Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Germany, Sweden, some others. It's been all over the news. But this page gives the lie to all that sensational news stuff. What gives? The German bund 10-year is at +0.183%. Is it only the short-term overnight rates that are affected? http://www.cnbc.com/id/15839203
I suppose the other issue becomes psychology of money and the fragility of that when you have negative interest rates. Do you get enough people - in particular enough people with a lot of money - deciding that they'd rather not have their money in cash that's effectively being taxed and go into assets? Do enough do that to create a snowball effect that eventually turns into something resembling a stampede? I don't know, but A) we live in interesting times and B) there's real risks to the monetary policies that central banks are using that they seem to shrug off.
"there's real risks to the monetary policies that central banks are using that they seem to shrug off. "
Hi Scott- yes, we've certainly examined that issue many times. In my view, the CBs looked in the rear-view mirror, saw 1929, and didn't want to go back there. That left them to go forward on an unmarked road, ending who knows where? The best of two bad choices, I'd say. If nothing else, at some point we'll have an idea where this road leads.
Not that this has not been discussed here and is part of many "paid business journalists" stories, is that there remains a very large group of folks in this country and I suspect other developed nations who remain to see portions (or all) of their lifetime/retirement savings go down the drain in purchasing power; as they will not become investors as we here understand the term. The passbook savings, bank money market, CD group. This circumstance for me, is a most devastating, ongoing side effect from the bad guys/girls who help bring all of us the mess from 8 years ago. 99.9% of these people in the investment world still roam the halls of money; without prosecution. Am I supposed to believe their are no big heads to put upon the "pike stick"?
I'll stop now, before I become too pissed............
"99.9% of these people in the investment world still roam the halls of money; without prosecution."
And a while back, in a discussion touching on outrageous Wall Street bonuses, somebody was trying to make the point that all of these folks still deserve them because they "earned them".
I bet a small sum that the higher those bonuses, the more likely that they are those same "99.9%" you mentioned. Now I'M pissed!!
"99.9% of these people in the investment world still roam the halls of money; without prosecution."
And a while back, in a discussion touching on outrageous Wall Street bonuses, somebody was trying to make the point that all of these folks still deserve them because they "earned them".
I bet a small sum that the higher those bonuses, the more likely that they are those same "99.9%" you mentioned. Now I'M pissed!!
Yep, sometimes that's all you can do. Who was it that said "nobody ever said that life was fair"?
You have a financial services industry lobby who the government will bend over backwards for. Or, if you threaten them (breaking up the banks, things like "rules and regulations") they will threaten to play the financial armageddon card.
We had to save firms like Bank of America so they could be slapped on the wrist with a fine every other month for not caring about things like rules and regulations.
"An effective way to burnish your legacy as a public servant to is to rebut your critics before you’ve even left office. Eric Holder seems to be trying to do just that: negotiating multi-billion dollar bank settlements at a rapid pace, and promising tough action in interest rate and currency manipulation cases.
This, Holder seems to hope, will counter the standard argument that his inability to bring a single criminal case against an executive in connection to the financial crisis is, most charitably, hard to fathom.
But Holder's legacy of failure goes even deeper than that: What's more bizarre is his additional failure to adequately prosecute ubiquitous, run-of-the-mill mortgage fraud. Holder failed to land a single big charge against a high-level executive, but he also failed to strike back at the many smaller-bore prosecution opportunities the housing crisis left at his feet."
Holder: "I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large."
" is that there remains a very large group of folks in this country and I suspect other developed nations who remain to see portions (or all) of their lifetime/retirement savings go down the drain in purchasing power; as they will not become investors as we here understand the term."
Absolutely. I've said it before and I'll say it again. I do not think this period ends well, but I fear that it will not be another 2008. It will be a crisis where the rules of the game are simply changed (perhaps this drastic choice, floated by Biden's former economic advisor, presented as a positive? http://www.nytimes.com/2014/08/28/opinion/dethrone-king-dollar.html?_r=0 Who knows?) because the financial tools used up to this point have no more room/are no longer effective. You'll never, ever hear "we were wrong", "this is no longer working" or even "this is not getting the intended result." It's never, ever that it was wrong, it is always that it "wasn't enough" and any problems are "transitory." It will always be preferable - and it's only gotten worse - to politicians to throw money at a problem rather than having to actually sit down and solve it in a lasting manner.
