Lagarde had the audacity to state that negative rates are good for the global economy. I guess, she forgot about all those people who are on fixed incomes and for whom a small move up or down can mean the difference from making ends meet or not. Instead, she goes on to give some SOB story about how things are better now that we have negative rates. Well, my dear, negative rates only fuel speculation, and if you are playing the markets and know how to play them, then you have a chance of doing well. The only people that fall into this category, for the most part, are the very people that already have more money that they could every possibly need. Translation, the average Joe, will continue to get screwed unless he jumps into the stock market before it’s too late. At this point, the average person needs to understand that the stock market will continue to rise because negative rates fuel speculation at the corporate level.
“If we had not had those negative rates, we would be in a much worse place today, with inflation probably lower than where it is, with growth probably lower than where we have it,” she told the broadcaster.
“It was a good thing to actually implement those negative rates under the current circumstances.”
Yeah good for whom; good only for the people you serve Lagarde and not the average person who is now struggling to make ends meet. Everything continues to rise, well things that matter, food, education, medicine, and rents. In the meantime salaries continue to drop, and right now $21.00 is equivalent to $4.00 in 1973. In fact, salaries have been trending downwards for the past several decades.
Negative rates in Sweden have fuelled a property bubble and will most likely fuel another one in the U.S the moment lending standards are lowered. We already have subprime loan crisis waiting to occur in the Auto-loan industry
We have been stating all along that it is just a matter of time before our Fed decides it’s time to embrace negative rates. Yellen made this comment regarding negative rates recently;”I guess I would judge they seem to have mixed effects, you know, some positive and some negative things,” she said.
The Fed, for its part, is “certainly not actively considering negative rates,” she went on to add. Keywords to pay attention to are “actively and considering”; this means that they could reconsider and move from inactive to active.
A simple overview of what Negative rates entail for the average Person
When you keep flooding the markets with money, stocks rise as it forces people and corporations to speculate. Corporations love this environment as it allows them to borrow money for next to nothing and then use to initiate share buyback programs. This raises the EPS and in the process, corporate officers get higher bonuses.
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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