Tag Archives: Monetary Policy

The Recession of 2019, by Charles Gave

A number of indicators with good (albeit not perfect) records are pointing towards a recession next year. From Charles Gave at evergreengavekal.com:

“While the Trump administration may crow endlessly about how swell the economy performed last quarter, that 4.1% GDP print will quickly become a wistful memory.”
-BERNARD BAUMOHL, Economist at the Economic Outlook Group


Towards the tail-end of July, the Commerce Department reported that Gross Domestic Product (also known as GDP), or the total value of goods and services produced in the US, increased at an annual pace of 4.1% in this year’s second quarter. As expected, President Trump took a victory lap around these numbers, which were the highest GDP growth results since 2014. (However, lost in the fanfare was the fact that the first quarter GDP number was revised down from 2.9% to 2.3%.)

In an equally anticipated move, the President went on to predict that this is just the start of a long-term trend, and that these numbers are “very, very sustainable” and are “going to go a lot higher.” With all due respect to the Trumpeter-in-Chief, the Evergreen Gavekal team is not nearly as confident. In fact, we would argue that there is a glaring black hole in his economic outlook.

Particularly, we believe that three unstainable factors led to this inflated higher-than-expected GDP number: tax cuts, a surge in government spending, and a rush to ship exports out of the country as the result of the trade war. We believe all three factors are based on high-risk policies that will eventually turn from a catalyst to a drag on the economy in the medium- to long-term—perhaps right around, if not before, President Trump seeks re-election in 2020.

This week’s Gavekal EVA comes from one of our most admired partners, Charles Gave. Charles also sees danger brewing on the economic horizon, both in the US and globally. In fact, he even goes so far as to postulate the exact year this brewing will turn into a full-fledge storm: 2019. In this week’s EVA, Charles explains his reasoning for making this bold, timestamped prediction. His forecast is based on several macro-economic factors that are already letting-on to a slowdown in the mostly elusive synchronized global expansion.

However, Evergreen itself is still holding off on issuing a call for the next recession, one we haven’t made since 2007. We admit, though, that the expansion clock is nearing midnight, which shouldn’t come as a surprise since this party has been going on for almost nine years. Keep dancing at your own risk!

To continue reading: The Recession of 2019 

Pope Francis Now International Monetary Guru, by Antonius Aquinus

The Pope is an idiot. From Antonius Aquinus on a guest post at theburningplatform.com:

Neo-Marxist Pope Francis

As the new year dawns, it seems the current occupant of St. Peter’s Chair will take on a new function which is outside the purview of the office that the Divine Founder of his institution had clearly mandated. Besides being a self proclaimed expert on global warming and a vociferous advocate of societal-wrecking mass immigration, it looks as if “Pope” Francis has entered the realm of global economics specifically, international monetary policy.

In an 18-page document issued through the Vatican’s Office of Justice and Peace, Bergoglio has called for, among other repressive and wealth-destructive measures, the establishment of a “supranational [monetary] authority” to oversee international monetary affairs:

In fact, one can see an emerging requirement fora body that will carry out the functions of a kind of‘central world bank’ that regulates the flow and system ofmonetary exchanges similar to the national central banks.*

The paper, “Towards Reforming the International Financial and Monetary Systems in the Context of a Global Public Authority,” contends that a world central bank is needed because institutions such as the IMF have failed to “stabilize world finance” and have not effectively regulated “the amount of credit risk taken on by the system.”

Naturally, as one of the planet’s preeminent social justice warriors, Bergoglio claims that if a world central bank is not commissioned, than the gap between rich and poor will be exacerbated even further:

If no solutions are found to the various forms of injustice, the negative effects that will follow on the social, political and economic level will be destined to create a climate of growing hostility and even violence, and ultimately undermine the very foundations of democratic institutions, even the ones considered most solid.

To continue reading: Pope Francis Now International Monetary Guru

Jim Grant: The Fed Is A Sleepwalking Relic Of The Age Of Command And Control, by James Grant

James Grant, editor of Grant’s Interest Rate Observer, usually has trenchant and incisive things to say, or write, and a way with words. Grant on the Federal Reserve, from davidstockmanscontracorner.com:

Central bank’s experimental policies are only hurting America instead of leading the nation into financial prosperity, exclaims James Grant, editor of Grant’s Interest Rate Observer. “The Fed is a relic of the age of command and control. The Fed is an anachronism,” Grant tells Bloomberg TV in this excellent interview, “The Fed ought to get out of the business of masterminding ‘the American enterprise,’ what we call the U.S. economy.” Central bankers, Grant adds, by pressing rates to nothing, have given rise to this “very pleasant kind of inflation we call bull markets.” While bull markets are great insofar as they reflect what is actually going on, “they are very dangerous to the extent that they are the artificial creation of artificial interest rates.”

