June 22, 2016

From ZIRP to NIRP but the economy is still dead

ZIRP = Zero Interest Rate Policy; NIRP = Negative Interest Rate Policy

At a press conference last Wednesday, Federal Reserve Chairwoman Yellen admitted that the Fed would consider using “helicopter money” in an extreme downturn. It’s a phrase used to describe when governments print massive sums of money and then “drop” them on the economy… hoping for the best.

This all means that today, you can supposedly create real economic growth right out of thin air. Just print the money and start giving it away for free.

It’s fake money of course, but we pretend it’s real. See how easy it is to hoodwink the masses?

To comfort the proletariat, Yellen said that “helicopter money” would only happen in “abnormal” circumstances. In other words, count on it. Helicopter money is coming the moment the S&P 500 takes a downturn of any note.

How the Hell Did We Get Here?

Ever since the dotcom bubble, the Fed and other central banks have tried to force banks to lend more to spur economic growth coming out of financial crises.

What if the growth is fake or unsustainable? No matter. Pay for it another decade.



They started with zero interest rate policy (ZIRP). But that money hasn’t gone out into the real economy. It’s remained with the banks.

And what a great deal for them! They borrow for zero then use the cash to make billions scalping every day using high-frequency trading.

When ZIRP didn’t force people to invest in Timbuktu condos, central banks in Europe and Japan moved to negative interest rate policy (NIRP).

The thinking goes that NIRP would surely force people to borrow, spend and buy those Timbuktu condos instead of paying interest on their savings.

Think about how crazy all this is. Force average citizens to choose between paying interest on their savings or investing in casino investments engineered by the central banks to collapse at any moment.

But none of this is working–whatever the hell “working” means to people like Yellen.

Savings rates in NIRP countries are actually going up. And in Japan, fearful citizens have started hoarding cash. The Japanese are buying safes in record numbers? You bet.

So what do you think people will do when Yellen makes like Santa Claus and starts handing out free money?

Do you think that will instill confidence in consumers to spend more as opposed to saving for what they instinctively know is a coming meltdown?

Do you think the Fed’s actions will encourage companies to make additional capital investments in their businesses instead of hunkering down for the collapse they also know is coming?

“Helicopter money” is the Fed signaling to the world: “Yeah, we’ve lost control. We have no idea what the hell we’re doing.”

A Colossal Failure

Read more at http://dailyreckoning.com/another-bat-crazy-move-fed


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