How Can Negative Interest Rates NOT increase Gold Demand ?

[gunDriller]

I have a feeling about the negative interest rates.

It is like in a gravitational model. If you have a model of a static system at equilibrium - like a bunch of toys at rest in a child's room, and you suddenly REVERSE FVCKING GRAVITY, it certainly does affect the model ... everything floats up to the ceiling.

There is a HUUUGE difference between a zero or super-low gravity, and a negative gravity.

Pretty sure that also applies to interest rates.

In any case, many of us at G-S.us didn't need negative interest rates to recognize the need for unencumbered wealth - the kind of wealth that has no counterparty risk.

But if I was a big company with millions or billions in cash - and I was suddenly told that my cash hoard was going to be whittled away by the bank if I kept it at the bank - I would take it out of the bank, and put it in my own vault.

I would keep some in FRN's, and most of it in Gold and maybe Silver. (Depends how much you want to get into working the Gold-Silver ratio.)

Obviously, there are risks with vaulting - but far preferable to leaving it in the hands of JP Morgan Chase.

So, here we are. Another article about Negative Interest Rates -

http://www.bloomberg.com/news/articles/2016-02-10/how-low-can-central-banks-go-jpmorgan-reckons-way-way-lower

"So in this brave new world, how much lower can rates now go? According to an analysis published late on Tuesday by economists at JPMorgan Chase & Co., way, way lower.

Having studied the lack of fallout in Switzerland, where the benchmark rate is minus 0.75 percent, Malcolm Barr and Bruce Kasman reckon the trick lies in a tiered system as already deployed by the Bank of Japan and in some places of Europe, whereby only a portion of reserves are subjected to negative rates.

On that basis, they estimate if the ECB just focused on reserves equivalent to 2 percent of gross domestic product it could slice the rate it charges on bank deposits to minus 4.5 percent. That compares with minus 0.3 percent today and the minus 0.7 percent JPMorgan says it could reach by the middle of this year.

The Bank of Japan’s lower bound on a similar basis may be minus 3.45 percent, while Sweden’s is likely minus 3.27 percent, the economists said."

Brave new world ?! How about insane bankers cesspool ?

They actually think people are going to put their money somewhere where they lose money ? Why don't they just have executives walk around Harlem getting pick-pocketed ?

They say the theory is that people will "put their money elsewhere". Yeah, well - like Gold and Silver. Maybe the stock market - after it crashes 75% and there are some reasonable valuations.

I have a feeling that in 50 years, as economic students study the late 20th & early 21st centuries, and build whatever models are appropriate, central bankers taking interest rates negative will begin to look like a Caltech party where physicists get drunk and mosey down to the lab and take one of their 3D models of a black hole - and make gravity negative - a repulsion force instead of an attracting force.

That might be funny if you're a drunk physicist at Caltech, at a holiday party. When the model breaks and everything goes flying, well, it's on a computer, and it might make some cool-looking animations you can show your friends.


Reminds me of that movie "Dumb and Dumber". Maybe call it "Crazy and Crazier" - the bankers are crazy; the general public is crazier for going along with their nonsense.

Maybe the general public will catch on if the bankers get too insane ?

[Neuro]

I don't think negative interest rate is possible for USD, at least not as long as it is considered worlds reserve currency. But the fact that it is close to 0% has pushed the other currencies in the basket which makes up the USDX (Yen, Euro, Swiss Franc, Swedish Krona) into negative territory, I think it is only GBP and CAD that still has positive interest rates...

[Twisted Titan]

You know who will be a huge winner?

Casinos.

I can see there new slogan now.

Put your money here and you MIGHT lose.

Put your money in a bank and DEFINITELY lose.

[gunDriller]

I don't think negative interest rate is possible for USD, at least not as long as it is considered worlds reserve currency. But the fact that it is close to 0% has pushed the other currencies in the basket which makes up the USDX (Yen, Euro, Swiss Franc, Swedish Krona) into negative territory, I think it is only GBP and CAD that still has positive interest rates...

I agree with you.

Based on the sounds they make when they open their mouths, the insane bankers don't.

[Neuro]

I agree with you.

Based on the sounds they make when they open their mouths, the insane bankers don't.
I think sitting in ivory towers far removed even shielded from reality for decades drove them insane. The Towers should have collapsed in 2008, but they have since then grown much taller...

