Here’s an astonishing statistic; more than 30pc of all government debt in the eurozone – around €2 trillion of securities in total – is trading on a negative interest rate. With the advent of European Central Bank quantitative easing, what began four months ago when 10-year Swiss yields turned negative for the first time has snowballed into a veritable avalanche of negative rates across European government bond markets. In the hunt for apparently “safe assets”, investors have thrown caution to the wind, and collectively determined to pay governments for the privilege of lending to them. On a country by country basis, the statistics are even more startling. According to investment bank Jefferies, some 70pc of all German bunds now trade on a negative yield. In France, it's 50pc, and even in Spain, which was widely thought insolvent only a few years ago, it's 17pc. Not only has this never happened before on such a scale, but it marks a scarcely believable turnaround on the situation at the height of the eurozone crisis just a little while back, when some European bond markets traded on yields that reflected the very real possibility of default. Yet far from being a welcome sign of returning economic confidence, this almost surreal state of affairs actually signals the very reverse. How did we get here, and what does it mean for the future? Whichever way you come at it, the answer to this second question is not good, not good at all. http://www.telegraph.co.uk/finance/...urse-for-biggest-mass-default-in-history.html
Yeah, i was gonna quip last night in another related thread that if i can be paid to borrow then what is my max if my collateral is aother form of debt that i get paid just a little less to borrow and the collateral on that is likely to be in high demand and soon to go negative rate as well.
Competitive devaluations have been a government tool for centuries. Governments are just using the politically accepted way of manipulating their currency and economy via rates. There was big talk about Corporate Europe's "Refinancing Wall" was to be hit sometime in 2013-2014.. I'm sure they are benefiting right now.
Central banks have gone off the deep end. There has to be a method in the madness. Perhaps it's to take all government debt, engineer a mass default and then begin all over again.
These negative interest rates can become a real problem. Examples of these problems in Europe: People withdraw their money and put it in vaults. But the problem is that there are already banks who refuse to rent vaults to put cash money in. Cash payments are limited to rather small amounts. Buying a car and paying cash is already impossible in some countries, due to the law that forbids cash payments for amounts higher than 3000 Euro. Split payments are not allowed. If you take your money out of your vault and put it in a bankaccount to make a big payment that cannot be done cash, the bank will ask you where this money comes from. They have to report all cash deposits over 10 000 Euro to the Ministry of Finance. Check for money laundry or tax evasion. So the only thing that we will be able to do is pay the bank to keep our money in a bankaccount. And people who take a loan will pay again. So the banks will take money on both sides.
What would the upshot of mass default be? Governments could reduce taxes, no? I'd move to a jurisdiction that reduced taxes instead of expanding government, that would indicate a sounder future.
It is not as simple as that. The US has reduced income taxes the last decades...... for the rich people. Rich people pay 10-15%, but the middle class pays 30%. One of the results : Because taxes were reduced government had less money to spend so students have to pay now 15 000 $ for studying at the University whereas 30 years ago is was almost for free. So the students pay for the tax reductions that were given to the billionaires. Or in other words: to put money in the pockets of billionaires, the pockets of the students (or their parents) have to be emptied. Billionaires get richer and middle class get poorer. If you have time ( and if not, you should make time) to watch this video, a perfect analysis what happened with the US the last few decades. Should be an eye-opener for most people. http://www.politifact.com/wisconsin...-class-pays-higher-tax-rates-millionaires-se/
no worries as negative interest rates will be here shortly....the fed is backed up into a corner and with no more magic tools left the only way out of the next crisis will be taking rates negative, all the talk about raising rates is all lies, they can't raise the rates if they could they would have done so numerous times, the fed funds rate should be now standing at 4% but that is impossible with all the trillions of debt they carry now since propping up the economy and stock market with QE 1 QE 2 and QE 3, keep in mind any heavy drop in the markets or a recession or another crisis will have the fed panicking, there is no other way out of the next crisis since the fed has depleted all its "useful" tools....so the next step would be QE 4 and negative interest rates....of course no one is going to agree with this but its coming....
Just to clarify and add to your thoughts. The largest banks business is to run the world indirectly using government debt as slavery and hire lobbyists to pressure politicians to get legislation to match their needs. The banks get bailed out when a major crisis happens (that they helped to cause) and mainstreet takes huge hits in employment, housing, and net worth to pay the bonuses of the wall street banker workers in a tough year for them and "save the world". The (ministry of truth) media tells those same folks we are all better off (however, as in animal farm, some of us are a little more equal). Corruption abounds in society but little is done to fix it or bring perpetrators to justice (tragedy of the commons - like socialism.) All of us know this is going on but prefer to hope that it will get better because it is easier for us to hope than to take action to fix stuff. Banks (a spread business) will directly force (AKA directly tax) borrowers to borrow because the ZIRP policy decimates their spread business model and makes them unprofitable. Above all, even governments, we need healthy banks as we all know. Negative rates effectively are a positive feedback loop so if "they" lose control of cash there is an inevitable monetary/debt explosion IMO. And the people elect those politicians promising butterflies out of their a**** to fix the problem du jour. More bread and circuses. And so it goes until it can't go anymore. IMO, negative interest rates are a tacit admission that the BIS is out of bullets. IMO it is an attempt in the forex market to repair a bond market with bad liquidity due to ZIRP and derivative spreads. Without worldwide control of the base currency, negative rates MUST fail IMO. Some slave has to service the massive world debt (who borrowed the interest?) and it is not going to be the bankers or the government. There is no great mystery who it will be unless voters get control of their government and lobbyists. Look for another false flag or a scapegoat to attempt to deflect blame of a failed fractional reserve system. ... and boy I hope my thoughts are wrong.