As I have been warning for years, Central Banks CANNOT normalize the Everything Bubble they created between 2008 and 2016.
Yesterday, yet another major Central Bank confirmed that I was correct. In this particular case, it was the European Central Bank (ECB).
The ECB first cut interest rates to NEGATIVE in 2014. It then lowered them an additional three times to -0.4% in 2016.
With negative interest rates, this means that EU banks are forced to PAY to sit in cash. Suffice to say, this has been a major drain on EU bank profits.
The ECB was able to pull this off by promising this was only an Emergency Situation, however it’s now been three years and the ECB has yet to raise rates even once. In fact, the ECB is now revealing it will probably NEVER be able to bring rates back to positive.
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Yesterday ECB President Mario Draghi revealed that the ECB is current analyzing whether or not to implement a “tiered deposit rate” through which certain banks wouldn’t have to pay as much interest for sitting in cash.
This was an implicit admission that rates will have to stay NEGATIVE for a long time… possibly forever.
A so-called tiered deposit rate would mean banks are exempted in part from paying the ECB’s 0.40 percent annual charge on their excess reserves, boosting their profits as they struggle with an unexpected growth slowdown…
A problem with a tiered rate is that it would signal that rates are going to stay low for a very long time, in potential conflict with the ECB’s forward guidance, which sees rates at record lows only until next year, one of the sources added.
Source: Reuters.
Why should US-based investors care?
Because the Fed’s #2 has already stated the Fed will be forced to cut rates to NEGATIVE during the next downturn. And the ECB is showing us that when this happens rates will stay there for years… possibly forever.
This is just one part of the Great Global Wealth Grab that will soon be hitting the US shores. The fact is that there is simply too much debt in the financial system. So the political elite are looking for means of grabbing capital to prop up insolvent institutions/ governments.
That capital will come from wealth grabs and taxes.
Consider the following:
- The IMF has already called for a wealth tax of 10% on NET WEALTH.
- More than one Presidential candidate for the 2020 US Presidential Race has already openly called for a wealth tax in the US.
- Polls suggest that the majority of Americans support a wealth tax.
And if you think this will stop with the super wealthy, you’re mistaken. You could tax 100% of the wealth of the top 1% and it would finance the US deficit for less than six months.
Which means…
Cash grabs, wealth taxes, and more will soon be coming to Main Street America.
Indeed, we’ve uncovered a secret document outlining how the Fed plans to both seize and STEAL savings during the next crisis/ recession.
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Best Regards
Graham Summers
Chief Market Strategist
Phoenix Capital Research
