Q: How will negative interest rates affect the price of gold?
A: On a fundamental level and for obvious reasons, negative interest rates are another reason to own precious metal assets: they refute the objection that gold does not earn interest.
Q: Why have the BOJ and ECB gone to negative interest rates?
A: Officially it’s just a ramping up of the low and then zero interest rate policy designed to stimulate the economy, increase GDP and promote full employment.
Q: But Japan has been following this policy for twenty years without success. Why the continuation and ramping up?
A: I am tempted to quote Einstein: Doing the same thing over and over and expecting a different result is the definition of insanity.
Q: Are you saying that the world’s central bankers are stupid and insane?
A: No. The people that actually control and own them know exactly what they are doing, why and what the consequences will be. They are among the smartest. It is just that they have a different agenda. This was made clear to me during a 3 hour lunch on the top floor of the Bank of America building in San Francisco. I got the invite from the recently appointed president of a reginal Fed bank. He previously was a vice president of Wells Fargo bank. They have their own agenda.
Q: And what is that?
A: To advance the interests of the owners. This was expressly stated in letters from the president of the ABA to his member banks in the decades leading up to founding the Fed. It is the same policy today. They only have one central policy: advance the interests of the major banks that own them. Everything else is camouflage.
Q: How do negative interest rates advance the interest of the owners of the major banks?
A: It will speed up the collapse of the existing monetary system. It is an attempt to control the timing of the collapse and therefore control what happens afterwards. I do not think they will succeed. I think the future will be more prosperity and freedom for all of mankind. But then, I have always been an optimist. The trend over the last 50, 150 and 500 years has clearly been one of increasing freedom. The Soviet Union and chattel slavery has faded and now most women can vote. The information economy dictates a free flow of information. It could not prosper otherwise. The communist leaders of th USSR and Red China understood this. We should too.
by Arthur Fixed
[box type=”info” style=”rounded” border=”full”]Commentary from Arthur Fixed the author of the Art of Speculation during Civil War – Sun Tzu Meets Jesse Livermore is a private manuscript copyrighted 2012 by Art Fixed.[/box]
Photo credit: mandiberg via Visual hunt / CC BY-SA
Leave a Reply