We are in a regime of price administration. Price control is a policy that has failed for millenia. When prices are manipulated, manhandled, and otherwsise distorted, real decisions follow and the real decisions are distorted… there’s bricks, mortar, and human lives attached to these [interest rate decisions]… and that’s why they matter“

“How do they know the funds rate ought to be zero?”

“The world’s central bankers went to the same schools, talk the same language, have the same world view.

They have shared conditions. They believe, for example, that an average of prices, which they believe they can calculate, must rise at two percent a year unless the world fall into something they choose to call deflation.

They believe that they can see into the future. They believe that they have the knowledge and the dexterity to manipulate interest rates to the benefit of society.

To continue reading: The Fed Is A Sleepwalking Relic

What the heck is happening in Sweden? Negative rates, cash bans, housing bubble and enormous debt, by Andrew Moran

Sweden may be a preview of monetary coming attractions in the US. From Andrew Moran at economiccollapsenews.com:

We have a message to all of the Bernie Sanders supporters and those who are fixated on Scandinavia: give up your obsession of Sweden. It doesn’t do anything to further your case as there are a lot of downward trends transpiring in the nation of Ingmar Bergman films, Ikea products and meatballs (SEE: ‘Socialist Paradise’ Sweden suffering from swelling debt levels, employee absenteeism).

The main question that must be asked, however, is this: what the heck is happening in Sweden?

Sweden is on the cusp of being the very first nation in the world to conduct an economic experiment of this kind: negative interest rates in a cashless society. That’s right. The central planners are charging you to save your money in a bank, while eliminating the use of cash. You’re stuck if you’re living in the home of beautiful blondes and August Strindberg plays.

Last week, the Swedish central bank (Riksbank) announced that it would leave its benchmark interest rate unchanged at -0.35 percent, a rate that has been instituted since the summer. There were talks of Sweden going deep into negative rates, but it instead opted to go for another round of its own version of quantitative easing.

Financial institutions have yet to impose negative rates on Swedish consumers, but many economists do believe the central bank will keep this negative rate policy for a while. This means retail banks will have no other choice but to start implementing negative rates and passing the costs to its customers.

To continue reading: What the heck is happening in Sweden?

The World Hits Its Credit Limit, And The Debt Market Is Starting To Realize That, by Tyler Durden

Zero Hedge touches on a topic that SLL has discussed for years: the diminishing, and eventually negative, marginal return from debt. In other words, debt, because it entails repayment, can be too much of a good thing. Right now, the world is in the too much of a good thing phase, to be followed by a debt contraction, because debt growth has exceed economic growth for many years and so there is more debt in the global economy than it can support. Interested readers are referred to the articles found in the Debtonomics Archive (tab is just above the picture of the train). From Tyler Durden at zerohedge.com:

One month ago, when looking at the dramatic change in the market landscape when the first cracks in the central planning facade became evident and it appeared that central banks are in the process of rapidly losing credibility, and the faith of an entire generation of traders whose only trading strategy is to “BTFD”, we presented a critical report by Citigroup’s Matt King, who asked “has the world reached its credit limit” summarized the two biggest financial issues facing the world at this stage.

The first is that even as central banks have continued pumping record amount of liquidity in the market, the market’s response has been increasingly shaky (in no small part due to the surge in the dollar and the resulting Emerging Market debt crisis), and in the case of Junk bonds, a downright disaster. As King summarized it “models linking QE to markets seem to have broken down.”

Needless to say this was bad news for everyone hoping that just a little more QE is all that is needed to return to all time S&P500 highs. And while this concern has faded somewhat in the past few weeks as the most violent short squeeze in history has lifted the market almost back to record highs even as Q3 earnings season is turning out just as bad, if not worse, as most had predicted, nothing has fundamentally changed and the fears over EM reserve drawdown will shortly re-emerge, once the punditry reads between the latest Chinese money creation and capital outflow lines.

The second, and far greater problem, facing the world is precisely what the Fed and its central bank peers have been fighting all along: too much global debt accumulating an ever faster pace, while global growth is stagnant and in fact declining.

King’s take: “there has been plenty of credit, just not much growth.”

