Zero Interest Rate Policy (ZIRP) was considered “extraordinary” when central bankers rolled that out roughly ten years ago. At that time, people would still have laughed at the idea of negative interest rates. Lenders didn’t pay borrowers and nobody paid their bank to hold their deposits.
So much has changed in the past 10 years. Now negative interest rate policies (NIRP) look set to go viral.
German banks will soon start toeing the European Central Bank line and pass negative rates on to depositors there. Germans who endured zero interest rates and somehow still want a savings account will now have to pay for the “privilege.”
The idea is preposterous, and it is perverse.
People build wealth and hold on to their liberty when there are incentives to save and invest. In just 10 short years, central bankers put an end to those incentives and implemented rewards for consumption, borrowing, and spending instead.
Formerly responsible nations, including Germany and the U.S., are accelerating down the road to ruin with debt exploding at all levels. Banking, finance, and government represent an ever-larger share of the economy. And record numbers of people depend on public assistance.
Of course, negative interest rates are but one example of the “contributions” bankers have made to society in recent years.
Measured in terms of societal and economic transformation, Wall Street appears to have “won” the last decade. All their investment in political campaigns and relationship-building with DC regulators paid off.
Guilty parties avoided prison for a pervasive mortgage and derivatives fraud and even got politicians to socialize the losses via bailouts. More recently they have been amassing extraordinary private gains via high-frequency trading, rampant market rigging, and access to unlimited Fed cash.
But the largest achievement has to be getting carte blanche to centrally plan the world’s largest economies.
The world can ill afford to let these people “win” another decade.
There are at least some signs that people are getting fed up. The recent election in the UK put Brexit back on track. The German people have been voting more for change. Perhaps they will tell bankers where they can stick negative interest rates.
Americans who are paying attention are alarmed by the Fed’s repo market bailouts and “not QE” stimulus program. When the next bubble pops, it will be hard for politicians and Wall Street to sell “print money and hand it to the bankers” as the solution once again.
About the Author:
Clint Siegner is a Director at Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.