You'll never get a crisis where asset holders are not ultimately the priority of being assisted above anyone else and after 2008, asset holders will expect to be bailed out should there be another crisis. No more QE? Watch how fast it'll be screamed for if the market drops 15-20% - and I bet they'll give the market what it wants. As is, people act like the market is broken when it goes down for one day. You'll never have a period in this country where savers and those who go about things "the old fashioned way" are not bent over and ultimately are the ones bailing out those who took risk. Can't have people acting prudent, gotta keep pullin' forward that demand from tomorrow and next year and the year after that.
The attitude that NIRP in parts of Europe is not potentially a disaster is baffling. But you know what? That's the view of countries these days: lets buy the reality that we'd like via financial engineering rather than face reality. It ultimately results in a worse reality and a bigger bill when the financial engineering has run its course. Politicians don't care because they think it'll be someone else's problem by the time that happens.
You know, people go, "Well, if they didn't do NIRP it would be worse there." Well, yeah, it will just eventually be even worse when the sugar high wears off or things get disorderly because NIRP in and of itself is risk. Or they have to take increasingly dramatic steps (as if NIRP wasn't dramatic enough) when NIRP doesn't get the result they're looking for.
"It could have been worse if they didn't do X, Y and Z." Well, wait until X, Y and Z wear off because they weren't a sustainable/lasting solution in the first place and it'll be worse anyways and you've just thrown a s-ton of money at the problem. Again, though - politicians just hope that'll be someone else's problem. All of this financial engineering is buying time while no one bothers to come up with solutions for what really is problematic within the global economy.
Financial engineering starts to have declining rates of effectiveness and results in having to take increasingly drastic steps to cover up the weakness of the underlying business that's been neglected. It just ultimately results in a bigger tab when the sugar high has run out and no steps have been taken to actually improve the underlying business.
Sears was an iconic American business and now what's left of it is a sad example of what is going on on a larger scale. You have a business that has been neglected and strip mined, but the zombie's okay because "it's a real estate story", "oooh, now they're spinning off a REIT", "the membership program that we don't charge a fee for is really working". People don't go, "who cares, the business fu**king sucks because it's been neglected by a hedge fund manager who should never have become a retailer!" Now Lampert has to pull one gimmick after another (a CEO loaning money to his own company backed by the best real estate, "tails I win, heads I win") to keep people distracted from the fact that the business has continued to lose an enormous amount of money with no real hope of actual improvement to the business, only more gimmicks.
The business of America has been neglected, and it's been neglected for quite some time now. As long as we can create bubbles though and make it look like everything's a-okay because the market is ramping, no one cares about all the rot and underlying problems that no one has begun to address and have only gotten worse.
Am I wrong? Look at the healthy reality we have where the Fed downgrades the economy and the market proceeds to ramp like hell because it means more easy money for longer.
With the bolded in mind, invest accordingly.
Yellen's advice to those who are not well off? Get assets.
Also, as for savers/on fixed income who think we'll get back to having those 3-4% CDs again within the next decade:
"At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed's main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke's lifetime. "
Welcome to the Oligarchy. You guys are stirring up the stuff that makes my blood boil, too. Gov't in bed with Big Money. No wonder no Executives have been prosecuted. But let's mortgage Social Security and make students become victims, taking too much in loans so they can just simply get through school. It's all criminal. And none of those responsible have been indicted.
Given the unusual length and intensity of Scott's comments above, here are selected remarks from an article in USA TODAY, as they also consider and substantiate many of Scott's observations. John Waggoner's article (linked yesterday, by Ted) is well worth reading in it's entirety. Unfortunately, it is more than 40 words.
The Federal Reserve has been dealing with a number of unintended consequences of its low interest rate policy, which was intended to goose the economy. And, while low rates have indeed kept the economy from a complete disaster, they have unleashed a new series of unsettling consequences as well. If you're an investor, you need to look at the possibility that rates could remain low for a long time.
