Negative Interest Rates: A Sure Sign the Economy Is Doomed

First, a quick look at the markets.

The Dow bounced yesterday, recovering 239 points of the nearly 400 it lost on Friday.

Why the comeback?

The financial press has a ready answer: ‘Stocks gain with cautious Fed comments,’ reads a headline.

Yes, dear reader, the Fed is in charge now. At least, according to the press.

Prices are no longer discovered by willing buyers and sellers. They are imposed by a central bank that lives in fear — fear that investors will discover that the recovery is phony and stocks and bonds are not worth what they paid for them.

Janet Yellen and her fellow PhDs at the Fed built a fake world…a hothouse for stocks and bonds.

Now, they can’t open the doors; the plants might die!

Weird and unnatural


The rift in the time-space continuum continues to widen,’ reports our ace researcher, Nick Rokke.

On Tuesday, German household-products giant Henkel and French pharmaceutical company Sanofi issued a total of €1.5 billion ($1.7 billion) of new bonds at yields of minus 0.05%.

Nick might have added an exclamation point; never in the last 5,000 years for which we have records has loaned money yielded less than nothing.

And since money didn’t even exist before that, we can presume that it has never before happened in the history of the universe.

Of course, today never happened before, either. But time is linear. Every day is a new day. Interest rates are cyclical. They go up and they go down. In each direction, there are limits.

Temperatures are cyclical, too. They go up in summer and down in winter. Occasionally, the media announces the ‘hottest day in 20 years’ or ‘the deepest snow since 1957’. We get out the fans or rubber boots. We brace ourselves for something unusual, but not unheard of.

Records are broken from time to time. It’s part of the cyclical nature of things. But when the media announces ‘the hottest day in 5,000 years’, watch out. Something else may be going on…something weird and unnatural.

It is certainly more than passing strange that a private company should be paid to borrow money. Or that investors are willing to pay for the privilege of lending. It bespeaks more than a new record. It tells us that the feds have made a damned mess of things.

A first in 5,000 years

We admit that our generation is the greatest, smartest, and most advanced in all history.

The Fed has more than 1,000 PhD economists on the payroll. Compare that with the Bank of England under Sir Isaac Newton…or the central bank of Cuba under Che Guevara. Neither had a single PhD in its employ.

We now have computers that can beat grandmasters at chess and hook you up to a porn site at the speed of light.

We have robots that can make automobiles…and 3-D printers that can make robots.

And we have large, shiny machines that lift up hundreds of people at a time and fly them across the oceans. (It’s true; we’ve seen them ourselves.)

Think of all the empires that rose and fell over the last 5,000 years: the Akkadians, the Hittites, the Egyptians, the Chaldeans, the Sumerians, the Assyrians, the Persians, the Babylonians, the Greeks, the Romans, the Sassanians, the Seljuqs, the Mongols…

Think of the conquests and defeats: Attila, Genghis, and Tamerlane…stout Cortés on a hill in Darien…Pizarro and his room full of gold…William at Hastings…and poor Harold with an arrow in his eye…Bonaparte in Moscow and then the crossing of the Berezina…Hitler in his bunker…Nagasaki…

And the last ditch stands…the lost causes — the Charge of the Light Brigade…Pickett’s Charge…the Little Big Horn…Culloden…and Dien Bien Phu…

The great battles of Vienna, Waterloo, Huaihai, Cajamarca, Antietam, Leipzig, Stalingrad, Yorktown…

Alexander conquered the known world…Hannibal crossed the Alps…Caesar crossed the Rubicon…and Lord Byron swam the Hellespont…

And think of the lost languages— and the whole races of humans — that lived and died: the Neanderthal, the Denisova, Homo floresiensis…

And the forgotten tribes — the Paiute, Shoshone, Omaha, Mandan, Hidatsa, Ojibwe, and Nermernuh — wiped out by disease…

The lost cities…the lost peoples. Hundreds of millions killed in wars…starved to death…burnt at the stake…tortured…murdered…

And the lovers: Cleopatra and Antony…Catherine the Great and Potemkin…Burton and Taylor…Gertrude Stein and Alice B Toklas…Prince Edward and Wallis Simpson…Helen of Troy and Paris…Juan Perón and Eva Duarte…

Think of the great geniuses, too: Euclid…Aristotle…Pythagoras…Archimedes…Galileo…Da Vinci…Pauling…Wittgenstein…and Einstein.

And yet as far as we know, in not a single instance did anyone (not Nebuchadnezzar, nor King Solomon, nor even ‘The Bard’ himself)…driven by love, or money, or madness…ever have the idea of lending money to get back less money later on.


Bill Bonner,
For Markets and Money, Australia

From the Archives…

The NASDAQ Is About to Blow
By Greg Canavan

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

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