This is the ballad of a newsletter writer …
A song of why thinkers get paid to think, writers paid to write.
This is a cry out to the flock that seeks greener pastures, but is reluctant to be shepherded there.
For it is the job of a shepherd to craft a line that’s going to get the sheep safely and efficiently to pasture.
To be sure, the shepherd analogy loses relevance when the “sheep” possess a conscious, rationale mind just like the shepherd.
This is where trust comes into play.
I may be crazy, but can you trust me not to lead you astray? For instance …
Negative Interest Rates Are Good for the Economy
That was the headline of my latest Global Resource Hunter monthly piece.
The opening line that followed?
“Just not this economy”
The claim in those two lines, one would think, should be further explained in the text that followed. Indeed, I believe I demonstrated a cogent, explanation for why negative interest rates are not good for today’s economy but could prove beneficial in a system that’s been drastically reconfigured.
Yet one of my sheep (if I may be so bold to assume shepherdship) wanted nothing to do with the idea.
For he thought my claims would lead him straight to the same old desolate wasteland of an economy rather than new, fulfilling pastures. To wit:
Negative interest rates are good? Then why is Europe & Japan in the dumps?
Here I thought that you guys were different, but such nonsense has turned my stomach.
Cancel my subscription & credit my acct. I expect a confirmation of the cancellation too.
I responded to him privately. Something along the lines of:
Indeed, there are many challenges in re-calibrating the system as I described. But at the very least, I thought my piece WAS different.
I mean, where have you read someone condemn central bankers, centralized government, capitalist excess, corporatist control, a misguided money system, a culture of separation and debt as well as environmental negligence … all in one place?
Those are the things that turn my stomach.
Oh yeah — I also told him:
Japan and Europe are not in the dumps because they have negative interest rates; they have negative interest rates because they are in the dumps. And if you read my entire piece, you’ll realize that negative interest rates — as being favored by central banks around the world right now — are not the ultimate solution because exorbitant debt levels restrict growth potential (and thereby restrict the velocity of money and credit moving through the system.)
This sheep thinks he knows of greener pastures somewhere.
Oddly enough, he thinks the same old drumbeat that only calls out central banks for abnormally low interest rates and extraordinary monetary policy is the way to those pastures.
Hey, I’ll plead guilty; I’ve beat that drum plenty of times because in our current system that sort of policy reaction breeds unintended consequences.
I realize that. And I acknowledge it.
For if ZIRP or NIRP have any credibility in an economic system, that system cannot be underpinned by debt that is underpinned by money that is underpinned by a growth-at-all-costs mentality.
It is that mentality that accommodates the justification for interest rates.
But that mentality has run its course.
Charging interest (however high or low) on borrowings that cannot generate growth and/or are aimed at servicing existing debts is a losing battle. The best it can do is grow wealth inequality by rewarding capital holders and encouraging wealth accumulation at the expense of debt holders.
I mean, Bill Gross was on the record last week spouting off about how negative interest rates turn assets into liabilities.
“$11 trillion of negative yielding bonds are not assets — they are liabilities. Factor that, Ms. Yellen, into your asset price objective.”
It’s fairly logical on the surface.
If we are “penalized” for accumulating and holding assets, why would we seek them?
But it might not be true anymore.
And here is what’s hard for most to wrap their minds around: why are bonds even considered assets to begin with?
Simply because they’re notorious for kicking off a yield and retirement accounts beckon for steady, stable ROI? (Forgive me: I’m in my thirties and a traditional retirement is likely not in the cards for me!)
This is where, if the thinking changes and the culture of debt has been addressed with a jubilee or something, zero or negative interest rates shouldn’t matter to “asset” holders. For holders of bonds and yielding assets first and foremost are seeking return on their money. The merit of the underlying asset is relevant only so far as the bond holder can be reassured the principle will be returned.
The investor doesn’t so much expect the borrower to generate utility for the public interest as much as he expects the borrower to reward him and only him for use of the capital that he perceives as belonging to him and only him.
Again, guilty as charged, your honor.
But should we not at least have this conversation?
Is this not a different way of looking at things?
I mean, central bankers argument for negative interest rates hinges entirely on perpetuating a culture of debt. Who wants that besides those getting rich off others’ debt bondage?
On the other hand, a worthwhile argument for negative interest rates hinges on sustaining a system that doesn’t encourage debt based on the conventional purpose of money that isolates us.
For in isolation we defer blame — we externalize costs, for instance — and we force further apart the gears of sustainability. That is, we divide society. And last time I checked, our politicians don’t need any helping dividing.
Am I crazy?
The ideas that go hand in hand with the system I’m hinting at will necessarily require a major transformation of mind, money and value.
The thing is, if we don’t want to be plagued by a worsening cycle of booms and busts, we need to do something. We can suffer the abruptness of financial crises, or we can exercise some self-regulating measures that reconfigure the system.
You’re gonna have to trust me on this!