President Trump tweeted against the FED. He demands the benefits of negative rates. As long as other countries have those benefits he wants it as well Which is interesting. As candidate Trump, he talked about artificially low-interest rates. But we should never forget that he is a real estate marketing guru. Doing unprecedented things. But he also has a ballooning But is this a gift?
No, it is not. Negative rates are supposed to so stimulate spending. But that is not happening. Just look at what happened in Japan over the last 30 years. But there is another example of negative rates as a failure. I’m talking about Switzerland. In the 1970s they had a recession. Due to the popularity of Swiss France, the export collapsed and the domestic industry did so as well. Simply said: the Swiss Franc was too expensive. So let’s have a look at what happened.
Before the recession, Switzerland had 81 unemployed people. At the peak of the recession it where 30,000 people. It took to the mid-’80s of the past century to recover. Despite a negative rate of over 8% on savings.
Some traders are positioning themselves for negative rates.
But Powell said, as FED chairman, that he is happy with the current toolkit and negative rates are no part of it. With all rate cuts, the effective rate is already 0%.
At the same time are Dollars printed at the highest rate of USA history. This as part of the 2,9 Trillion USD stimulus package. Since when is stimulus working? The stimulus failed us always. What will happen when the stimulus is over?
But the problem is bigger. The official USA unemployment is 14,7%. This is the highest since World War II. 40% Of American households with less than $40,000 in income have lost one, or more, of the jobs they have.
The smartest guys in the room, Goldman Sachs, is expecting that unemployment levels will exceed the 24,9% record of 1933.
To show that the smartest people in the room are wrong even more stimulus. After all is unemployment, a loss in income, and a loss in wealth very bad for spending. Anyone with money is doing everything to keep the money safe. To increase wealth, or at least remain at the current wealth level.
But this is something that you can do as well. Negative rates are destruction. But it is also the price society needs to pay for the monetary system we are in. I have outlined the investments I’ll make in the negative rates report.