Quotes of the Day
We have no special insight into the impact of negative interest rates on future valuations for traditional asset classes such as stocks, bonds and real estate. But as we stated earlier on, we believe that for gold this is the real deal and we suspect things are just getting started.
My questions are simple. If rates continue to fall then how do pension funds, insurance companies, banks and others relying on dependable sources of income survive? If a bank (like in Denmark) is forced to offer a negative interest rate mortgage I’d like to know how they make a profit lending out $100,000.00 and getting back $99,000 over 15 years. That would be like someone wanting a loan from me and saying, “if you give me $10,000.00 today, I’ll pay you back $9900.00 over 10 years- can you lend it to me?” I would have to be awfully benevolent to make that loan- something the banks most assuredly are NOT. So, tell me again how negative rates help the economy? It appears to me to be a dagger to the heart of the real economy. Take the profit motive out and commerce will come to a standstill- as all the charts are showing is already happening.
How will pension funds hit the 7-8% bogey with negative interest rates? Will they rely on an ever-expanding stock market or forever lower rates to produce the gains? Good luck with both!
If insurance companies earn less on their investments expect insurance premiums to rise. Again, causing another negative impact to an already reeling real economy.
The only thing propping up this illusion is ever expanding and increasingly risky DEBT.
For those who don’t trust bonds and want to buy stocks- I implore you to look at their debt load. The first casualty in a default is the common stockholder. The first person to stop getting dividends is the common shareholder. There is a greater possibility of gains but also a greater risk of loss.
After seeing what is happening in the real economy and watching the central banks across the globe taking emergency actions while trying to pretend “all is well” I can only ask “Do you feel lucky?”
This is no time to rely on luck and it is no time to stick your head in the sand thinking that the central banks have our backs. Where were they in 2000? In 2008? Where will they be when the third bust follows the third boom in the last 20 years? So many have forgotten already.
I don’t pretend to know how this will all end. I am just sure that it will. When it does those who have prepared will likely be in far better shape than those who are anticipating that the next 10 years will be like the last 10 years. To me, that is EXTREMELY unlikely.
As a matter of fact, since the central banks bought 571 tons of gold last year and are buying far more this year- year to date- it doesn’t appear they expect the next 10 years to even resemble the last 10. The major banks, hedge funds and many billionaires are also following this lead. Are you astute enough to see what is happening here?
– Mike Savage
At the time you receive this Trend Alert, the Dow closed down over 600 points and Gold spiked nearly $30 per ounce at $1,528 per ounce, up from $1,332 an ounce since my 6 June Gold Bull Run forecast.
Rest assured, central banks, over 30 of which have already lowered interest rates this year, will continue to lower them, even as they dip lower into negative territory in many nations. And governments across the globe will continue to announce aggressive “stimulus measures” to boost sagging economies.
The monetary methadone cheap-money injections to prop up the addicted equity Bull and stimulus measure to lift sagging economies will push governments deeper in debt, further worsening economic conditions when the Greatest Depression hits.
I maintain my gold forecast of over $2,000 per ounce on the upside, and $1390 on the downside.
The worst is yet to come. Prepare-Prevail-Prosper.