Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Closing Report: Gold and Silver Reverse Overnight Losses To End Higher
By: Chris Mullen, Gold Seeker Report

Ira Epstein's Metals Video 5 21 2018
By: Ira Epstein

Gold, Silver and US Dollar Updates with Review of Latest COTS
By: Clive Maund

Federal Reserve Note Dances Upon Its Own Grave
By: Clint Siegner

SWOT Analysis: Is Silver Poised For A Rebound?
By: Frank Holmes

Italy: An Anti-Euro Government Takes Power In the Heart Of The Eurozone
By: John Rubino

Why the “Gold is Ready to Explode Higher Any Day” Narrative Hurts the Truth Movement About Gold
By: JS Kim

Incomplete silver COT analysis, revisited
By: Steven Saville

Beware “Snollygosters” and the Empty Promises of Pathological Politicians
By: GoldCore

Gold’s Near-term Downside Target
By: Przemyslaw Radomski, CFA

 
Search

GoldSeek Web

 
The World is Turning Japanese [Chart]


 -- Published: Friday, 12 February 2016 | Print  | Disqus 

 

Negative rates, Kuroda’s “Peter Pan” analogy, and gold’s surge

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

Nearly a year ago, Bank of Japan governor Haruhiko Kuroda described the unlikely inspiration behind Japan’s unprecedented monetary stimulus: Peter Pan.

I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it’. Yes, what we need is a positive attitude and conviction. Indeed, each time central banks have been confronted with a wide range of problems, they have overcome the problems by conceiving new solutions.

Kuroda’s optimism is desperately needed in a country that has now been officially “leapfrogged” by the four Asian Tigers in terms of Real GDP per capita (PPP). With over a decade of experimentation in extreme monetary policy under their belts, Japan has very little to show for it.

It would be fine if this story of economic malaise could be confined as a global outlier. However, recent circumstances have prodded the world’s central bankers to finally buy into the tale of Peter Pan.

The world is turning Japanese.

So Much Negativity

Negative interest rates were an economic pipe dream many decades ago, but the idea of “charging” interest to hold money is now becoming mainstream. Conventional wisdom was that depositors would just hoard cash rather than depositing at a cost, but now the people running central banks are beginning to believe that this fear is misplaced. Especially as society becomes more cashless, the inconvenience of withdrawing money to save a few bucks isn’t worth it.

Central banks in Switzerland, Sweden, Denmark, and Japan now all have negative interest rates. The ECB has also held their Deposit Facility Rate for overnight deposits in the negative since June 2014.

In recent weeks, the interest in this economic experiment has risen significantly. Sweden cut their rates deeper into negative territory, signalling to the rest of the world that there is nothing to fear. Meanwhile, both the Federal Reserve and the Bank of Canada have openly pondered the possibility of NIRP in their respective jurisdictions.

Misplaced Conviction?

Not everyone agrees with the central bankers in seeing the Peter Pan analogy to be a fitting representation.

We’d liken it more to a squad of musketeers running out of gunpowder, and turning desperately to their bayonets to win a decision. It doesn’t matter how much conviction and optimism the crew has in their bayonet skills – at the end of the day, it’s only going to add a few extra minutes of life into the inevitable battle against a much more powerful deflationary force.

In other words, “hope” isn’t a strategy that central bankers can use to any efficacy, and wishful thinking can only go so far. The market seems to agree, and it’s part of the reason that stocks have sold off this year. Even the “safe haven” gold trade is back, after being absent for much of the previous year.

Many critique assets such as gold, which is up 15% year-to-date, because it does not pay a dividend or interest.

This may be true, but at least gold does not “charge” interest, as bankers across the world are beginning to ponder.

Courtesy of: Visual Capitalist

| Digg This Article
 -- Published: Friday, 12 February 2016 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.