3-May-13 World View -- ECB considers negative interest rates

[John]

3-May-13 World View -- European Central Bank considers negative interest rates


Turkey's Erdogan will pressure Obama to intervene militarily in Syria

** 3-May-13 World View -- European Central Bank considers negative interest rates
** http://www.generationaldynamics.com/pg/ ... tm#e130503



Contents:
Hezbollah leader Nasrallah says he will defend Syria's Assad militarily
Turkey's Erdogan will pressure Obama to intervene militarily in Syria
European Central Bank considers negative interest rates


Keys:
Generational Dynamics, Lebanon, Hezbollah, Sayyed Hasan Nasrallah,
Syria, Bashar al-Assad, Syrian National Council,
Turkey, Recep Tayyip Erdogan,
European Central Bank, Mario Draghi, deflation

[solomani]

Draghi had resisted lowering the interest rate because of fear of inflation. But the inflation rate in the Eurozone has fallen sharply in the Eurozone during the past month, so Draghi felt that a lower interest rate was justified. It's worth pausing a moment here to point out again that for the last ten years I've been predicting a global deflationary spiral during this generational Crisis era, while mainstream economists and various politicians and pundits have been predicting high or hyperinflation, and that they've been consistently wrong and I've been consistently right.

This talk of deflation intrigues me. I tend to agree with you, I am seeing tons of money being printed yet no inflation (or marginal). When, if you would hazard a guess, will the deflation actually ‘bite’. When countries stop printing money? In this case is there any reason they should if it is keeping deflation at bay?

I am no economic expert but I find all this talk of deflationary cycle very interesting.

Thanks.

[Trevor]

I highly doubt that we're going to do anything in Syria. If more incidents of chemical weapons are recorded, they'll just say that we require more proof... and so on and so on. If we were going to intervene, we would have done so by now.

[gerald]

A negative interest rate is a sign of an accelerating deflationary spiral, since it means that cash is actually becoming more valuable with time, rather than increasingly worthless, as the inflation pundits have been claiming. Bloomberg

If cash is becoming more valuable how does one keep it? In a bank where it can be Cyprused? As physical cash where it can be "Argentiniened" your old money is now void but we will give you x for so many y's. Or hold gold, and have the government make it illegal to hold like FDR, hmmm

[at99sy]

A negative interest rate is a sign of an accelerating deflationary spiral, since it means that cash is actually becoming more valuable with time, rather than increasingly worthless, as the inflation pundits have been claiming. Bloomberg

If cash is becoming more valuable how does one keep it? In a bank where it can be Cyprused? As physical cash where it can be "Argentiniened" your old money is now void but we will give you x for so many y's. Or hold gold, and have the government make it illegal to hold like FDR, hmmm

Well.... perhaps keep your money in foodstuffs, ammo, medicines, fire making implements, gas, booze, clothes, clean water, batteries, hand tools, personal hygiene items, simply put, items you can use and trade for items you can use. I saw markets in Argentina created by people in empty buildings, they created their own script and rates of exchange based on the goods you brought to the market. You could "cash" in your goods for script to buy other items our you could set up shop in a booth and conduct business on your own as long as you followed the rules of the co-op.

seemed to work quite well in several areas.

This guy apparently went through SHTF in Bosnia/Serbia when they collapsed. A bit of aggrandizing and he offers a course/school to teach how to survive but there is some interesting accounts and insights.

http://shtfschool.com/

cheers
sy

[gerald]

A negative interest rate is a sign of an accelerating deflationary spiral, since it means that cash is actually becoming more valuable with time, rather than increasingly worthless, as the inflation pundits have been claiming. Bloomberg

If cash is becoming more valuable how does one keep it? In a bank where it can be Cyprused? As physical cash where it can be "Argentiniened" your old money is now void but we will give you x for so many y's. Or hold gold, and have the government make it illegal to hold like FDR, hmmm

Well.... perhaps keep your money in foodstuffs, ammo, medicines, fire making implements, gas, booze, clothes, clean water, batteries, hand tools, personal hygiene items, simply put, items you can use and trade for items you can use. I saw markets in Argentina created by people in empty buildings, they created their own script and rates of exchange based on the goods you brought to the market. You could "cash" in your goods for script to buy other items our you could set up shop in a booth and conduct business on your own as long as you followed the rules of the co-op.

seemed to work quite well in several areas.