One of the Fed's jobs is to be lender of last resort: That is, to make loans available when nobody else will. Banks, investment banks, money market funds and many large corporations rely on overnight and other short-term loans to keep running.
And even if the Fed does raise rates, it could be years until short-term rates return to normal levels. What happened?
• the economy is showing signs of sputtering. Retail sales and mortgage applications have been declining the past three months.
• the value of the dollar has been soaring. Money flows to countries with the highest interest rates.
Fortunately for the Fed, there's no urgency in raising interest rates. Consumer prices fell 0.1% the 12 months ended January, thanks to falling gas prices. What does all of this mean for investors?
• If you're waiting to get any meaningful return from money funds or bank CDs, your long national nightmare is far from over. The average money fund yields 0.02% now, and it could be years before the Fed gets short-term rates to its long-term average of 4% to 5%.
• Until Europe starts to recover, you're unlikely to see much higher long-term interest rates, either. Barring a meltdown – which is always possible – the 10-year Treasury at 2% looks much, much better than rates at any healthy and developed country.
• Stocks still look more attractive than cash or bonds, despite a six-year bull run. And while the first Fed rate hike usually produces a modest sell-off, the stock market often views rising rates as a sign of an improving economy. It's not until the Fed puts rates above average that stocks fall apart.
Here's the thing: The people at the Fed aren't dummies, and they're having a hard time predicting the future course of the economy. It's like a giant game of Whac-A-Mole: You push something down here, and something else pops up elsewhere.
The best bet for most people: Remain widely diversified.
Currency wars preceded the Great Depression by about a decade. I have no idea whether history will repeat, but there's plenty of doomstayers out there if you Google it. And, my weak understanding is that in the past the debate about returning to the gold standard played a role in the general currency chaos these wars inflict.
Suffice it to say these attempts out out-flank each other with cheaper and cheaper currencies seldom ends well. Ed Studzinski had an excellent but complex article on the current currency wars in David's monthly commentary a month or two back. Ed I'd put among the doomsayers in that regard.
It is difficult for me to understand why anyone would deposit a sum at a negative interest rate. Surely there is some good reason for so doing? BTW - glimpsed an article on Japan's dilemma recently. Their debt to GDP ratio is double that of the U.S. and growing.
Currency wars preceded the Great Depression by about a decade. I have no idea whether history will repeat, but there's plenty of doomstayers out there if you Google it. And, my weak understanding is that in the past the debate about returning to the gold standard played a role in the general currency chaos these wars inflict.
Suffice it to say these attempts out out-flank each other with cheaper and cheaper currencies seldom ends well. Ed Studzinski had an excellent but complex article on the current currency wars in David's monthly commentary a month or two back. Ed I'd put among the doomsayers in that regard.
It is difficult for me to understand why anyone would deposit a sum at a negative interest rate. Surely there is some good reason for so doing? BTW - glimpsed an article on Japan's dilemma recently. Their debt to GDP ratio is double that of the U.S. and growing.
Damn - over 40 words again.
I suppose it goes back to the idea that money goes where it is treated best. In a world where a number of countries have negative interest rates (and as much as the dollar has moved in recent months, that could easily change in a moment with some announcement or intervention), I do think there is potential for long-term changes to happen across the economic landscape.
You have IMF/World Bank-like entities popping up, including the Asian Infrastructure Bank (http://www.forbes.com/sites/donaldkirk/2015/03/23/chinas-asian-infrastructure-investment-bank-upsets-u-s-lures-u-s-allies-including-korea/). The only issue with these long-term changes is that they are likely going to be far more in the way of every country/region for themselves rather than done in the interests of world unity. There's not as big of a pie as there was before and there's more of an "every country for themselves" feeling as to those trying to grab a piece.
The whole negative interest rate thing is likely to not end well, but people are all excited about Europe now as if NIRP somehow fixes the underlying problems, so who cares? You'll have companies with bonds trading at negative interest rates (http://money.cnn.com/2015/02/05/investing/nestle-corporate-bonds-negative-rates/) You have such distortions in the market and you've created an environment where everything is about what central banks may do next. It's completely unhealthy, but it - to me - is the "new normal" more than Pimco's "new normal" was when they first applied that term a year or three ago.