[Jerrylynnb]

Gundriller, when you say, "It is like in a gravitational model...", and go on to discuss "negative gravity", that sparked my attention deep.

I have been befuddled with this "negative interest" for some time now, and, I admit that I just flat didn't understand it. Your comparison slapped some sense into me, and, I think I might be seeing things a little better.

Remember, in the real physical world, there is NO SUCH THING as negative gravity. Only in our imagination can we concoct such a thing, and, we eventually will come up with a contradiction should we explore that imossibility to its logical ends.

So it MUST be in the financial world.

Money can NEVER be unwanted to the point that you will pay NOT to have it, and CHARGE someone for letting you USE IT. That is a practical impossibility. The only logical explanation I can come up with is that the financial powers that own and issue MONEY (the Fed, the bank of england, etc.) are playing mind games with us - they are promoting the idea of negative interest as a ploy to infect the minds of the public with the idea that money is not only worthless, but actually UNDESIREABLE to hold, to the point that they are watching the general public struggle to rid themselves of cash.

I don't believe it. I am not smart enough to have this all figured out down to the tiniest detail, but, I flat reject the idea that money, especially the yankee dollar, is worse than worthless. No sir, I suspect, what with the new technology where money can be created AND DESTROYED with the flick of a computer keystroke, that the FED is trying a psychological ploy to herd the sheep into a corral where they will be without cash so when the FED pulls the rug out from under us (greatly reduces the total REAL money supply), they will have a massive new number of willing slaves to serve them.

Negative interest is something that disturbs the mind (like negative gravity), and, leaves logical thinking minds befuddled. I admit that I really am lost trying to figure all this out, but, I smell a RAT coming from these super deceptive and clever thieves who control the yankee dollar. They're up to something no damn good and we are all going to feel like idiots when they play their hand out in real time, asking ourselves "why couldn't we have seen this coming?"

[Jewboo]

Banks could only earn a profit by skimming interest off each electronic or physical paper transaction. Payroll for tellers and expenses for maintaining the electronic data centers. With "zero interest" now they have no way of making a Loan profit so they must now charge STORAGE FEES for your cash deposits that they can no longer loan out.

[gunDriller]

Gundriller, when you say, "It is like in a gravitational model...", and go on to discuss "negative gravity", that sparked my attention deep
...
I don't believe it. I am not smart enough to have this all figured out down to the tiniest detail, but, I flat reject the idea that money, especially the yankee dollar, is worse than worthless.

It's sort of like Heisenberg's uncertainty principle.

If you try and pin down every detail, you might finish in 5 years. But interesting things are happening today.

Not trusting the US $ as a store of value is sort of, the short version - and quite possibly, good enough.


One thing that helped me respond to the interesting events of 2008 was the Washington Mutual stock price. I had been with Great Western Bank since 1975. WaMu bought Great Western and Home Savings. I had 16 ounces of Gold in a safe deposit box in San Diego, and lived in NorCal.

I was thinking, "I have to make that drive" when Washington Mutual was down to a $20 Billion market cap.

I got more and more worried as the market cap fell. $10 Billion during the summer.

By the time I made the drive, it was $5 Billion.


The stock market may not be good at honest pricing but it is decent at identifying impending bankruptcies of large banks.

Is it still a good canary in the coal mine, in 2016 ?

For example, Europe's JP Morgan Chase, Deutsch Bank - their market cap was down to $20 Billion on Tuesday. Lower than it got in 2008.

http://finance.yahoo.com/echarts?s=DB+Interactive#{%22range%22:%225d%22,%22 allowChartStacking%22:true}

Because they are 4 times bigger than WaMu - with a whole lot more derivatives - what size stock market valuation for them is, EXTREMELY ALARMING ?


With Washington Mutual for sure, $5 Billion was Extremely Alarming. If a situation forces you to drive 600 miles, with an urgency comparable to escaping death by drowning on a big wave - that's alarming.

I removed my Gold and closed out the safe deposit box on Saturday September 2008. WaMu ceased to exist on Thursday September 25, 2008.

For sure, something simple like stock market valuation of a bank helped me navigate the interesting times of 2008.

