How to Protect Your Money Against Negative Interest Rates

Keith Fitz-Gerald

It's official… the lunatics are running the asylum.

Former Fed Chair Ben Bernanke said last week that policymakers should give some serious thought to negative interest rates.

I think HE ought to think about what that means for millions of investors.

I know I am.

That's why we need to have a chat today about how you defend your money before it's too late.

Here's what you need to know.

Bernanke's Comment Shows He Still Doesn't Understand the Consequences of His Actions

Millions of investors haven't wanted to believe it…

Legions of politicians have done their best to perpetuate it…

And Wall Street hopes you'll never figure it out…

What's "it?"

Lunatics really do run the asylum.

Most rational people change course when something is not working. They admit they're wrong and move on.

But noooooo.

Profit Opportunity: This Is the Single Most Valuable Investment on Wall Street

Not the Fed, and certainly not Ben Bernanke.

The former Fed chair, now a consultant to The Brookings Institution think tank, noted in a post recently that "it would be extremely helpful if central banks could count on other policymakers, particularly fiscal policymakers, to take on some of the burden of stabilizing the economy during the next recession."

Including "the possibility of using negative interest rates" which aren't really so bad "if properly motivated and explained."

Translation: The Fed is out of options, is looking to politicians to fix the mess they've created, and Bernanke thinks the rest of us are too stupid to understand what he's talking about. Which is why somebody has to explain it to "us" – meaning you and me.

Thing is… we do understand, and very well at that.

Negative interest rates are bad no matter which way you cut them and no matter how you try to justify them. Negative interest rates:

1. Mean that companies and individuals are paid to borrow but charged to save – ergo, you're penalized for trying to be responsible and incentivized to go into hock.
2. Are supposed to result in more lending that, in turn, boosts growth. In reality, negative rates squeeze profit margins for every lender, making them less willing to loan. Customers who would otherwise borrow simply withdraw their money in an attempt to preserve what they have and that, in turn, further depletes the deposit base that's supposed to collateralize lending. Piles of cash are still kept at the bank, only people start keeping it in safe deposit boxes instead of accounts (where the banks can use it to their advantage).
3. Force pension funds, institutional investors, and individuals – especially individuals – into increasingly risky assets in a desperate search for yield. That's like adding gasoline to a fire because it sets up another boom/bust situation and boosts the stock market yet fails to benefit the economy. This is why markets are near all-time highs today despite the fact that earnings are down, millions have left the work force for good, and millions more individuals are one paycheck away from financial oblivion… after the government has spent trillions!
4. Undermine business confidence and decrease borrowing because savvy CEOs don't want to risk their hard-earned money at a time when the economy is so bad that the Fed has had to resort to negative rates.
5. Create global protectionism that will cause geopolitical tension at a time when the world's nations need to be working together in the name of mutual survival.

Now for the really sad part.

Keith Fitz-Gerald

About the Author

Browse Keith's articles | View Keith's research services

Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.

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