Central bankers embrace Negative interest rate wars

Don’t part with your illusions. When they are gone, you may still exist, but you have ceased to live.
Mark Twain

Central bankers embrace Negative interest rate wars

The “devalue or die” currency wars are picking up steam; Japan’s central bankers are not alone when it comes to taking rates into negative territory. A host of European nations are now joining the bandwagon, and the latest victim is Sweden.  

We alluded to this development a long time ago and published a multitude of articles on this topic.  Central bankers Worldwide understand that the only driving force behind the miraculous recovery in the U.S s hot money and that is the only weapon that can maintain that illusion. Get ready for negative rate wars; imagine having to pay the banks to keep your money; soon people will start to question the value of banks.

Must read: Currency Wars Intensify

Sweden’s central bank stated that they would continue to follow this path to achieve their targeted rate of 2% inflation in 2017. Our response is good luck dudes; this is not going to be possible for the velocity of money has dropped dramatically.  You have to create money and put it into the hands of the masses to create chaos, oops we mean boom and bust cycles.  This was the precursor to the subprime mortgage crisis of 2008.

They reduced the repo rate to negative 0.50% from negative 0.35%.  The Krona as expected dropped as that is really what the whole purpose of this exercise is all about.  Competitive currency devaluations are here to stay, and there is a race to reach the bottom.

The majority of economists at Bloomberg and the Wall Street Journal were expecting a rate cut, but they were not expecting it to be so steep.  In our opinion, this clearly confirms our long-standing argument that this entire economy recovery is nothing but one massive illusion.

Game Plan

When you keep flooding the markets with money, stocks rise and eventually the precious metal’s sector will catch fire. We might be witnessing the first stages of the next bull market right now. It is too early for us to confirm that a bottom is in place as the minimum requirement would be a monthly close above $1200. We would avoid jumping into Gold stocks, but getting into Gold and Silver bullion right now could be construed as a good idea. The downside is limited as they are both trading well off their 2011 highs and both markets are extremely oversold.

Secondly, consider compiling a list of top-notch stocks and use the current correction to open position in these stocks. Our central bankers will join the negative interest rate party sooner or later. Look at the bond market it has rallied in the face of interest rate hike. In fact, it is trading at new highs as we speak.  This is a signal that the Fed’s hands are tied and that sooner or later it will have to join the “negative interest rate club”. In this race, resistance is futile.

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7 Reasons America’s Economic Recovery Is Not Real  (Feb 1)