Is the US headed for Negative Interest Rates?

Everything is pointing to YES. By the looks of it, we’ll soon hit a sub-1% yield on the 10 Year US Treasury Bond. Right now, the yield on the 10 Year {1.45%} is at historical lows!

So what does that mean? Well… it could mean that countries outside of the US investing in our T-Bonds either have a ton of confidence in US Debt and believe the US Dollar will remain stronger against other world currencies, or more likely… they don’t see many other safe havens out there, with the lone exception of precious metals which have taken off like a rocket this year.

Gold is up $300.00 from its low of 1050 to 1350, a 30% move. Even more impressive is Silver, which has shot up 50% off its lows this year! The mining sector is also doing very well… after suffering through 3 horrible years for that industry.

But the bond market is more telling than the metals market.

Denmark and Sweden, along with Switzerland and Japan embarked on a negative rate policy, where central banks have decided to have a negative rate on commercial banks’ excess funds held on deposit. What that means is that private sector banks have to pay to park their money.

The central bank of Sweden, actually went below zero on the rate it lends money to the banks, in order to stimulate economic growth and to raise inflation.

In Denmark and Switzerland their main objective was to prevent their currencies from rising too much. Lower interest rates, and in this case negative rates, is used to discourage investors from buying the local currency, which tends to push its value up.

This leads to all kinds of speculation on global currencies, and countries around the world are moving to devalue their currencies to gain a favorable trade advantage.

Remember, devaluation of a currency causes a country’s exports to become less expensive, making them more competitive on the global market… China mastered that game!

Players in the Eurozone right now might be betting on a HUGE drop in the Euro, with the future prediction of more countries leaving post-Brexit!

All of this reflects weakness of many economies around the world. Central banks are keeping their interest rates low to stimulate economic growth and to get higher inflation. And there’s a lot less demand for money to fund new investment around the world, so the cost of borrowing is lower.

So chances are… interest rates here are gonna go even lower.

Question is… if we go negative, are you gonna pay to keep your money in a bank that not only earns nothing, but continues to be devalued everyday?

This is why I agree that it’s crazy to not have at least 10% if not 20% of your assets in hard currency.

2 Comments on Is the US headed for Negative Interest Rates?

  1. Stimulate economy, quantitative easing (central bank buys commercial debt), higher bank fees, get banks to lend. Yeah, inflate our way to prosperity, that’ll work.
    All the while we still are NOT producing anything tangible.


    • And now there’s about ZERO percent probability of them raising rates… they’ll continue to trot out Old Yeller there, the Old Hag FED Chief Yellen to keep telling the idiots maybe, we need more data, the economy is strong, the unemployment rate is low, just can’t commit to raising rates now…. yeah right.


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