"Currency wars preceded the Great Depression by about a decade."
It wouldn't surprise me. As if we'd learn anything from history. I don't think people learned anything from 2008 and that wasn't even 10 years ago.
I do not see us going back to the gold standard - I give that as much chance as me buying a smartwatch. It goes absolutely opposite to everything that central banks stand for. The Fed getting to the point where they send everyone in this country a check is more likely.
Lastly, it's not that there isn't enough gold (that response is frustrating), it's simply the question of: "at what price?"
From Bernanke's famed speech: "Of course, the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior).8 Normally, money is injected into the economy through asset purchases by the Federal Reserve. To stimulate aggregate spending when short-term interest rates have reached zero, the Fed must expand the scale of its asset purchases or, possibly, expand the menu of assets that it buys. Alternatively, the Fed could find other ways of injecting money into the system--for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities. Each method of adding money to the economy has advantages and drawbacks, both technical and economic. One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies. Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation."
"The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt.16"
"Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation."
Comments
Hi Scott- yes, we've certainly examined that issue many times. In my view, the CBs looked in the rear-view mirror, saw 1929, and didn't want to go back there. That left them to go forward on an unmarked road, ending who knows where? The best of two bad choices, I'd say. If nothing else, at some point we'll have an idea where this road leads.
The passbook savings, bank money market, CD group.
This circumstance for me, is a most devastating, ongoing side effect from the bad guys/girls who help bring all of us the mess from 8 years ago. 99.9% of these people in the investment world still roam the halls of money; without prosecution.
Am I supposed to believe their are no big heads to put upon the "pike stick"?
I'll stop now, before I become too pissed............
Yep, sometimes that's all you can do. Who was it that said "nobody ever said that life was fair"?
And a while back, in a discussion touching on outrageous Wall Street bonuses, somebody was trying to make the point that all of these folks still deserve them because they "earned them".
I bet a small sum that the higher those bonuses, the more likely that they are those same "99.9%" you mentioned. Now I'M pissed!!
We had to save firms like Bank of America so they could be slapped on the wrist with a fine every other month for not caring about things like rules and regulations.
"An effective way to burnish your legacy as a public servant to is to rebut your critics before you’ve even left office. Eric Holder seems to be trying to do just that: negotiating multi-billion dollar bank settlements at a rapid pace, and promising tough action in interest rate and currency manipulation cases.
This, Holder seems to hope, will counter the standard argument that his inability to bring a single criminal case against an executive in connection to the financial crisis is, most charitably, hard to fathom.
But Holder's legacy of failure goes even deeper than that: What's more bizarre is his additional failure to adequately prosecute ubiquitous, run-of-the-mill mortgage fraud. Holder failed to land a single big charge against a high-level executive, but he also failed to strike back at the many smaller-bore prosecution opportunities the housing crisis left at his feet."
http://www.huffingtonpost.com/2013/08/21/eric-holder-financial-crisis_n_3790800.html
Holder: "I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large."
http://www.huffingtonpost.com/2013/05/15/eric-holder-too-big-to-jail_n_3280694.html
-------------------
" is that there remains a very large group of folks in this country and I suspect other developed nations who remain to see portions (or all) of their lifetime/retirement savings go down the drain in purchasing power; as they will not become investors as we here understand the term."
Absolutely. I've said it before and I'll say it again. I do not think this period ends well, but I fear that it will not be another 2008. It will be a crisis where the rules of the game are simply changed (perhaps this drastic choice, floated by Biden's former economic advisor, presented as a positive? http://www.nytimes.com/2014/08/28/opinion/dethrone-king-dollar.html?_r=0 Who knows?) because the financial tools used up to this point have no more room/are no longer effective. You'll never, ever hear "we were wrong", "this is no longer working" or even "this is not getting the intended result." It's never, ever that it was wrong, it is always that it "wasn't enough" and any problems are "transitory." It will always be preferable - and it's only gotten worse - to politicians to throw money at a problem rather than having to actually sit down and solve it in a lasting manner.
