KW: So here we have it, panic in the Reserve Bank of New Zealand. Probably rightly so too. But slashing interest rates at this time is going to do what? Encourage budding entrenprneurial business people to go out and borrow $500, 000 to buy a new Kenworth logging truck with the industry in chaos? Encourage a young fashion designer to borrow $150,000 to set up a new retail chain? (maybe that should be $1,500,000 for that). The problem is that cutting interest rates like this DOES NOT work any longer as it does not affect the economy. Its a kneejerk response that only a central banker can think will cut the mustard befalling the global economy. They have no other ‘weapons’ in the monetary policy bag of trickery so this is all they can offer plus the liklihood of the RBNZ being the buyer of last resort for government bonds in the future becasue no one wants to buy them as an investment individually. It’s been tried in Japan and now the JCB is the biggest owner of bonds and stocks in the Japanese market, all fake yen (money). And negative rates don’t work as central bankers think. Despite what many academics believe, people don’t spend more, they actually save more. And fiscal policy doesn’t stimulate when the debt-to-GDP ratio is greater than 90%. We are heading that way in NZ and the Western world is drowning in new debt since the 2008 GFC crisis which is now playing out as a continum of that very unresolved crisis in 2020. So we are heading the same road to destruction with this clueless response that has taken to stealing the interest earned on savings to a new low. It makes ‘saving for your retirement’ via KiwiSaver a complete farce and is forcing savers mostly retired people trying to get by and an income from their accumulated wealth, into high risk investments such as shares that remain significantly over priced and risky to own. What a bad call. The one thing we all should count on is that authorities are going to limit more of our freedoms and liberties with regulations like the withdrawal of currency as an option and things similar. Power leaves the people to be placed into the gray hands that manipulate your lives. Could this be the start of a cycle of stagflation that many commentators have spoken about over the past few years? Frightened fund managers such as Deutsche Bank AG, global head of currency research George Saravelos has a wish list that includes fiscal stimulus “on the order of magnitude of the Lehman crisis, above 1% of global GDP,” he wrote in a note on Monday. Central banks should “offer to buy risky assets including equities and corporate bonds, at least temporarily, and as soon as this week,” he added, in order to alleviate liquidity risks in markets. Risky assets such as equities are what our financial advisers have been forcing down everyones throat over the last few years in the make beleive that this was only a one way track.
Now Central Banks the world over have gone to Zero interest rates plus a $700billion FED quantative easing program to purchase assets with money made out of thin air (printed currency). Trump is happy as he doesn’t want a crisis on his watch. They have also abolished the amount that banks need to hold in Reserves to Zero. What? It is disgraceful.
“The negative economic implications of the COVID-19 virus continue to rise warranting further monetary stimulus.”
Also: Mike Maloney: The FED has lost Control
Proof the FED has lost Control