Finale of the show ECB negative interest rates.

[BA Deere]

Soon to follow here i`m sure, Shellady mentioned it a bit on the market page.  Money is so worthless, like Don`s old joke of "bank charging rent to store my money" is coming to fruition.

http://www.nytimes.com/2014/06/05/upshot/europe-likely-to-get-negative-interest-rates-what-does-that... 

I really don`t know how negative interest rates can be spun as a good thing,but if interest was any amount at all, with all the national debts around they would all be in deep doo-doo.   How the ECB can do that and not have the rest of the world follow (if they can) is beyond me.

Think in your own situation, at what amount of money would you balk at borrowing if they paid you to take it?   Well, obviously that means there is nothing out there that you could do that you would make profits even if the money was "less than free".    Rigor-mortis has set in on the canary.

[bruce MN]

There only ever were 2 practical options to chose from. Neither taken, A) Significant, if not massive stimulus injected directly into  economies or B) to simply stand back and watch the tail go down the chute with the hide.   http://community.agriculture.com/t5/Ag-Forum/Nox-Did-you-catch-this/m-p/499278

Neither was taken, even though certain legend builders will say that A was tried and produced nothing,  Wrong..it wasn't tried in that it wasn't significant, much less massive, and was however modestly effective in many areas. 

The ECB (that would be the Germans, essentially, in al matters of policy ultimately) carved out a path through the jungle of enforcing extreme austerity upon hundreds of millions of people. The entire history of the 20th Century screamed out that wasn't the thing to do.  How odd it seems that a power that was vanquished twice in that century would now find itself able to hamstring a contitnent and set an entire planet on night watch?

Of course for you and any maker or producer of significant amount or level of something that is primary in consumption that path through the jungle has been like the Bg Rock Candy Mountain. I'd take it easy on Drahgi and the ECB Board if I were in your shoes.  They are actually hard at work trying to cut you the best deal they can get ya'.

[r3020]

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@bruce MN wrote:

There only ever were 2 practical options to chose from. Neither taken, A) Significant, if not massive stimulus injected directly into  economies or B) to simply stand back and watch the tail go down the chute with the hide.   http://community.agriculture.com/t5/Ag-Forum/Nox-Did-you-catch-this/m-p/499278

Neither was taken, even though certain legend builders will say that A was tried and produced nothing,  Wrong..it wasn't tried in that it wasn't significant, much less massive, and was however modestly effective in many areas. 

The ECB (that would be the Germans, essentially, in al matters of policy ultimately) carved out a path through the jungle of enforcing extreme austerity upon hundreds of millions of people. The entire history of the 20th Century screamed out that wasn't the thing to do.  How odd it seems that a power that was vanquished twice in that century would now find itself able to hamstring a contitnent and set an entire planet on night watch?

Of course for you and any maker or producer of significant amount or level of something that is primary in consumption that path through the jungle has been like the Bg Rock Candy Mountain. I'd take it easy on Drahgi and the ECB Board if I were in your shoes.  They are actually hard at work trying to cut you the best deal they can get ya'.

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On A how much is enough?

[BA Deere]

I'm not necessarily against what the Eu's version of the fed has to do to keep the house of cards vertical, that is probably all they can do at this point. I'm just pointing out what a desperate move that negative rates are.....I mean where do you go when that doesn't work? And doesn't it basically boil down to going to the bank to borrow money to make minimum payments on your MasterCard?

[hardnox]

The only thing it really could have hoped to accomplish was drive the euro lower to help the German export machine.

I'll give it a couple of days to play out but right now the euro is 128 pips off the lows and higer on the day so it looks like it might already be a failure.

Expect some jawboning about future intentions shortly and we'll see how that goes.

[hardnox]

Intraday bond charts look like the euro- sold off before the announcement and now US long rates are back in decline (bonds higher).

Pushing on a string, or in the immortal words of The Vapors

https://www.youtube.com/watch?v=BvMgnH7sGI0

[hardnox]

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10876377/The-nagging-fear-that-QE-...

I don't have any fancypants math to support my position but I don't think QE is causing deflation.

I do agree with Steve Roach that QE 1 was probably a wise move at the time, 2 not so much and 3 no. Less and less traction to it and just much harder to unwind- a serious complication to whatever comes next.

We are living in a world with plenty of excess capacity and very low wage bargaining power. The simple math doesn't work indefinitely.

[hardnox]

Indefinitely is the key word, just ask everyone who has tried to short lousy companies and credit securities recently.

The bad outperforms the good as short squeezes become the motive force of the bull market.

Therein lies the major mechanism of mispricing. If you're sure the Fed has your back it is easy pickin's.

BTW, one of the most pernicious notions that took hold during the crisis was that short sellers are the enemy. Given reasonable rules and regulations they're the truth seekers of capitalism.

[hardnox]

Euro now up .63.

I'm awaiting the writier of this evening's excuse sheet to note that it showed "confidence in the actions of EU officials."

[BA Deere]

Hey Nox, the reason QE hasn't caused inflation is the money never makes it to mainstreet, it sits in the member banks idily earning 1/4% interest just sitting, perhaps going into Wall street on sure bets.

I guess the way to look at it if a farmer kept lying that his farm gets bigger every year and borrows more money and the banker is a happy accomplice because his bank has more assets mortgaged each year. It will end sometime, probably go on longer than many of us think.  But its a shame, if we are to buy into the "stimulus theory" shouldn't we at least be "stimulating"? Creating shovel ready jobs to turn things around.