ZIRP, NIRP and QE -policies have backfired:
The world economy is on the mend, as the mainstream media want us to believe, although the true numbers never have been published, the importance is that the public assumes that everything is under control and recovery is around the corner. Good news is bad news, and bad news is good news. Up is down and backward is forward. Nothing is what it seems, or what it ought to be. If the economy were really doing better, the Central Bankers would have followed through on their promise to “normalise” monetary policy. But reality is that Central Bankers extreme extravaganza of so-called extraordinary policies of zero and negative interest rates – ZIRP and NIRP – and quantitative easing (QE) have backfired. Those only have inflated the banking casino and crushed honest savers and retirees. And left Main Street economies stranded in the weakest ‘recovery’ since World War II.
What this means is that there is no genuine recovery. It’s all the smoke of ZIRP and NIRP and the mirrors of QE. When the magic-show ends, so does the illusion of recovery. Few people understand this. But the ZIRP, NIRP and QE policies are not bringing about prosperity. They’re bringing poverty. They’re suppressing – repressing – depressing – a real recovery.
Based on historic patterns and the principles of sound money, nominal interest rates should be in the 4-5% range to allow for a real return for risk, illiquidity and deferral of consumption by savers. The difference between that and current zero rates is astonishing when viewed at the macro level.
Since there are upwards of $10 trillion of bank deposits and like savings in the US economy, the zero interest policy results in the arbitrary and unjust transfer of some $400 billion per year of interest from savers to borrowers, banks and speculators.
Consider a working man who spent 40 years at the median wage, lived frugally, and managed to accumulate savings of $250,000. If he is now retired and has his money invested in treasury bills, he gets: $750 annually. That’s less than one cup of coffee per day! One cup of coffee for a lifetime of thrift. That’s clearly injustice.
Pension Funds and their beneficiaries:
The next question is, will pension funds keep their promises? The answer is, NO. The investments these pension funds depend on to perform well and grow assets under management are not yielding sufficient returns. That’s not their fault. It’s todays’ economic ZIRP and NIRP environment. It is simply impossible for these funds to attain anything close to the yield needed to pay out on all of the promises. Because interest rates are just too low, and the stock markets aren’t going upward fast enough to compensate for the lack of yield. When pensions funds were originally set up, interest rates were much higher. At 5%, it was easy for the fund to attain the necessary 7% annual average yield needed to cover all future pension pay-outs.
But now with ZIRP and NIRP rate policies investing in government bonds with yields of 2% or lesser, are far too low. There is no way to generate a 7% average annual return. And this of course is a recipe for disaster when some of their riskier investments blow up. Either way, 7% is unattainable now, and as such, something has to give. Either benefits must be cut, contributions must be raised, or some other patch must be found.
Investors of government bonds still have the illusion that they will receive the capital back. But the reality is that investors are neither going to get the return on their money nor the return OF their money, at least not in real terms.
Dark times lie ahead for these pension funds and their beneficiaries. Millions upon millions of workers across the world who have trusted this system for retirement will be affected. This means that many will face massive decreases in living standards and possibly even poverty.
Debt-ridden monetary system:
It’s all in large part the result of the debt-ridden monetary system that forces people to use a manipulated and irredeemable currency. It encourages runaway stock market bubbles, massive volatility, and keeps interest rates in pathological free-fall.
Sadly, the truth is those who have trusted in the promises offered by this system have been swindled. They are waking up from their retirement dream only to discover a retirement nightmare.
This same injustice has massively distorted the financial system and created the set-up for the next stock market crash. The signs of global deflation and recession become increasingly more frequent and obvious, the casino gamblers will come to realize that the Central Bankers are out of dry powder. They will be powerless in the face of the coming downturn.
The markets and most people are not remotely prepared for the deflationary recession that is now engulfing the world economy, and instantly could turn into hyperinflation the moment the US dollar and consequently all other fiat currencies collapse. Although planned for 2018, this is the moment the RKM is waiting for to introduce the world currency to enslave the whole world population at once. Be forewarned and take cover in the precious metals now it still is possible.
The biggest problem is liquidity. When a default cycle begins, people always rush to the exits. Bonds start going bad, as few investors want to buy them. Bond funds are experiencing huge waves of selling pressure and, already a handful, are responding by erecting “gates” – making it impossible for investors to get their money out.
It’s going to get much, much worse. The powder keg is waiting to blow-up the junk-bond market, and the lowest-calibre group of investment-grade corporate debts. More corporate bonds are outstanding – as a percentage of GDP – than ever before. Worse, the mix of obligations has never been more skewed toward low-quality loans. Over the past five years, record amounts of junk bonds were underwritten. Vast quantities, likely up to 40% of the total outstanding of these bonds will default over the coming years.
