Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Gold, Silver, Zika, ZIRP, and NIRP Viruses

Stock-Markets / Financial Markets 2016 Mar 14, 2016 - 05:28 PM GMT

By: DeviantInvestor

Stock-Markets

The Zika virus is the newest threat to humanity, especially pregnant women, so they say.  Big Pharma is working feverishly to create a vaccine.  Chances are the vaccine will be created, highly profitable, and Big Pharma will be “held harmless” for injuries to those who were vaccinated.

Add GM mosquitos, birth defects, Brazilian Olympics, big profits, and the story becomes a huge distraction.  John Rappoport has suggested there is more to the story.


There is money to be made on vaccines and GM mosquitos, and money to be lost if sales of pesticides and other chemicals are reduced.  It is clear in which direction the politics will lean.

The Zika virus should remind us of other strange activities in the financial world.

——– Speculation and Sarcasm Alert ————-

What if we think of ZIRP (Zero Interest Rate Program) as a financial virus, created and distributed by the central banks, that infects pools of savings?  Symptoms are:

  1. The ZIRP virus weakens and gradually destroys pension funds. Retirees, beware of this virus!
  2. The ZIRP virus destroys income for personal savers. People saved for decades and now their savings yield little or nothing in interest.
  3. The same has occurred with Insurance companies – they earn little on their bonds compared to what they previously earned.
  4. Governments must (in theory) increase their contributions to retirement plans to supplement the decreased earnings due to the deleterious effects of the ZIRP virus. Consequently some governments are closer to insolvency and should curtail expenditures.  Retirees, this is another warning!
  5. The bond market is further levitated in its 35 year bull market. This benefits the political and financial elite  …   until it crashes.

The ZIRP virus is a nasty virus that affects many people, pension plans, insurance companies, and government budgets.  Central banks have concocted this virus and it has infected many pools of savings.

But there are worse viruses than the ZIRP virus!

The ZIRP virus has mutated into a nastier version – the NIRP virus, otherwise known as the Negative Interest Rate Program virus.  Currently over $7 Trillion in sovereign debt has been infected with this virus and the quantity of infected debt increases daily.

From John Rubino:

“Yesterday Japan’s government borrowed money on terms that require the lenders to pay rather than receive interest for ten years.  And not only was that bond issue snapped up, it was vastly oversubscribed.  This raises a lot of questions, the chief being ‘why would anyone voluntarily commit to something that’s guaranteed to lose money for a decade?’

The short, obvious answer is that the world’s central banks are creating so much excess cash that there seems to be nowhere else for it to go.”

The NIRP virus is similar in symptoms and consequences to the ZIRP virus:

  1. Pension funds are destroyed even more rapidly.
  2. Personal savers will, once infected by the NIRP virus, experience the questionable privilege of loaning money to their favorite bank and, if the bank survives, receiving back less than they “deposited.”
  3. Insurance company earnings are hurt by the NIRP virus. Perhaps rates will rise.
  4. Many governments, which are already in financial trouble, will increasingly underfund their pension plans after they have been infected with the NIRP virus.

There are other consequences besides insolvent private pension plans, retirees unable to earn enough from savings, insurance companies earning too little, and government pension plans becoming insolvent quicker.

From Bill Gross (quoted by Rubino):

“Capitalism does not function well, and profit growth is stunted, if short-term and long-term yields near the zero bound are low and the yield curve inappropriately flat.”

From John Rubino:

“They [life insurance companies] price their policies on the assumption of a mid-single digit positive return on their bond portfolios.  Turn that return negative and all of a sudden the world’s life insurers are either unprofitable or insolvent.  And that’s a big industry.

“Pension funds, meanwhile, operate the same way, taking in and investing contributions against future obligations.  Many US pension plans are already borderline broke and in a NIRP environment they’ll suffer a mass extinction.”

Repeat:   regarding the effects of the ZIRP and NIRP viruses:

  1. Capitalism does not function well.
  2. Life insurance companies become unprofitable or insolvent.
  3. Pension funds: expect mass extinction.
  4. Retirees and future retirees: This is your warning!  Read an article from John Mauldin.

However, an even more destructive mutation of the NIRP virus has been sighted and may infect larger pools of capital:

It is possible the NIRP virus will mutate into the NIR-BAM virus.  The Negative Interest Rate with Bank Account Mandatory virus would require that all cash be deposited into bank accounts that are “taxed” each year with negative interest rates.  In other words, you can’t win and you must play the game.  The NIR-BAM virus is spreading in Europe and Japan, and a few early signs have been seen in the U.S.  An outbreak or epidemic is possible.

CONCLUSIONS: 

The ZIRP virus, NIRP virus, and a potential outbreak of the NIR-BAM virus are destructive to savers, pension plans, insurance companies, economies, and governments who fund pension plans.  These viruses have mutated from QE and central bank diseases, and all the consequences of these diseases and viruses have not yet been fully realized.

Going forward we might expect additional QE, continued ZIRP and NIRP, deflation in paper financial markets, weakened economic activities, a banking system crash, and a renaissance in gold and silver markets as people seek protection from the effects of the ZIRP and NIRP viruses.

Economies could deteriorate further as more capital, people and markets are infected by financial viruses.  Fortunately, gold and silver have no counter-party risk and both are likely to prosper as other investments experience the deadly consequences of the ZIRP and NIRP virus.  Also, gold and silver will help protect savers from the NIR-BAM virus if it becomes an epidemic.

Gold and silver might diminish worries and help people sleep, and thereby improve their immune systems, which will also help protect people from the Zika virus.

Gold and Silver will thrive – as paper assets are increasingly infected by financial viruses.

Gary Christenson

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail. My books on Amazon

© 2016 Copyright Deviant Investor - 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.

Deviant Investor Archive

© 2005-2019 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

6 Critical Money Making Rules