23/04/2019/08:00CET

The IMF has come out into the open about negative interest rates. This will likely spell the end of some Fiat currencies while hobbling the rest of them. But first a look at the charts post Easter 2019.

BTCUSD Daily on Bitstamp

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#Bitcoin is trading at 5550usd at press time
We have had a large spike over the last few hours that has pushed btc up north of 5620 for a short time.
Our redrawn ascending channel has been breached to the upside, but it still has not challenged the previous, steeper channel that we broke out of back on the 11th April.
Technically this rally is still does not inspire much confidence. The main reason is the lackluster volumes.
We are hovering now around the level where bitcoin found some support back in mid Nov 2018 during our sickening drop from the 6k to 3k.
From a technical perspective, and this is the focus of my analysis in this blog, I still think the odds favour a correction. Say back into the 4k levels. To retest and strengthen a base, some market structure, before moving higher.
But my fundamental analysis is more open. Read on below for more...

IMF blog post lays out how they plan to bring about deeply negative interest rates

On February 5, 2019, Ruchir Agarwal and Signe Krogstrup, a pair of esteemed economists at the IMF wrote this blog post on the official IMF website outlining in pretty straight forward english how they imagine negative interest rates going mainstream. The piece doesn't mince around. It opens like this!

So here we see that the IMF believes that the only policy tools Central banks really have is controlling interest rates!
Individual sovereign fiscal policy is dead - or irrelevant to the central planners of the global economy.
As the world descends into the event horizon of debt saturation, lower interest rates have not coaxed borrowers to save the day and go deeper into debt. They themselves are already saturated in it and would prefer to curtail lifestyle rather than venture deeper into the maw of the debt beast.

So their last sentence in this paragraph is nonsense in my view. The average person (who is not aware of how the actual monetary system operates) believes in living within their means as much as possible. There is a point at which interest rates make no difference to the appetite for credit.

Also forcing people to spend their money or else it will be confiscated is the most un-capitalistic, non free market policy anyone could imagine. At what point have these lunatics completely lost touch with the fundamentals about economics. The only way one can accumulate capital to deploy it to a productive activity, which earns a profit is to save. If you destroy the mechanisms by which people can start to accumulate capital - save money, how do they expect the economy to expand or thrive?

Let's read more...

So here they state a no brainer and weave into it some bullshit alchemy.

True, cash is a non interest bearing instrument which permits trade at a peer to peer personal level. So if banks really do pass on negative interest rates, then watch the back runs unfold. Only the most knuckleheaded moron would leave their money in the bank to just be eroded away.

Now they go into their spin by conflating that those countries that have already going marginally into negative interest rates have actually been successfull with this policy!

Bullshit!

I can say with certainty that Switzerland has not succeeded under this policy. Yes, the economy is still operating OK despite the fact that interest rates at the bank level are slightly negative, but the banks have not yet passed this onto the average bank accounts, so it is just a fact of life that the average Swiss has no return on deposits at a bank, at virtually no deposit level.

But it is important to take into account, that the reason Switzerland has ventured into negative interest rates has nothing to do with recession fears and everything to do with currency manipulation. See Switzerland is cursed with a sound economy and currency that often acts as a safe haven for capital. Add to that its attractive tax code and you have a recipe for a very sought after currency.
This causes a problem for the Swiss. As people pile into its currency, the currency appreciates. Since Switzerland is an export based economy, this hurts the big exporters, in particular into the Euro zone, whose currency is not so attractive.

How to stop, or discourage foreign capital from parking itself in the swiss franc? Well drop the interest rates into the toilet is pretty effective. Nothing to do with recovering from a recession or any such other garbage claim by the IMF.

More...

Here they dive into the technicalities on how they can keep cash in circulation while still punishing us with negative interest rates.

There are no surprises here and their idea is doable. Their policy will work in as far as it will disincentivize anyone to hold cash. What it will do is be a huge boon to VISA and Mastercard, and also for Paypal, Apple and Google and any other large tech giant who has, or is rolling out some payment gateway service.

Kiss goodbye to the last vestiges of transaction privacy as well.
It will not be long before cases of punitive account disruptions will occur. This acute pressure point onto the average citizen will be exploited before long to curtail behaviours deemed unwelcome to the state.

In one swoop, we will be deep in a protofacist world.

And finally the epilogue of the piece...

Well, they see no real cons it seems. It would make accounting much more of a headache, especially for SME's but what do they care of these things. The openly only say it is doable for central banks, and pay no heed to the extra overheads companies will face.

This blogpost is right from the horse's mouth. Here is a link to the article.

My take

The monetary gurus of the world have shown here a huge lack of imagination or contrition. The problems of the world economy today are no mystery, but for them to admit the architecture of the post WW2 monetary world is coming apart means they have to admit it is their fault we are in this mess.
Since the mainstream media, the finance and banking world, and governments are very much intertwined with a myriad of "revolving door" interactions and exchanges, we can be almost certain that the traditional media will not peak behind the curtain to expose the truth for you. No, instead they will do their utmost to control the narrative that "things may be challenging at the moment, but it's all in total control". Economics is a confidence game, when confidence is lost, it collapses. Their priority is to support confidence, not tell the truth. ALWAYS keep that alway in mind.
Those at the top of the economic ladder will benefit the most by these policies. They have capital to deploy into yielding instruments. Those that have no or very little capital will be herded like desperate sheep into whatever get rich quick scheme can be devised by scamsters and/or governments.
What will really cause the most pain and suffering is the simple lack of financial education. For most investing into stocks, bonds, etc... is simply not on their radar.
This will be the twilight phase of the global economy. This will be a one way road. There will be no return to the good old days of a relatively free capitalistic economy where patient saving is rewarded and profligate and unsustainable borrowers are shunned as irresponsible. This policy will only be temporary as the imbalances it will unlock, will be virtually impossible to reconcile without some economic shock.
We are being softened up. In preparation for what? I do not exactly know, but the economic reality the world will face in 2030-2040-2050 will be sooooo different to what we have known for most of human civilisation. Whatever it will be it will be a far cry from the free market capitalism that is credited so widely as the saviour of humanity.

Crypto

Seems like bitcoin arrived on the scene just in the nick of time. This policy direction will encourage a flood of capital to flee the system into the non bank systems. Real estate, precious metals, and lastly, and with the least friction, cryptos.
When this policy is gently rolled out around the world, we will see capital flee in random surges trying to escape this tax. It will find a home, it must. And if it cannot lie in wait for a productive application in cash under your pillow, then it will just as easily find its way into a cold paper bitcoin wallet under your pillow.
Since bitcoin and some of the other monetary cryptos are already quite easy to use in commerce, it is possible that a shadow economy begins to thrive as capital floods into this new asset in its escape from the negative interest rate trap.

In general, since 2008, and some may say 2000, we have seen the global economy reach the real limits of the debt based monetary system. It was inevitable that at some point debt would reach a level where there is simply not enough monetary units in existence to service the debt.
Lowering interest rates is the obvious solution, till that also does no longer work. But negative interest rates are blocked by the existence of cash.

I wonder if negative interest rates will be honestly implemented. Would this mean that I could take out a mortgage and the bank would pay me a mortgage interest dividend each month? Food for thought.

As always guys, leave comments, have fun and trade safe.