minimum wage increases are inflation. Sales tax percentage increases are inflation. Fee increases on licenses and permits are inflation. The same goods or services at a higher price. I don't understand the need to continue perfuming this pig. Oil is offsetting a lot of the noticeable increase in daily cost of living - but I see through it (especially since I went from a 40mpg car to a 20mpg car!)
