Savers Are About to Get Railed...

We were sitting in a small parlor in his Manhattan penthouse yesterday…

“Everyday savers are getting a raw deal,” explained colleague David Stockman. “But it’s about to get even worse…”

Addison and I met with David to discuss the landscape for investors like you… and how he could be of further help to you. Bill Bonner joined us. (That’s Bill with David in the featured image atop today’s post. They’re reminiscing over a cartoon lampooning David’s efforts in the ’80s to slash defense spending.)

Over $1 trillion in paper wealth has been lost since we popped the cork on 2016. Forty stock markets around the globe are in a bear market. The other major three stock markets — the U.S., Australia and Germany — are in 10% correction territory. The mother of all financial bubbles is deflating, just as David said it would during the free live training event we hosted on the eve of December’s rate hike.

At writing, all three stock indexes have rolled into the red again. But look out below — the “Big Drop” has yet to happen. The market sowed way more in the last seven years than the small correction it’s reaped during the last 28 trading days.

This is why we’ve worked with David to create his Bubble Finance Trader. Investing in this new era of deflating asset prices will be a different ballgame than has been played since 2009. Four months into publishing, he’s three for three on closed-out positions.

“When Nixon broke the link to gold in ’71,” Stockman continued later over lunch, “he and his ‘estimable free market advisers’ did not in their wildest imaginations foresee that this would unhinge the monetary and financial nervous system of capitalism. They had no premonitions at all that it would pave the way for a 40-year storm of financialization and a debt-besotted symbiosis between central bankers possessed by delusions of grandeur and private gamblers intoxicated with visions of delirious wealth.”

That process has left the globe on life support for nine years. Despite trillions in QE, we never got the full recovery we expected. Now we’re coming full circle. “U.S. CEOs Unleash Recession Fears in Earnings Calls,” reports Reuters.

If those recession fears become reality — something our own Jim Rickards says is likely — expect the Fed to reverse course and perhaps even impose negative nominal interest rates. These are the latest fads emanating from central bank boardrooms. And a danger for U.S. savers that David Stockman was concerned about during our meeting yesterday.

“There will be a political uprising if the Fed institutes a negative interest rate policy (NIRP),” explained David. It isn’t hard to see why. Under today’s system, a negative interest rate is a simple and absurd idea: You pay the bank to hold your money.  

At first glance, this harkens back to the days when banks’ basic function was warehousing money. You would pay the bank to keep your pile of gold safe, and they’d give you a paper receipt that let you demand it back anytime you wanted. Sort of like the fee you might pay for a storage unit to keep your belongings safe if you’re renovating your house. But back then…

A) Your money (gold) maintained its value over time, or even increased in value.
B) The fee you paid banks was set in stone and agreed upon in advance.

That system benefited savers, who knew where and what their money would be one day or 20 years in the future.

Today’s fiat money system is different, though.

In 2016, negative interest rates could be a means of stealing your money. They’d be yet another subsidy to the big banks and a way to force you to spend instead of save. And they could be coming to a bank branch near you soon…

“The madness of NIRP,” explains David, “is probably no longer containable since it already infects the eurozone, Sweden, Switzerland, Denmark, Japan — and, soon, South Korea.

“The world’s being choked by the $225 trillion credit bubble that’s deflating. It was created by the Fed and global central banks over the last two decades.”

Desperate times call for desperate measures. “Now they are going to make matters worse by doubling-down on a failed experiment in crank economics. They’ve already driven nearly $6 trillion of sovereign debt below the zero bound. Even a decade ago, every student of Economics 101 knew that is a recipe for calamity.

“Just a few dozen monetary apparatchiks in the world’s major central banks and their shills in the world’s financial casinos are driving the system straight toward the monetary abyss…”

If you’re a boomer who’s worked and saved your whole life, you’re being led to the slaughter. Bill Bonner sounds the warning

Regards,

Peter Coyne
for The Daily Reckoning

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