Our take: we have – long ago – crossed the Rubicon where incremental debt results in incremental growth, and are currently in an unprecedented place where economic textbooks no longer work, and where incremental debt leads to a drop in global growth. Much more than ZIRP, NIRP, QE, or Helicopter money, this is the true singularity, because absent wholesale debt destruction – either through default or hyperinflation – the world is doomed to, first, a recession and then a depression the likes of which have never been seen. By buying assets and by keeping the VIX suppressed (for a phenomenal read on this topic we recommend Artemis Capital’s “Volatility and the Allegory of the Prisoner’s Dilemma“), central banks are only delaying the inevitable.

The bottom line is clear: at the macro level, the world is now tapped out, and there are virtually no pockets for credit creation left at the consolidated level, between household, corporate, financial and government debt.

To continue reading: The World Hits Its Credit Limit

People’s Bank of China Freaks Out, Devalues Yuan by Record Amount, Vows to “Severely Punish” Capital Flight, by Wolf Richter

From Wolf Richter at wolfstreet.com:

Everything has started to go wrong in the Chinese economy despite its mind-bending growth rate of 7%. Exports plunged and imports too. Sales in the world’s largest auto market suddenly are shrinking just when overcapacity is ballooning. The property market is quaking. Electricity consumption, producer prices, and other indicators are deteriorating. Capital is fleeing. The hard landing is getting rougher by the day. But Tuesday morning, the People’s Bank of China pulled the ripcord.

In a big way.

It lowered the yuan’s daily reference rate by a record 1.9%. The yuan plunged instantly, and after a brief bounce, continued to plunge. Now, as I’m writing this, it is trading in Shanghai at 6.322 to the dollar, down 1.8% from before the announcement. A record one-day drop.

The PBOC had kept the yuan stable against the dollar. As the dollar has risen against other major currencies, the yuan followed in lockstep. Over the past week, the Yuan’s closing levels in Shanghai were limited to vacillating between 6.2096 and 6.2097 against the dollar. Over the past month, daily moves were limited to a maximum 0.01%. The PBOC controls its currency with an iron fist.

Hence the shock to the currency war system.

The Nikkei, beneficiary of the most aggressive currency warrior out there, had been up, nearly kissing the magic 21,000 at the open for the first time in a generation, but plunged 200 points in one fell swoop when the news hit. Then the Bank of Japan jumped in with its endless supply of freshly printed yen, furiously buying Japanese ETFs to stem the loss. The lunch break put a stop to all this. Then the Nikkei plunged again. Maybe the folks at the BOJ were late getting back to their trading stations. But now they’re back at work, mopping up ETFs.

“Currently, the international economic and financial conditions are very complex,” a PBOC spokesman explained. “Emerging market and commodities currencies are facing downward pressure, and we are seeing increasing volatilities in international capital flow. This complex situation is posing new challenges,” he said.

The yuan’s “relatively strong” exchange rate was “not entirely consistent with market expectation,” he said in perfect central-bank speak. “Therefore, it is a good time to improve quotation of the RMB central parity to make it more consistent with the needs of market development.” So he said, “Today’s central parity depreciated by about 200 bps. The market still needs some time to adapt.”

Meanwhile, the PBOC would “monitor the market condition closely, stabilizing the market expectation, and ensuring the improvement of the formation mechanism of the RMB central parity in an orderly manner.” Certainly, the market would not be allowed to do anything on its own.

And the devaluation is “a one-time correction,” he added, which everyone believed instantly.

To continue reading: PBOC Devalues Yuan

Slay the Creature From Jekyll Island! by Robert Gore

In business, what doesn’t work is changed. Every day companies announce they are reorganizing, divesting, and eliminating unprofitable or insufficiently profitable operations. People are fired, factories closed, towns abandoned—painful but necessary economic root canals. If a company doesn’t do so, investors mark down its securities, profitability declines, executive bonuses shrink, worker pay erodes, market share declines, and the company falls behind its competitors, until it’s bankrupt. That is the ceaseless, pitiless logic of markets and capitalism; it’s built into the system.