You'll never get a crisis where asset holders are not ultimately the priority of being assisted above anyone else and after 2008, asset holders will expect to be bailed out should there be another crisis. No more QE? Watch how fast it'll be screamed for if the market drops 15-20% - and I bet they'll give the market what it wants. As is, people act like the market is broken when it goes down for one day. You'll never have a period in this country where savers and those who go about things "the old fashioned way" are not bent over and ultimately are the ones bailing out those who took risk. Can't have people acting prudent, gotta keep pullin' forward that demand from tomorrow and next year and the year after that.
The attitude that NIRP in parts of Europe is not potentially a disaster is baffling. But you know what? That's the view of countries these days: lets buy the reality that we'd like via financial engineering rather than face reality. It ultimately results in a worse reality and a bigger bill when the financial engineering has run its course. Politicians don't care because they think it'll be someone else's problem by the time that happens.
You know, people go, "Well, if they didn't do NIRP it would be worse there." Well, yeah, it will just eventually be even worse when the sugar high wears off or things get disorderly because NIRP in and of itself is risk. Or they have to take increasingly dramatic steps (as if NIRP wasn't dramatic enough) when NIRP doesn't get the result they're looking for.
"It could have been worse if they didn't do X, Y and Z." Well, wait until X, Y and Z wear off because they weren't a sustainable/lasting solution in the first place and it'll be worse anyways and you've just thrown a s-ton of money at the problem. Again, though - politicians just hope that'll be someone else's problem. All of this financial engineering is buying time while no one bothers to come up with solutions for what really is problematic within the global economy.
Financial engineering starts to have declining rates of effectiveness and results in having to take increasingly drastic steps to cover up the weakness of the underlying business that's been neglected. It just ultimately results in a bigger tab when the sugar high has run out and no steps have been taken to actually improve the underlying business.
Sears was an iconic American business and now what's left of it is a sad example of what is going on on a larger scale. You have a business that has been neglected and strip mined, but the zombie's okay because "it's a real estate story", "oooh, now they're spinning off a REIT", "the membership program that we don't charge a fee for is really working". People don't go, "who cares, the business fu**king sucks because it's been neglected by a hedge fund manager who should never have become a retailer!" Now Lampert has to pull one gimmick after another (a CEO loaning money to his own company backed by the best real estate, "tails I win, heads I win") to keep people distracted from the fact that the business has continued to lose an enormous amount of money with no real hope of actual improvement to the business, only more gimmicks.
The business of America has been neglected, and it's been neglected for quite some time now. As long as we can create bubbles though and make it look like everything's a-okay because the market is ramping, no one cares about all the rot and underlying problems that no one has begun to address and have only gotten worse.
Am I wrong? Look at the healthy reality we have where the Fed downgrades the economy and the market proceeds to ramp like hell because it means more easy money for longer.
With the bolded in mind, invest accordingly.
Yellen's advice to those who are not well off? Get assets.
http://www.zerohedge.com/news/2014-09-16/janet-yellen-trolls-americas-poor-tells-them-it-important-get-rich
Also, as for savers/on fixed income who think we'll get back to having those 3-4% CDs again within the next decade:
"At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed's main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke's lifetime. "
http://www.reuters.com/article/2014/05/16/us-usa-fed-bernanke-insight-idUSBREA4F0OG20140516
Sorry, way more than 40 words.
The Federal Reserve has been dealing with a number of unintended consequences of its low interest rate policy, which was intended to goose the economy. And, while low rates have indeed kept the economy from a complete disaster, they have unleashed a new series of unsettling consequences as well. If you're an investor, you need to look at the possibility that rates could remain low for a long time.
One of the Fed's jobs is to be lender of last resort: That is, to make loans available when nobody else will. Banks, investment banks, money market funds and many large corporations rely on overnight and other short-term loans to keep running.
And even if the Fed does raise rates, it could be years until short-term rates return to normal levels. What happened?
