Charles Hugh Smith* explains why the central bank policy of negative interest rates (NIRP) is communicating that “this sucker is going down” – therefore suggesting it is time to sell everything, hoard your cash & precious metals .. “The last hurrah of central banks is the negative interest rate policy–NIRP. The basic idea of NIRP is to punish savers so severely that households and businesses will be compelled to go blow whatever money they have on something–what the money is squandered on is of no importance to central banks. All that matters is that people and enterprises are forced to spend whatever cash they have rather than ‘hoard’ it, i.e. preserve and conserve their capital. That this is certifiably insane is self-evident. If an economy depends on bringing future spending into the present by destroying savings, that economy is doomed regardless of NIRP, for eventually the cash runs out and spending declines anyway.” .. but the driving reason why NIRP will fail is more fundamental – negative interest rates force us to save even more, not less, meaning we are going to spend even less by saving more .. “If banks start charging savers interest on their cash, savers will have to save even more income to offset the additional costs imposed by central banks on their savings.” .. in any case, the big point is what does it say about the health & stability of the financial system if central banks are saying the only way to save the status quo is to force everyone to empty their piggy banks & spend every last dime of cash? .. “What exactly are we saving by destroying savings and capital? Isn’t capital the foundation of capitalism? What NIRP says about central banks is that they have run out of options and are now in their own end zone, heaving the final desperate Hail Mary pass that has no hope of saving them from complete and total defeat. NIRP also says the economy that needs NIRP is sick unto death and doomed to an implosion of impaired debt, over-leveraged risk-on bets and asset bubbles generated by stock buybacks and central bank purchases of risky assets. The central bankers are delusional if they think NIRP will inspire confidence in investors, punters, households and enterprises. Rather, NIRP signals the failure of central bank policies and the end-game of credit expansion as the solution for all economic ills.”

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