Governments do not operate in the same way, not a dazzling insight. They have their own internal incentives and logic, which defy logic. SLL has said that for government, nothing succeeds like failure. That’s not facetious; it’s true and there are reasons for it. In response to some sort of public demand, a government program is created. The day the legislation is signed marks the height of the public’s concern with whatever problem the program was meant to address. It also marks the beginning of the Washington scrum among affected individuals and businesses, their lobbyists, bureaucrats, and politicians. While the public moves on the next issue, the scrum know that outcomes will be dictated by the government and big bucks ride on influencing those outcomes. Before long new shoots of Washington’s indigenous flora and fauna sprout: lobbying, campaign contributions, bribes, revolving doors, cronyism, and regulatory and bureaucratic capture, in short, corruption that dares not speak its name.

It’s tempting to say that the question of failure or success of the programs original mission becomes irrelevant, but that’s seeing it through rose-colored glasses. Failure is preferred by all concerned. Failure can always be attributed to lack of adequate funding and inadequate powers for the government agency responsible for the program. This leads to bigger budgets, more power, and more of the attendant influence peddling and corruption. And that’s why government continuously gets bigger, more powerful, more failure-prone, and more corrupt. To outside observers, Washington is an out of control cancer. For those on the inside, the malignancy is a huge success, precisely because it is malignant: destroying healthy tissues, proliferating unchecked, but ensuring its own survival at the expense of its host.

The history of the Federal Reserve presents no anomalies; it has gone from failure to failure. Its loose money during the 1920s led to the stock market crash of 1929 and a recession that FDR turned into a Great Depression. Fed printing press financing of Johnson and Nixon’s guns and butter paved the way for inflation in the 1970s, the worst since the Civil War. Greenspan’s serial lowering of the monetary floodgates in response to the 1987 stock market crash, the savings and loan fiasco, the Asian market meltdown, Y2K (a crisis that never happened!), and the tech wreck gave rise to his infamous equity market “put.” The Fed sponsored a cheap-money housing bubble and bust; the bust met by Bernanke’s “put.” Bernanke and Yellen’s zero interest rate policy and massive debt monetization have not produced economic recovery, but have destroyed price discovery in financial markets, promoted the political propensity to run up debt, and underwritten trillions of dollars of malinvestment. Because the Fed’s program has served as a template for other central banks’, there are trillions of new yen, euro, and renminbi debt and malinvestment as well.

Not despite but because of these failures the Fed’s budgets, powers, and influence over the economy has grown since its 1913 inception. So too has the attendant corruption. The central bank has been captured by the banking industry and is emblematic of the what’s-a-back-scratching-among-friends culture of Washington. Beneficiaries of cheap money recycle some of their loot into six-figure speaking fees for the men responsible for that largess, dutifully sitting through Greenspan’s and Bernanke’s unmemorable speeches. The door between the Fed and Wall Street never stops revolving. A stint at the central bank is a worthwhile apprenticeship before a lucrative career in hedge funding or investment banking or an influential semi-retirement and cushy sinecure afterwards.

If the Fed were a business it would have been shuttered decades ago. As a de facto arm of the federal government it has thrived. If SLL were a conventional, mainstream financial website this article would conclude dutifully with a call for reform, joining hundreds of other long-forgotten articles on the Fed. Reform is a badge of honor for government entities. Every agency, bureau, and department worth it’s salt has been reformed; most more than once. Experienced bureaucrats roll with the punches: publicly accepting the need for reform; working with lawmakers on its specifics; implementing it; then distorting it beyond all recognition to further serve the needs of the bureaucracy and constituents. Like regulation for private businesses, reform is not embraced but is tolerated, an inevitable part of governance.

The only “reform” that would have a lasting effect on the Fed (or any other government entity or program) is abolition. Nobody has ever presented a coherent case why governments and their central banks must be involved with money, and there are plenty of reasons why they shouldn’t. Invariably debtors, usually their country’s largest, governments have a clear incentive to devalue their debt through monetary depreciation. They accrue issuers’ advantages of seigniorage, the difference between the cost of production and the value of their currencies. Central banks purchase their debt with money they conjure from thin air, providing a market and suppressing interest rates, thus facilitating governments’ indebtedness and expansion. The economic value governments realize from currency depreciation comes from their citizens, who hold their depreciating currencies. It’s another tax, much preferred by governments because it’s hidden.

What would private money look like? Undoubtedly any transition from government money to market-determined money would be complicated. Multiple forms of money would probably evolve in a private-money world. Specie-backed bank notes are almost certain, which might not be the end of fractional reserve banking but would certainly curtail it. Some of the newer cyber-monies might meet the market test. Money, whatever its forms, serves economically useful functions. Taking money away from central banks and governments and leaving it for market determination takes it away from the two institutions most responsible for impairing or destroying its economic value. Markets will determine the most efficient and trustworthy forms of money, some of which are unforeseeable at the present time (almost by definition, innovation is unforeseeable until it happens).

