{"id":95032,"date":"2016-08-31T07:32:15","date_gmt":"2016-08-31T11:32:15","guid":{"rendered":"http:\/\/countingpips.com\/?p=95032"},"modified":"2016-08-31T07:32:15","modified_gmt":"2016-08-31T11:32:15","slug":"fomc-vice-chair-stan-fischer-endorses-negative-rates","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/08\/fomc-vice-chair-stan-fischer-endorses-negative-rates\/","title":{"rendered":"FOMC Vice Chair Stan Fischer Endorses Negative Rates"},"content":{"rendered":"
August 31, 2016<\/div>
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By Jason Hamlin, GoldStockBull.com<\/a><\/strong><\/p>\n

Multiple\u00a0central banks around the globe are embracing negative interest rates. This is being done in an effort to spur economic growth, encourage spending, stimulate lending and force savers to put their money at risk in the markets.\u00a0Central banks have been very effective in creating asset price inflation, including in stocks, bonds and real estate, where prices all have skyrocketed.<\/p>\n

FOMC Vice Chair Stan Fischer told Bloomberg Surveillance today that he thinks negative interest rates are working in other countries. While this currently seems unthinkable in the U.S., I would not be surprised to hear a rising chorus of support for\u00a0negative rates in the US should another major market crash materialize.<\/p>\n

\"fischer<\/a><\/p>\n

In fact, Yellen even brought up the possibility late last year, stating:<\/p>\n

\u201cPotentially anything \u2013 including negative interest rates \u2013 would be on the table. But we would have to study carefully how they would work here in the U.S. context.\u201d<\/p><\/blockquote>\n

Furthermore,\u00a0the FED\u00a0required banks to include the possibility of negatively yielding Treasury rates in recent stress tests.\u00a0Suddenly, zero interest rate policy, or ZIRP, may not be enough. The economy may now need a\u00a0negative interest rate policy, or NIRP, to keep chugging along.<\/p>\n

\"FED<\/a><\/p>\n

While the Fed isn\u2019t \u201cplanning to do anything in that direction,\u201d the central banks using them \u201cbasically think they\u2019re quite successful,\u201d Fischer said Tuesday on Bloomberg Television with Tom Keene in Washington. He reiterated that Fed rate increases will be data dependent without giving a specific timeline.<\/p>

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\u201cWe\u2019re in a world where they seem to work,\u201d Fischer said, noting that while negative rates are \u201cdifficult to deal with\u201d for savers, they typically \u201cgo along with quite decent equity prices.\u201d<\/p>\n

\u201cThe United States is fortunate that we aren\u2019t in a position where interest rates have to be negative.\u201d<\/p><\/blockquote>\n

Yes, indeed, how robust is our economy that it can stay afloat with interest rates near\u00a0zero, but not yet below zero. We can\u2019t raise rates much above zero, but at least we aren\u2019t negative (yet). Such confidence-inspiring words!<\/p>\n

When Fischer said that negative rates seem to work, perhaps he meant that they work for central bankers. For retirees, savers and conservative investors, not so much.<\/p>\n

Implications for Gold Investors<\/strong><\/p>\n

\"gold<\/a>Gold prices have risen sharply\u00a0in 2016, following the first rate hike in years that took place in December of 2015. This first rate hike did not cause the gold price to tumble. Those thinking another nudge of 25 basis points\u00a0will crush the gold bull are mistaken. Yet, they have convinced a good number of people to exit their positions.<\/p>\n

Gold and silver prices have corrected over the past month, primarily driven by fears that the FED is going to start raising rates aggressively. But what if the analysts\u00a0have it wrong and the FED isn\u2019t going to raise rates anytime soon? What if the markets are not strong enough to support higher interest\u00a0rates? Or what if the FED does hike the benchmark rate and the stock market collapses?<\/p>\n

Mike Maloney is quite confident that the liquidity-driven \u2018recovery\u2019 created by the world\u2019s central banks is now over. In his estimation, the path ahead is one of accelerating descent into inevitable currency destruction. He is not alone. Some of the world\u2019s top investors view the equity market as vastly overvalued and due for a major correction.<\/p>\n

While we can\u2019t rule out another small hike of 25 basis points by year end, I think the FED will have to reverse course at some point in next few years. I believe we are more likely to see negative interest rates than a FED funds rate above 2%. If I am correct, the market is mispricing assets and there are opportunities to profit from this mispricing.<\/p>\n

It is my view that misguided\u00a0fears of rising rates\u00a0have pushed the USD higher and capped the gold price advance. These fears are unfounded. I believe that gold and silver are headed much higher, even if rates slowly creep higher. But if negative rates are a possibility in the United States, then gold and silver prices are severely undervalued at current levels and set to rocket substantially higher.<\/p>\n

We believe the market is currently blessing investors with an excellent opportunity to buy the dip in precious metals and quality mining stocks. You can subscribe to our paid newsletter and get our top gold and silver stock picks here<\/a>.<\/p>\n

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About the Author: Jason Hamlin<\/strong><\/em><\/p>\n

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Jason Hamlin is the founder of Gold Stock Bull and has been investing in precious metals for over 20 years. Jason spent nearly a decade in analytics for the world\u2019s largest market research firm, before finding success investing full time. He launched Gold Stock Bull in 2005 and turned his focus from helping fortune 500 companies to helping individual investors that were struggling to achieve strong gains in the stock market.<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

By Jason Hamlin, GoldStockBull.com Multiple\u00a0central banks around the globe are embracing negative interest rates. This is being done in an effort to spur economic growth, encourage spending, stimulate lending and force savers to put their money at risk in the markets.\u00a0Central banks have been very effective in creating asset price inflation, including in stocks, bonds […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-95032","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/95032","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=95032"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/95032\/revisions"}],"predecessor-version":[{"id":95033,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/95032\/revisions\/95033"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=95032"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=95032"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=95032"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}