• the economy is showing signs of sputtering. Retail sales and mortgage applications have been declining the past three months.
• the value of the dollar has been soaring. Money flows to countries with the highest interest rates.
Fortunately for the Fed, there's no urgency in raising interest rates. Consumer prices fell 0.1% the 12 months ended January, thanks to falling gas prices. What does all of this mean for investors?
• If you're waiting to get any meaningful return from money funds or bank CDs, your long national nightmare is far from over. The average money fund yields 0.02% now, and it could be years before the Fed gets short-term rates to its long-term average of 4% to 5%.
• Until Europe starts to recover, you're unlikely to see much higher long-term interest rates, either. Barring a meltdown – which is always possible – the 10-year Treasury at 2% looks much, much better than rates at any healthy and developed country.
• Stocks still look more attractive than cash or bonds, despite a six-year bull run. And while the first Fed rate hike usually produces a modest sell-off, the stock market often views rising rates as a sign of an improving economy. It's not until the Fed puts rates above average that stocks fall apart.
Here's the thing: The people at the Fed aren't dummies, and they're having a hard time predicting the future course of the economy. It's like a giant game of Whac-A-Mole: You push something down here, and something else pops up elsewhere.
The best bet for most people: Remain widely diversified.
http://www.vanityfair.com/news/2015/03/wall-street-executives-2008-jamie-dimon-cancer
https://www.linktv.org/programs/richard-wolff-democracy-in-action-the-cure-for-capitalism?utm_source=facebook&utm_medium=social&utm_campaign=link#.VQjYq9iCtZw.facebook
Suffice it to say these attempts out out-flank each other with cheaper and cheaper currencies seldom ends well. Ed Studzinski had an excellent but complex article on the current currency wars in David's monthly commentary a month or two back. Ed I'd put among the doomsayers in that regard.
It is difficult for me to understand why anyone would deposit a sum at a negative interest rate. Surely there is some good reason for so doing? BTW - glimpsed an article on Japan's dilemma recently. Their debt to GDP ratio is double that of the U.S. and growing.
Damn - over 40 words again.
You have IMF/World Bank-like entities popping up, including the Asian Infrastructure Bank (http://www.forbes.com/sites/donaldkirk/2015/03/23/chinas-asian-infrastructure-investment-bank-upsets-u-s-lures-u-s-allies-including-korea/). The only issue with these long-term changes is that they are likely going to be far more in the way of every country/region for themselves rather than done in the interests of world unity. There's not as big of a pie as there was before and there's more of an "every country for themselves" feeling as to those trying to grab a piece.
The whole negative interest rate thing is likely to not end well, but people are all excited about Europe now as if NIRP somehow fixes the underlying problems, so who cares? You'll have companies with bonds trading at negative interest rates (http://money.cnn.com/2015/02/05/investing/nestle-corporate-bonds-negative-rates/) You have such distortions in the market and you've created an environment where everything is about what central banks may do next. It's completely unhealthy, but it - to me - is the "new normal" more than Pimco's "new normal" was when they first applied that term a year or three ago.
"Currency wars preceded the Great Depression by about a decade."
It wouldn't surprise me. As if we'd learn anything from history. I don't think people learned anything from 2008 and that wasn't even 10 years ago.
I do not see us going back to the gold standard - I give that as much chance as me buying a smartwatch. It goes absolutely opposite to everything that central banks stand for. The Fed getting to the point where they send everyone in this country a check is more likely.
Lastly, it's not that there isn't enough gold (that response is frustrating), it's simply the question of: "at what price?"
From Bernanke's famed speech: "Of course, the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior).8 Normally, money is injected into the economy through asset purchases by the Federal Reserve. To stimulate aggregate spending when short-term interest rates have reached zero, the Fed must expand the scale of its asset purchases or, possibly, expand the menu of assets that it buys. Alternatively, the Fed could find other ways of injecting money into the system--for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities. Each method of adding money to the economy has advantages and drawbacks, both technical and economic. One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies. Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation."
"The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt. Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt.16"
"Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation."
http://www.federalreserve.gov/boarddocs/Speeches/2002/20021121/default.htm