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First ZIRP, Now NIRP!

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Published : February 24th, 2015
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Category : Editorials

A Destabilizing Policy - by Gordon Long and John Rubino - Feb 23, 2015

Published 02-23-15
32 Minutes

What is the significance of the dramatic shift from ZIRP (Zero Interest Rate Policy) to NIRP (Negative Interest Rate Policy)?

This is a startling development that changes the investment landscape, strategies and business models of many traditional industries. We have watched rapid developments in Europe unfold with:

24hGold - First ZIRP, Now NIRP...

NIRP from the Central Banks of:

  • ECB,
  • Switzerland,
  • Denmark
  • Sweden.

We have NIR Bonds from :

  • Germany's BMW,
  • France's LVMH,
  • Britain's BP,
  • Swiss Nestle

When money becomes less than free and you get paid interest to borrow all sorts of distortions begin to happen.

EU's emerging "NIRP"


Stock Buybacks

Negative interest rates are inviting companies to be "PAID TO BORROW MONEY" and then use the proceeds to buyback their shares, boost eranings per share and reduce dividend payments.

It has fostered an explosion in stock buybacks

24hGold - First ZIRP, Now NIRP...


Fractured Business Models

The question on the table that few can answer is: How do these industries survive with negative rates?

  • Pension Plans,
  • Insurance Plans,
  • Money Funds,
  • Retirement Plans

Industries which have been considered to be the safest places to place money are now being forced into becoming quasi hedge funds to achieve yield. This is a towering change in the world.

If because of this, any one of the participants in any one these industries were to 'blow up' it would add greatly to the already skeptical mistrust of investors.

It is highly likely to trigger a' risk-off' shift 'in a heart beat which would impact credit flows and liquidity! The same thing that happened in 2008.

24hGold - First ZIRP, Now NIRP...


With Low Interest Rates Not Working - Did The Central Banks Finally Lose Control?

24hGold - First ZIRP, Now NIRP...


First ZIRP, Now NIRP w/ John Rubino

 

Data and Statistics for these countries : Denmark | France | Germany | Sweden | Switzerland | All
Gold and Silver Prices for these countries : Denmark | France | Germany | Sweden | Switzerland | All
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John Rubino is the author of The Coming Collapse of the Dollar (co-written with James Turk), How to Profit From the Coming Real Estate Bust (Rodale, 2003), and Main Street, Not Wall Street (William Morrow, 1998). A former Wall Street financial analyst and columnist with theStreet.com, he currently writes for Fidelity Magazine and CFA Magazine He lives in Moscow, Idaho
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Industries which have been considered to be the safest places to place money are now being forced into becoming quasi hedge funds to achieve yield.

Minsky's instability hypothesis in a nutshell.
Latest comment posted for this article
Industries which have been considered to be the safest places to place money are now being forced into becoming quasi hedge funds to achieve yield. Minsky's instability hypothesis in a nutshell. Read more
M. - 2/24/2015 at 3:14 PM GMT
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