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<p>[QUOTE=&quot;InfleXion, post: 1657792, member: 29012&quot;]Not negative interest rates, negative <u>real</u> interest rates. The real interest rate is the interest rate minus the inflation rate. Interest rates can be positive but if inflation is higher than that then the real rate is still negative, and thus even with gaining interest on your money from the bank you are still losing to inflation in a negative real interest rate environment. In this case people will seek out a better return than sitting on their devaluing cash. </p><p><br /></p><p>In a positive real interest rate environment it is desirable to hold cash that is earning you value that outpaces inflation, and so people will not seek out alternatives such as metals or stocks to the same degree. </p><p><br /></p><p>As long as people are punished for saving their cash there will be demand for metals as a hedge, and as long as inflation is greater than interest rates anyone holding metals will be rewarded.&nbsp; </p><p><br /></p><p>Also remember that QE was the direct result of interest rates hitting zero. When interest rates cannot be lowered then money must be printed to get below the zero line. With positive real interest rates people are rewarded for having money in the bank. With negative real interest rates people are punished by inflation from money printing.&nbsp; </p><p><br /></p><p>They can raise interest as high as they want, but they cannot feasibly raise it higher than the inflation rate at this point, because raising interest rates at all would remove a substantial profit driver for the too big to fail banks which re-loan that near zero % (free) money to folks like us for 3-4% because we can&#039;t go directly to the Fed like they can. Without ZIRP (0 % interest rate policy) these banks would require bailouts, which would necessitate money printing, and thus any rise in interest rates would cause that much more inflation. </p><p><br /></p><p>Some might say that banks could simply increase the % they are charging on the loans, but this would inhibit loan requests and impact their bottom line through lack of demand, because high interest loans are not as desirable for the customer. </p><p><br /></p><p>Until the financial system is not dependent upon ZIRP for solvency there is no way that real interest rates can be positive.&nbsp; </p><p><br /></p><p>I completely agree with you that any rise in interest rates would inundate us with even more unpayable debt, and so it is also not feasible for that reason.&nbsp; </p><p><br /></p><p>Their goal is to extend the current system for as long as possible. We know that the debt/GDP ratio is not sustainable, and that median household income is stagnant in contrast to an ever increasing tax payer burden. Raising interest rates would accelerate the unwavering path we have embarked upon. Stopping QE would cause a mass exodus from mortgage backed securities (directly propped up), bonds (directly propped up), and stocks (the non-metal hedge against inflation) as the big players react to the prospect of no more free money and go into risk-off mode, pulling the plug at what would be perceived to be the top of the markets. This would necessitate more QE to get back to the new normal and stave off what 2008 was only a preview of. </p><p><br /></p><p>This also extends the amount of time we have to continue to buy undervalued metals in preparation for their return to sound money which will be not because anyone wishes them to be, but because that will be the only way to restore stability after fiat currency runs its inevitable course.[/QUOTE]</p><p><br /></p>

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