This guy apparently went through SHTF in Bosnia/Serbia when they collapsed. A bit of aggrandizing and he offers a course/school to teach how to survive but there is some interesting accounts and insights.

http://shtfschool.com/

cheers
sy

I was commenting on the bloomberg quote from a strictly financial position and have made appropriate adjustments to avoid all three scenarios, assuming that everything doesn't just fall apart. I am familiar with the importance of things like water,food, shelter, fire, and not becoming lunch for something else.

Thanks

[solomani]

I would assume people with cash should do fine. How did people in the depression cope? Worth a Google.

[at99sy]

I would assume people with cash should do fine. How did people in the depression cope? Worth a Google.

I imagine many will be maxing out credit cards as things approach the point of no return in hopes of maiximizing their possessions in hopes of or in prep of a total financial meltdown.

sy

[at99sy]

I was commenting on the bloomberg quote from a strictly financial position and have made appropriate adjustments to avoid all three scenarios, assuming that everything doesn't just fall apart. I am familiar with the importance of things like water,food, shelter, fire, and not becoming lunch for something else.

Thanks

My father was born in 1928 and he told me stories of his family being mostly cashless for much of the 30's. His father was a carpenter and bartered for most of what they needed and did fairly well in southern CA. They would walk the beaches and gather items that had washed ashore or from shipwrecks to use and sell or trade. They would spend a couple of months in Mexico on the Baja Penn. and literally live off of what they caught in the surf, and traded for and bought from the locals. I think in the coming situation hard goods, skills, and cash will be quite valuable. Not sure about the cash though. What happens to the dollar after the crash? That's the quadrillion $$ question isn't it?

sy

[gerald]

I was commenting on the bloomberg quote from a strictly financial position and have made appropriate adjustments to avoid all three scenarios, assuming that everything doesn't just fall apart. I am familiar with the importance of things like water,food, shelter, fire, and not becoming lunch for something else.

Thanks

My father was born in 1928 and he told me stories of his family being mostly cashless for much of the 30's. His father was a carpenter and bartered for most of what they needed and did fairly well in southern CA. They would walk the beaches and gather items that had washed ashore or from shipwrecks to use and sell or trade. They would spend a couple of months in Mexico on the Baja Penn. and literally live off of what they caught in the surf, and traded for and bought from the locals. I think in the coming situation hard goods, skills, and cash will be quite valuable. Not sure about the cash though. What happens to the dollar after the crash? That's the quadrillion $$ question isn't it?

sy

Living off the land today may be a bit harder due to the increased population, lakes in northern Wisconsin and Michigan are still short of fish from the last depression.
As for cash just hope it doesn't get like Argentina is now - and most Argentina likely get worse - from https://mail.google.com/mail/ca/u/0/#in ... df902e3080



Joel Bowman, checking in today from Buenos Aires, Argentina...
“Ten-to-one! Can you believe it? Ten-to-f#@king-one!”

Our friend was clearly exasperated. He couldn’t believe it.

“Ten-to-one” wasn’t the time...nor the odds he’d been offered for backing some dodgy ol’ nag down at the racetrack. It was -- it is -- the unofficial “blue” rate at which pesos are exchanged for dollars here in Argentina.

“Why is this peculiar?” Fellow Reckoners want to know. “Why should those of us who don’t carry Argentine liabilities worry about what’s going on south of the Pampas?”

Ah, we’re glad you asked. Think of the Argentines as a kind of canary, deep down the mineshaft of monetary mismanagement. What the Argentine government does not know about how to ruin an economy is probably not worth knowing. In 160th position, the latest Heritage Economic Freedom Index ranks the uselessly resource rich country a couple of slots above Uzbekistan...and a couple below Angola. Cristina Kirchner’s bestest buddy, the late Hugo Chavez, managed to drive his own poor nation down to the 174th spot on that list before his bilged corpus reached room temperature, narrowly beating out the centrally-planned paradises of Zimbabwe, Cuba and North Korea. In Christina’s eyes, there’s still more work to be done in impoverishing “her” people.