What can be foreseen is that private money, whatever its form, will embody some sort of identifiable value. Specie-backed money will be convertible into a precious metal, obviously tangible value. Cyber-money will promise anonymity, transactional ease, and an untouchable promise of a controlled quantity in existence. In a private money system, both those who originate the money and those who use it will have an interest in maintaining its value. Beyond that, we would have to see how people and markets use private money and how it evolves.

That statement shouldn’t doom it. All sorts of government programs are birthed with extravagant promises, when it can confidently be asserted beforehand that the program will fail, expand, grow in power, become increasingly corrupt, and never die. Markets and private, for-profit entities continuously change and improve…or die. Private money would be a process of trial and error. So is manufacturing, medicine, transportation, entertainment, communications, and every other private market activity. That’s how change and improvement happen.

However, there is no way that the transition to private money can happen in the present system. The government and its beneficiaries would lose power, prominence, the ability to manipulate economic variables—including asset markets’ prices—for political advantage, and hidden tax revenues. It is no coincidence that bloated welfare-warfare-regulatory states blossomed in conjunction with central banks.

Central banking’s greatest failures lie ahead of it. As the Fed’s powers have grown, the variables it is charged with controlling have grown as well. Inevitably it will run into the Command and Control Futility Principle: Governments and central banks can control one, but not all variables in a multi-variable system (see “Crisis Progress Report,”). When control is lost and the economy and financial markets crash into a deflationary depression, it is to be hoped, perhaps in vain, that the Fed will be unable to escape its rightful share of the blame. Consequently, there may be an intellectual shift, a willingness to question and reject the fundamental premises of central banking. The ultimate conclusion: for freedom and economic sanity to be restored, money must be privatized and the creature from Jekyll Island slain.


TGP_photo 2 FB





Punk Q1 GDP Wasn’t Surprising—It Extends A 60-Year Trend Of Exploding Money And Imploding Growth, by David Stockman

David Stockman deep dives into six decades of economic statistics to make a virtually irrefutable case for what most of us older than thirty know in our bones—the economy isn’t what it used to be. From Stockman, at stockmanscontracorner.com:

During the heyday of post-war prosperity between 1953 and 1971, real final sales—–a better measure of economic growth than GDP because it filters out inventory fluctuations—-grew at a 3.6% annual rate. That is exactly double the 1.8% CAGR recorded for 2000-2014.

And after this morning’s punk GDP report in which growth stayed above the flat-line by a hair only due to a massive inventory build, the contrast is even more dramatic. Real final sales actually declined by 0.5% during Q1 and, more importantly, reflected a mere 1.1.% annual growth rate since the pre-crisis peak in the winter of 2007-2008.

The long and short of it, therefore, is that there has been a dramatic downshift in the trend rate of economic growth during an era in which central bank intervention and stimulus has been immeasurably enlarged. In this regard, the size of the fed’s balance sheet is the telltale measure of its policy intrusion. That’s because the only mechanism by which the Fed can actually impact the real economy is through open market purchases of treasury bills, bonds and other existing securities for the purpose of raising their price and lowering their interest rate or yield. And it doesn’t matter whether the Fed is buying short term T-bills to peg the federal funds rate or 10-year notes to drive down long-term interest rates and flatten the yield curve.

Thus, the old-fashioned business of pegging the Federal funds rate and the new-fangled intrusion of massive bond buying under QE are all the same maneuver. They both involve expansion of the central bank balance sheet and, therefore, the systematic injection of fraud into the financial system.

That is to say, growth on the asset side of the Fed’s balance sheet involves the acquisition of financial claims that arise from the utilization of real labor and capital resources. This happens, for example, when the Fed buys treasury notes that were issued to fund the purchase of concrete and bulldozer operators under the highway program or when new homes embodying carpenters’ wages and lumber are financed with Fannie Mae guaranteed mortgages purchased by the Fed.

That contrasts with the liability side of the Fed’s balance sheet, which expands dollar for dollar with the asset side, but represents nothing more than bottled monetary air confected from its digital printing press. Stated differently, the Fed’s fundamental tool of open market purchases of public debt and other securities, and thereby the expansion of its balance sheet, embodies the exchange of claims based on something for credits made from nothing.


