Wednesday, February 10, 2016

The #Fed Likely Considering Negative Interest Rate Policy #NegativeInterestRates

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While public focuses on the 2016 Presidential election, they fail to recognize the growing risk within the global financial system. The Fed, stuck between a rock and a hard place, is likely considering adopting Europe and Japan's negative interest rate policy. That's right, soon the public could be paying for the privilege of holding cash at their banks. The Fed's inclusion of prolonged negative three-month Treasury yields in the coming stress tests reflects the growing probability of adopting this unorthodox and likely completely ineffective policy. Widening credit spreads, Deustche Bank stock collapse, market- rather than government-based indicators of confidence, suggest failing confidence and growing worry within the financial system.

Make no mistake, if a negative interest policy is adopted globally, US pensions, largely dependent on debt, will blow up. That's only a matter of time. The Fed understands this reality. If they take interest rates negative, thus, abandoning domestic objectives, it's a clear sign that they're worried about an international contagion spreading from Europe.

Headline: Why the Fed's Interest Rate Plans May Get Turned Upside Down

This year was supposed to be when everything went back to normal. Instead, the economy could get a lot weirder.

After years of of near-zero interest rates, it appeared the Federal Reserve would able to guide its benchmark short-term interest rate close to 1% by year’s end. Sure, that’s low by historical standards, but rhetoric coming from the Fed and many analysts on Wall Street was that in 2016 the price of money would begin to rise back to levels that we were used to before the financial crisis.


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