There are troubling signs that the doves at the Federal Reserve are considering a negative interest rate policy (NIRP) as a way to handle “the next crisis” – and there’s always a next crisis…
NIRP is a monetary policy tool that sets interest rates below zero. A recent MarketWatch article on NIRP said it has a “‘Dr. Strangelove’ feel.”
I have to agree. They’re a lot like nuclear warfare in that they’re so extreme, so irrational and destructive, that they fly in the face off all common sense and decency.
But this is the Great Stagnation Middle Class Elimination. You can bet that the “General Jack D. Ripper” faction at the Federal Reserve is thinking the unthinkable – and thinking about it incorrectly.
Consider this quote from that MarketWatch article:
“…pushing rates into negative territory works in many ways just like a regular decline in interest rates that we’re all used to.”
That’s patently false – so much so that it borders on insanity.
They don’t work just like a “regular decline in interest rates” – not that a “regular decline in interest rates” does what economists think it does, but that’s another story.The issue here is that central bankers don’t even seem to understand how negative interest rates work, or why they’re so destructive to individual wealth and entire economies…