To continue reading: Exploding Money And Imploding Growth

The “War on Cash” in 10 Spine-Chilling Quotes, by Don Quijones

The Orwellian “war on cash,” in the words of its advocates. Big Brother will soon be watching every dollar, euro, franc, yen, ruble, or yuan you spend, all in the name of convenience and to foil any “bad” people who would otherwise use cash to facilitate their misdeeds. From Don Quijones, at wolf street.com:

The war on cash is escalating. As Mises’ Jo Salerno reports, the latest combatant to join the fray is JP Morgan Chase, the largest bank in the U.S., which recently enacted a policy restricting the use of cash in selected markets; bans cash payments for credit cards, mortgages, and auto loans; and disallows the storage of “any cash or coins” in safe deposit boxes. In other words, the war has moved on from one of words to actions.

Here are ten quotes that should chill the spine of any individual who cherishes his or her freedom and anonymity:

1. Kenneth Rogoff (from the intro to his paper The Costs and Benefits to Phasing Out Paper Currency):

“Despite advances in transactions technologies, paper currency still constitutes a notable percentage of the money supply in most countries… Yet, it has important drawbacks. First, it can help facilitate activity in the underground (tax-evading) and illegal economy. Second, its existence creates the artifact of the zero bound on the nominal interest rate.”

In other words, cash (not money) is the source of all evil and must be destroyed because governments can’t trace its every movement, and it represents a limiting factor on central banks’ ability to continue their insane negative-interest-rate experiment.

2. Citigroup’s Chief Economist Willem Buiter responds to the monetary economist Charles Goodhart’s description of abolishing currency as “shockingly illiberal.”

“(T)his cost has to be seen against the cost that the anonymity of currency presents to society. Even though hard evidence is hard to come by, it is very likely that the underground economy and the criminal community are among the heaviest users of currency.”

This, I believe, is the hidden intent behind all the excited talk about banning cash: to do away with the personal anonymity it offers.

3. France’s finance minister Michel Sapin adds a dose of scare-mongering, which can do wonders. In the wake of the Charlie Hebdo murders, put much of the blame for the attacks on the assailants’ ability to buy dangerous things with cash. Shortly thereafter he announced a raft of capital controls that included a €1,000 cap on cash payments, down from €3,000. Such radical counter measures were necessary, he said, to “fight against the use of cash and anonymity in the French economy.”


To continue reading: The “War on Cash” in 10 Spine-Chilling Quotes

See also: The “War on Cash” Migrates to Switzerland, SLL, 4/26/15

The “War on Cash” Migrates to Switzerland, by Pater Tenebrarum

Cash in today’s world may be just unbacked fiat paper, but it offers anonymity, and, weirdly, while it doesn’t pay interest, it also doesn’t require paying negative interest. Holding cash allows the holder a small refuge from the moronic Keynesian war being waged on savers (see “Anti-Value: Europe’s Rape of Savers,” SLL, 3/6/15). Reason enough, it what passes for thinking among Keynesian witch doctors, to get rid of it. From Patar Tenebrarum, acting-man.com:

Banks Increasingly Refuse Cash Withdrawals – Switzerland Joins the Fun

The war on cash is proliferating globally. It appears that the private members of the world’s banking cartels are increasingly joining the fun, even if it means trampling on the rights of their customers.

Yesterday we came across an article at Zerohedge, in which Dr. Salerno of the Mises Institute notes that JP Morgan Chase has apparently joined the “war on cash”, by “restricting the use of cash in selected markets, restricting borrowers from making cash payments on credit cards, mortgages, equity lines and auto loans, as well as prohibiting storage of cash in safe deposit boxes”.

This reminded us immediately that we have just come across another small article in the local European press (courtesy of Dan Popescu), in which a Swiss pension fund manager discusses his plight with the SNB’s bizarre negative interest rate policy. In Switzerland this policy has long ago led to negative deposit rates at the commercial banks as well. The difference to other jurisdictions is however that negative interest rates have become so pronounced, that it is by now worth it to simply withdraw one’s cash and put it into an insured vault.

Having realized this, said pension fund manager, after calculating that he would save at least 25,000 CHF per year on every CHF 10 m. deposit by putting the cash into a vault, told his bank that he was about to make a rather big withdrawal very soon. After all, as a pension fund manager he has a fiduciary duty to his clients, and if he can save money based on a technicality, he has to do it.


To continue reading: The “War on Cash” Migrates to Switzerland

See also The “War on Cash” in 10 Spine-Chilling Quotes,” SLL, 4/26/15