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Watch out! Negative interest rate policy is coming to the US sooner than later

Last August, Runnymede Capital warned our readers that a financial hurricane was coming. Over the past six months, the stock markets around the world tumbled and the US has followed suit in 2016. Our clients, who gave us permission to raise cash reserves, were fortunate and their assets were protected.

Today, we are sounding off another BIG alarm that the banks are planning to take principal out of your bank deposits. Most Americans don’t know that the Central bank is not an agency of the US government but a privately owned banking cartel. It is owned by the banks which are members of the Federal Reserve. No one knows how much of the system each bank owns because it is a deep dark secret. Their actions and assets are never audited by anyone.

The Fed's number one priority: Bank Profitability

The Federal Reserve has power over the U.S. banking system and it makes certain that the banks make lots of money. The depositors (you) are not the Central Bank’s number one priority. The Fed controls the money supply, sets the interest rates and hands out bailouts to the big banks by asking the banks not to pay depositors any interest payments. Billions of dollars in taxpayer money allowed banks that were on the brink of collapse in 2008 from underwriting low quality subprime mortgages and gambling in derivatives, not only to survive but to flourish. These banks collected $1 trillion in revenues mainly from funds out of our pockets by not paying interest to us and made billions in profits. Are they still in trouble eight years later? The answer is YES because they are still gambling with trillions of derivatives and moreover, the energy loans are going sour.

Expect negative rates in 2016 or 2017

Once you understand the Central Bank is not your friend, you can predict their next move: say goodbye to zero interest rates and say hello to its evil twin negative interest rates. The “den of thieves” is coming to take your principal straight out of your bank accounts. You and I will soon have to pay the bank interest as a “patriotic” way to stimulate the economy. A negative interest rate means the banks will charge you fees based on the size of your deposit; instead of receiving interest on deposits, depositors must pay regularly to keep their money with the bank. They say this is intended to incentivize banks to lend money more freely and businesses and individuals to invest, lend, and spend money rather than pay a fee to keep it safe. Do you really believe their line of reasoning?

The second argument is that our “allies” are doing it and therefore, you have nothing to fear. The Bank of Japan is the latest central bank to enact negative rates on January 29, 2016. The European Central Bank and the central banks of Switzerland, Denmark and Sweden have had negative interest rates for over a year. The Swedish just cut their rates today to -50bps. The central banks and media may present this as a stimulus to economic growth, it is in fact the opposite. Negative interest rates are extremely deflationary because it is taking money out of our pockets which could be spent on goods or services. It is clear from the last year that negative interest rates have not helped the economy, nor the financial markets, of these countries which enacted NIRP (negative interest rate policy). Have these central bankers lost their minds or are they just helping the banks to take away your savings?

Desperate measures from central banks

Richard Koo, the chief economist of the Nomura Research Institute recently wrote in Barron's 2/3/16 issue: “In my view,” he wrote, “the adoption of negative interest rates is an act of desperation born out of despair over the inability of quantitative easing and inflation targeting to produce the desired results.”

“The failure of the Bank of Japan and the European Central Bank to meet their inflation and growth goals is shared by the Federal Reserve and the Bank of England. None of these central banks understand that their textbook solutions don’t fit the real economy,” Koo asserted.

Guess who gets hurt from all this? The savers and retirees. By contacting Runnymede, we can help you to take protective action and to navigate this challenging environment.

"COMING SOON" by Peter-Ashley is licensed under CC BY-SA 2.0


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About the Author: Samson Wang

Samson Wang


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.-"Runnymede"), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede.  Please remember that if you are a Runnymede client, it remains your responsibility to advise Runnymede, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Runnymede's current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Runnymede does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Runnymede's web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

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