In other words, the Argentine state is a shining example for all meddler states...yours included. So, back to our story...

The ten-to-one exchange rate is important because it tells us (albeit approximately) just how detached from reality the Argentine government has become...and it is a leading indicator on just how detached from reality all governments eventually become. It also reveals to us the sad and sorry state of the local economy, as experienced by real and honest people, those hard-working folk who don’t hold positions in the nation’s political class.

At ten-to-one, the “blue” rate demonstrates an enormous spread over the official exchange rate, which currently sits at 5.14 pesos to the USD. La brecha -- the spread -- between what the government decrees and what the market realizes is, in other words, non- trivial.

We took a bottle of wine to a friend’s place a couple of nights back. One hundred pesos it cost us. At the official exchange rate, that’s a $20 vino tinto. Not bad (and a good drop it was, too!) At the unofficial rate, however, it worked out at only $10. How could this be?

First of all, Argentina has fantastic wine at any price. Your editor’s wife won’t have him spend more than a few months per year in climates that aren’t conducive to producing fantastic local wine. We go along because we don’t want any trouble...

Secondly, nobody changes dollars for pesos here at the official rate. Not if they know what’s good for them. A few blocks from where we sit is a casa de cambio that follows the unofficial rate. Everyone knows it’s there. The police -- mostly corrupt and “on the take” anyway -- know it’s there too. Heck! they stand right across the street, smoking cigarettes and watching people come and go...nervous old ladies clutching their purses...young businessmen converting their pay out of pesos...sweaty foreigners in backpacks who read about the “dolar blue” online and want a better rate than CFK’s goons will give them. The cerdos policias do nothing. They can do nothing. There are thousands of places around the city where people buy dollars illegally.

The whole scene is a pretty fair example of Gresham’s Law, where (simply stated) “bad money drives out good.”

As with everything here in Argentina, there is the “official” number...and then the truth. “Officially,” inflation runs at just shy of 10%. Unofficially, it’s closer to 30%. And, truthfully, it’s probably a fair bit higher again. Maybe 40%...or more. As such, Argentine savers -- who are used to thieving politicians swiping their hard-earned dough -- look to save in currencies their government can’t (directly) manipulate. The US dollar is the most popular choice...hence the reason it’s virtually illegal to buy them...and hence the reason for the black market premium.

When we first came to Argentina a few years back, taxi drivers wouldn’t take 100 pesos notes. They couldn’t make change. Now, it’s a different story.

“Hoy por hoy, no es mucho,” they say. The value of the peso decays by the day...and along with it goes the value of the savings and retirement accounts of the long-suffering people of Argentina.

And so, from time to time la gente organize protests and demonstrations against “La Dictadura.” They bang their pots and march up and down the streets. They gather around el obelisco, waving placards and chanting slogans. But for what? Isn’t asking the State not to steal your money a bit like lobbying the KKK to amend their unequal employment policy? Ain’t gonna happen, brother! Just as racism and bigotry form a core part of the KKK’s...ahem... “value set,” stealing, coercion and violence are defining components of the State’s genetic code. After all, if it didn’t steal from you, it wouldn’t be called “the State”...it would be called “a business,” and you’d be free to purchase its goods and services (such as they are)...or not.

“All governments engage in larceny and fraud,” observed Bill Bonner earlier in the week, “using their authority to transfer wealth and power from the outsiders to the insiders. But the clever government does so by deception... while the clumsy one does so with no pretense or excuses.”

We have little doubt that ten-to-one will soon become twenty-to- one... thirty-to-one...one-hundred-to-one and beyond. It’s in the nature of governments to steal from their people. The Argentine people have come to expect it. They march along and bang their pots...but secretly they are making escape plans. Those in the “civilized” world, by contrast, have no idea what’s coming. Our sense is, they’ll find out soon enough...

Regards,

Joel Bowman
Editor at Large for The Daily Reckoning
Follow on Twitter: https://twitter.com/JoelBowman