February 23, 2016

Why Negative Rates Can't Stop the Coming Depression

Negative rates - Lenders give their money to governments… who swear up and down, no fingers crossed, that they’ll give them back less money sometime in the future.

Is that weird or what?

At least one reader didn’t think it was so odd.

“You pay someone to store your boat or even to park your car,” he declared.

“Why not pay someone to look out for your money?”

Ah… we thought he had a point. But then, we realized that the borrower isn’t looking out for your money; he’s taking it… and using it as he sees fit.

It is as though you gave a valet the keys to your car. Then he drove it to Vegas or sold it on eBay.

A borrower takes your money and uses it. He doesn’t just store it for you; that is what safe deposit boxes are for.

When you deposit your money in a bank, it’s the same thing. You are making a loan to the bank. The bank doesn’t store your money in a safe on your behalf; it uses it to balance its books.

Read more at http://dailyreckoning.com/why-negative-rates-cant-stop-the-coming-depression

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