Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Critical Fibonacci Extensions May Mark End Of Trump Stock Market Rally - 29th Mar 17
Ending Syria’s Nightmare will Take Pressure From Below - 29th Mar 17
Charts That Reveal US Real Employment Status and It’s Not Good - 29th Mar 17
SNP Controlled Scottish Parliament Demands Right for Scotland to Commit Suicide - Indyref2 - 29th Mar 17
USD Gold Myriad of Signs - 28th Mar 17
Ominous Social Trends That Will Shape Our Future - 28th Mar 17
Foundation And Empire: Is Donald Trump The Mule? - 28th Mar 17
Top Ten US Dollar Risks - 27th Mar 17
The Popularity of Gambling and Investing Amongst Students - 27th Mar 17
Is Political Betting on the Rise? - 27th Mar 17
US Stock Market Consolidation Time - 27th Mar 17
Russia Crisis - Maps That Signal Growing Instability and Unrest - 27th Mar 17
Goldman Sachs Backing A Copper Boom In 2017 - 27th Mar 17
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

Where to Hide Your Money From Reckless Governments

Stock-Markets / Financial Crisis 2016 Feb 12, 2016 - 11:02 AM GMT

By: Casey_Research

Stock-Markets

By Justin Spittler

A major central bank just made a desperate move…

If you’ve been reading the Dispatch, you know we’re living through a gigantic “global monetary experiment.”

In short, global central banks cut interest rates to zero to fight the 2008 financial crisis. They’ve held interest rates near zero ever since.


These reckless “easy money” policies have made it extremely cheap to borrow money. Using borrowed money, people have bought trillions of dollars’ worth of stocks, bonds, cars, commercial real estate projects, and single-family homes.

This has warped prices of nearly everything. U.S. stocks, commercial real estate, and art prices have all climbed to record highs.

•  In December, the Federal Reserve raised its key interest rate for the first time in years…

Many in the mainstream media called it the end of easy money. We pointed out at the time that interest rates were still extremely low. You can see in the chart below that the rate hike was tiny:

Although the rate hike was tiny, global stock markets couldn’t handle it. U.S. stocks were in a strong bull market from March 2009 through December 2014, gaining 204%. However, since the Fed raised rates on December 16, the S&P 500 has dropped 6.4%.

Foreign stocks have also fallen. The Stoxx Europe 600, which tracks 600 of Europe’s largest stocks, has dropped 5.4% since December 16. The Japanese Nikkei has dropped 8% in the same period.

If markets were healthy, a tiny rate hike would not cause them to fall apart. Global financial markets are addicted to easy money.

•  On Friday, Japan’s Central Bank dropped its key interest rate below zero…

The Wall Street Journal reported (emphasis ours):

Central banks around the world are going to new lengths to boost their economies, underscoring both the importance and limits of monetary policy in a global economy plagued by paltry growth and unsettled markets.

The Bank of Japan on Friday joined a host of European peers in setting its key short-term interest rates below zero.

The BOJ lowered its key rate to -0.1%. It’s the first time in history Japan has seen negative rates.

The idea of negative interest rates sounds bizarre to most people. After all, the whole point of lending money is to earn interest…

With negative interest rates, the lender pays the borrower. If you lend $100,000 at -1%, you only get $99,000 back.

This is the Japanese government’s latest scheme to jump-start the economy. The Bank of Japan has pumped hundreds of trillions of yen into its financial system in the last couple years. The flood of new money helped goose Japanese stock prices for a while. From December 2012 to August 2015, the Nikkei surged 120%.

However, Japan’s easy money scheme hasn’t helped the “real” economy at all. Japan has slipped into a recession three times since 2010. And Japan’s currency, the yen, has lost 36% of its value against the U.S. dollar since 2012.

•  Many major countries are using negative interest rates…

The Eurozone’s key rate is -0.3%. Sweden’s key rate is -0.35%. Denmark’s key rate is -0.75%. Switzerland’s key rate is -1.1%.

On Friday, Financial Times reported that $5.5 trillion in government bonds worldwide now have negative rates. That’s about one-quarter of the world’s government bonds.

According to The Wall Street Journal, countries that account for 23% of world economic output have negative interest rates.

•  The European Central Bank (ECB) adopted negative rates in June 2014…

Today, its key rate is -0.3%.

Like Japan, negative interest rates haven’t helped Europe’s economy. Europe’s 9.1% unemployment rate is nearly double the U.S. unemployment rate. And the euro has fallen 20% against the U.S. dollar since the ECB introduced negative rates in June 2014.

•  Dispatch readers know the global economy is stalling…

China is the world’s second largest economy. Last year, it grew at its slowest pace since 1990. Brazil, the world’s eighth biggest economy, is going through its worst economic downturn since the 1930s. Canada slipped into a recession last year.

Meanwhile, the U.S. economy has grown just 2.2% annually since the financial crisis ended in 2009… well below its historical average growth rate.

• And there’s little reason to think the global economy will pick up any time soon…

Last week, Caterpillar (CAT) reported bad quarterly results. Caterpillar is the world’s largest equipment and machinery maker. It sells equipment used to construct buildings, clear land, and dig mines. Caterpillar’s sales are a good indicator of how healthy the global economy is.

The company’s sales dropped 23% last quarter. It recorded a net loss of $87 million for the quarter… after making a $757 million profit during the fourth quarter of 2014.

Caterpillar’s sales dropped in December for the 37th month in a row. Caterpillar’s stock has dropped 31% over the past two years to its lowest level since 2010.

• Near-zero interest rates are failing to stimulate the economy…

We expect more governments to adopt negative rates. After all, making “easy money” even easier is the only way governments know how to fight a slowing economy.

And keep in mind this is all a gigantic experiment…

Central banks have never used negative interest rates before. No one knows how this will end. It’s very likely these reckless policies will blow up the financial markets.

That’s why we recommend taking two important steps to protect your money…

One: Own physical gold. Unlike stocks, bonds, or cash, it’s the only financial asset that has value no matter what happens to the financial system.

Two: Put some of your wealth outside the “blast radius” of a financial crisis. We wrote a new book with all of our best advice on how to do this. And we’ll send it to you today for practically nothing… we just ask you to pay $4.95 to cover our processing costs. Click here to claim your copy.

Chart of the Day

The global mining industry is in a severe downturn…

Today’s chart shows the performance of the S&P/TSX Global Mining Index. This index tracks the global mining industry, including producers of aluminum, coal, gold, and silver.

This index has been in a downtrend for nearly five years. It’s fallen 68% from its 2011 peak.

Global mining stocks have crashed with commodity prices. The Bloomberg Commodity Index, which tracks 22 different commodities, hit an all-time low less than two weeks ago.

Many of the world’s largest mining stocks are now trading at incredible bargains. Share prices of Glencore (GLEN.L) and Anglo American (AAL.L), two of the world’s largest mining companies, both recently hit record lows.

It’s tempting to buy these stocks at all-time lows… but we think they could get even cheaper. The global economy is slowing. This means companies will build fewer bridges, homes, and office buildings. That’s bad news for commodity prices and mining companies.

The article Where to Hide Your Money From Reckless Governments was originally published at caseyresearch.com.
Casey Research Archive

© 2005-2016 http://www.MarketOracle.co.uk - 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

Catching a Falling Financial Knife