[Half Sense]

They've already determined they can go -10% or more and people will hold still for it if they do it incrementally. Just don't give the sheeple a big enough overnight change to make them rush out of the system...while making it increasingly difficult to GET out of the system...and most people will be increasingly pissed but the alternatives to getting slowly robbed by the banks will all suck. All escape routes will position you as a criminal or terrorist.

[madfranks]

Money can NEVER be unwanted to the point that you will pay NOT to have it, and CHARGE someone for letting you USE IT. That is a practical impossibility. The only logical explanation I can come up with is that the financial powers that own and issue MONEY (the Fed, the bank of england, etc.) are playing mind games with us - they are promoting the idea of negative interest as a ploy to infect the minds of the public with the idea that money is not only worthless, but actually UNDESIREABLE to hold, to the point that they are watching the general public struggle to rid themselves of cash.

In an honest monetary system, this would never happen, for the reasons you explain above. In a fiat money system, with a central bank which controls the supply of money and issues it at will, they can make the interest rate whatever they want. Interest rates are no longer discovered by market forces; the central bank has the power to declare 50% interest, or -50% interest, and although they never would, it illustrates just how much power they have. And because the central bank is filled with hardcore Keynesians who truly believe that to stimulate an economy all you have to do is get people to spend their money instead of save or invest it, they believe that by penalizing people with negative interest rates, which actively makes their money worth less the longer they hold it, this will incentivize people to spend all their money and stimulate the economy. They don't understand that savings and investment need to come first, before economic growth, they think the primary driving force of growth is spending.

[palani]

The gold standard fell because gold is bulky, because there is not enough gold to fund all of society, because people hoard gold.

The silver standard fell because silver is bulky, because there is not enough silver to fund all of society, because people hoard silver.

The fiat standard fell because ink and paper is cheap, because strings are attached to the use of fiat (taxes, negative interest) and because there is not enough fiat to heat your house in winter.

The bitcoin standard fell because ... it is virtual.

Livestock always succeeds because ... you can eat them, their eggs, their milk.

[Twisted Titan]

When this ends ....Their will be much weeping, wailing and gnashing of teeth for the holders of paper instruments

[Neuro]

The gold standard fell because gold is bulky, because there is not enough gold to fund all of society, because people hoard gold.

The silver standard fell because silver is bulky, because there is not enough silver to fund all of society, because people hoard silver.

The fiat standard fell because ink and paper is cheap, because strings are attached to the use of fiat (taxes, negative interest) and because there is not enough fiat to heat your house in winter.

The bitcoin standard fell because ... it is virtual.

Livestock always succeeds because ... you can eat them, their eggs, their milk.
But, but they put ranchers in prison for trying to protect their rights to ranch...

[palani]

But, but they put ranchers in prison for trying to protect their rights to ranch...

They put ranchers in prison because they participate in the social (in)security ponzi scheme. Bonds are created and paid for by the SSN ... making the rancher the cattle .... he is meat on the hoof and this is how they make money on him.

Everyone is where they are by the law of their being.

[gunDriller]

Livestock always succeeds because ... you can eat them, their eggs, their milk.


And you can use their droppings to build the soil.

I just got a quote for manure, $250+ for 10 cubic yards, and, none in stock.

3 years ago, it was $125 for 10 cubic yards.


I have a garden area that has really crappy soil. I was going to put some crap on it to make it less crappy :)

One of my garden rituals involves transporting the chicken manure to the worm castings pile.

If I was smarter about it, I'd put the worm castings right under the chickens.


Anyway, people pay big $$ for premium garden supplements - bat guano, seabird guano.

I think my chickens produce better guano than seabirds, but I guess I have to prove it if I want $10 for a 4 pound bag.


I have heard of people paying $1500 per cubic yard for earthworm castings. Seems like $600 is the more normal price.


I wonder if there's anything significant about the Gold-Guano price ratio ?

[palani]

I wonder if there's anything significant about the Gold-Guano price ratio ?

You can read up on the Durham Trust here

http://www.tidefans.com/forums/showthread.php?t=7934


the Bill of Lading known as the Contract or Bonus 3392 was not secured by those looking to cash in on this issuance of debt, and it was listed as being among the debts of Peru assumed by an Agreement of the United States government via the Department of Agriculture with regard to The Guano Act of 1856 and other acts and agreements. The debts of Peru were assumed as being ours, and many of them were paid in gold at that time.

Definitely a tie-in between guano and gold.