“The RIKSBANK strikes again! This is the most important story of the day. The Swedish Central Bank lowered its lending rate to ZERO in an effort to halt a slide into deflation .. Deflation is a very dangerous economic outcome for a country with a large public and private debt load. It is why I keep discussing the impact of 1937 on the work of Ben Bernanke and why he obsessed about removing FED stimulus until he was sure of price stability, meaning inflation of 2 percent .. Riksbank Governor admitted that depreciating the Swedish kroner was one of the tools in the central bank’s arsenal .. the Riksbank has made efforts to weaken the currency. This is a problem for ECB President Draghi as he comes under increasing pressure from France and Italy to enact policies to depreciate the EURO. Mario Draghi’s job is now more difficult as he sees his neighbors weaken their currency to prevent deflation, just as the tide of deflationary fears washes up on the ECB‘s shore .. But the job of the Yellen Fed became easier as global deflationary fears will keep the Fed steady as it goes. More importantly, for the world financial system the G20 agreement of not entertaining policies aimed at weakening a nation’s currency is now officially dead. The global financial system is now in a full-blown war against deflation. Damn the printing presses, debt restructurings, currency devaluations and full speed ahead. I wonder if Sweden will get a Nobel Peace Prize for its efforts. The global equity markets comprehend that deflation is the common enemy. What new policies await the markets? Is this what Joseph Schumpeter meant by CREATIVE DESTRUCTION?”
– Yra Harris
“The Swedish Riksbank (central bank) has cut its key interest rate to zero percent. With this quantitative easing monetary policy the central bank is desperately trying to stimulate borrowing to fight deflation .. How can dropping the interest rate from 0.25% to 0% make ANY difference? They will wipe out any savings for the elderly causing them to spend nothing if not seek employment driving unemployment higher. This is how brain-dead government operates when you NEVER consider yourself in the equation and the problem is always the people who have to be manipulated .. When the economy turns down in the USA, look out below. We are facing one of the most dramatic deflationary waves perhaps in history. This is the price of a collapse in socialism. We are going through the same collapse process that destroyed communism. It ain’t the private sector – its government!
– Martin Armstrong
Also a great piece by Ambrose Evans-Pritchard also on the same subject ..Riksbank cuts rates to zero & mulls currency war to fight deflation .. “Sweden’s central bank is having to pick its poison, choosing between deflation or an asset bubble .. The Riksbank is now fully aligned with the Yellen Fed in Washington, which argues that raising rates to stop asset bubbles merely destroys jobs for little useful purpose. Both are pitted against the Bank for International Settlements. The BIS says radical monetary stimulus may help invidual countries but only by displacing the problem onto others, leading to a ‘Pareto sub-optimal’ for the world as a whole. It warns that speculative excess is reaching pre-Lehman levels, and calls on global central banks to take pre-emptive action before the bubbles becomes unmanageable.”