Six of the world’s most important financial institutions – Citigroup, Bank of America, Morgan Stanley, Goldman Sachs, Deutsche Bank, and HSCB – have all seen their credit ratings downgraded nearer to junk level. These banks will fail immediately as they are downgraded to junk status, because their funding costs will rise at the same time that most investors will be selling their bonds. While most institutions are not allowed to own junk-rated debt.
That would result in a collapse 10 times worse than the Lehman collapse. Then it is impossible to imagine how the global financial system will be functioning at all.
Huge Bear market:
The world is approaching a huge bear market. There are nearly $2 trillion worth of stocks whose bonds already are trading for less than $0.80 on the dollar. All of these stocks could go to zero if these bonds default.
These problems are going to get a lot worse. Because this is exactly the way the credit cycle works. Credit builds as more and more credit is extended. As long as lenders remain willing to “roll” debts forward, few borrowers default. Then, suddenly, creditors start to worry. They slowly withdraw their support out of the market. Suddenly, default rates spike – already double since last year. This causes more fear, which causes tighter credit conditions, which leads to more defaults, and so on.
This default cycle is going to be massive – much larger than usual – because during the last default cycle in 2009, the central banks stepped in and guaranteed trillions of tax payers’ money against debt, allowing the banks to be refinanced. Well, those debts are now coming due. But how many of them can be repaid? Experts in the corporate-bond market predict more than $1.5 trillion in defaults will occur before 2019. A recession, respectively depression – another financial disaster is inevitable.
Get out stocks and buy Gold and Silver:
The Dow Jones Index has been rising since the crash in 2009 on lower trading volume. Furthermore, the reason the Dow Jones Index has increased from 865 points in Q1 1980 to 17,663 recently was due to the massive increase of U.S. Debt from $863 billion to $19.2 trillion during the same time period. The Dow Jones Index increased 21 times while total U.S. Debt increased 22 times. This is no coincidence!
The economic energy value of a physical one-ounce silver coin is stored in it, whereas the value of the Retirement Market is based on a massive amount of energy debt. Unfortunately, this cheap energy supply will not be available in the future to pay back this energy debt. – Thus, the collapse of financial assets will occur as the value of gold and silver rise to unimaginable levels. Why? Because gold and silver will be the only few liquid stores of economic energy in the entire market. Something to think about.
GOLD, SILVER & OTHER TRUTHS in a Sea of Lies — Andy Hoffman
Be scared about the state of the economy that won’t improve, cost of living is raising in a deflationary environment, as true unemployment number is at least 23%. Count with a major shortage of gold and silver in the very near future. Listen to this interview here.
Latest INTEL News:
When Puerto Rico defaulted on May 2, 2016, so did the USA, Inc. which was founded in Puerto Rico in 1871 and illegally mimicked the Republic of the United States government originally founded in 1776.
This means all government agencies created by the illegal USA, Inc. government also defaulted including but not limited to: The Federal Reserve Bank, Internal Revenue Service, Homeland Security, Federal Emergency Management Agency, National Security Agency, Central Intelligence Agency, and National Aeronautics and Space Administration.
A hand-chosen white-hat military leadership along with white-hat politicians have been positioned and seated in this new Republic government that has been installed by the BRICS nations to handle the day-to-day operations of the United States, that includes military and political oversight over all domestic and international matters concerning the country.
To re-establish international banking credit, the Republic is now to put out a gold-backed currency called United States Notes (USN) that will have Martha Washington on the $10-dollar bill. The Republic’s sovereign currency designation is called Treasury Reserve Notes (TRN) and is currently being traded on markets all over the world, specifically between governments.
All 208 sovereign nations of the world are now only diplomatically, militarily and financially recognizing the Republic of the United States and their USN/TRN combination of monetary value. Meaning the USA, Inc., and all of its minions and false agencies, are no longer acknowledged on the global stage.
Anything having to do with enemies of the State Obama, Biden, Trump, Clinton, Sanders, US Congress leadership… is nothing more than a pageant meant to keep their grand lie going. Their nickname is the cabal. Better Known as the Khazarian Mafia. For more details:
BREXIT THE MOVIE FULL FILM
Escaping fortress EU is the solution for more and higher prosperity for everyone!
BREXIT THE MOVIE spells out the danger of staying part of the EU. Is it safe to give a remote government beyond our control the power to make laws? Is it safe to tie ourselves to countries which are close to financial ruin, drifting towards scary political extremism, and suffering long-term, self-inflicted economic decline?