Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

ECB Cuts Base Interest Rate. So What?

Interest-Rates / ECB Interest Rates Jun 06, 2014 - 01:49 AM GMT

By: Jonathan_Davis


I won’t bore you with the minutiae just a couple of details:

BBC website

The ECB has cut the Base Rate by the staggering amount of, er, 0.1% to 0.15%.

Also, banks depositing funds at their Central Bank (the ECB) will be charged 0.1% for the privilege.

There were other announcements, including an extra €160Bns of QE.  They’ll buy doubtful debts off banks.  Think about that.  The banks loaned to any wally with a business idea.  That the loan will go sour is of no issue because the Central Bank will buy from the bank at 100c on the €.  The bank loses nothing. yet it recklessly loaned.  The banksters got their fees and bonuses.  No-one loses, right?  Wrong.  Those who hold the Central Bank’s liabilities will pay.  Who?  The next generation.  Sickening.

Back to the interest rates.  Firstly, let me point out that I lave been saying for ages that rates will more likely fall than rise – to much merriment and laughing of 49 out of 50 commentators.  See, for example, here, from April.

So, what will these cuts do for us?

One word – nothing.

If you have a mortgage or a business loan and you are told the cost will fall by 0.1% p.a. will that improve your position?  Will it Hell.  Will you invest more, spend more etc etc?  Of course not.

It’s not about you.  It’s about the bankers – the paymasters to the politicians.  You see the banks have, collectively, hundreds of trillions !!! of $ of interest rate derivatives.  These are so finely priced that they need cuts in interest rates.  Otherwise the banks will go belly up.

And yes, it’s going to happen anyway.

What happens when we get to 0.01% Base Rate and the ECB can’t go any lower?

That’s when banking will be in the state of collapse it should have endured in 2009.  That would have been Capitalism.  But oh no.  The bankers persuaded the corrupt politicians to bail them out.

Base rates were slashed. In the case of the UK from 5.0% to 0.5% within 6 months.

And Marxism/Fascism took over.

To simplify Mussolini: Fascism is the merger of Corporation and State.  This is obviously what is increasing.  And no, there is no practical difference to you and me between Marxism and Fascism.

So, the cuts in rates will not help the real economy.  Only the one directly or indirectly related to the banksters.  So, what happens next?  As I’ve long said, the next time there is a global economic shock Base Rates will fall to effectively 0.0%, there will likely be Bail Ins (deposit confiscations*) and massive borrowing again – from our grandchildren this time – and handing over to banksters again.

*   There’s your negative rates that some of you were wondering about.

So the banking economy will again be bailed out.  But this time they will not bail out the real economy which is dependent on ever lower and lower borrowing rates.  They’re already near rock bottom.

#30YearDepression is coming.


The evidence continues to build that we are experiencing long term deflation and asset price collapse and massive reductions in those you call Middle Class.  See here. That’s probably you.

No-one will bail you out.  Your responsibility is to protect yourself.  We might be able to help there…

Nothing in these articles can be taken as financial advice.   Neither Jonathan Davis nor Jonathan Davis Wealth Management will be held responsible for action taken or not taken from reading these articles.

We recommend investors seek bespoke advice before acting.

By Jonathan Davis

25+ year veteran of the world of financial services, the last 10 doing the same thing under his own name.  We work with families all over the UK and in Switzerland and, indeed, on 2 other continents. If interested in our Wealth Management work, cast a glance at the firm’s website.

From time to time media folk call me and ask me to rant live or in the press.  JD in the media.

I don’t buy hype.  I don’t believe it’s the end of the world but I do believe, within a generation, the West will have no welfare state.  The maths don’t lie.  We’re toast.  It’s obvious if you think about it.

© 2014 Copyright Jonathan Davis - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in