By STAFF NEWS & ANALYSIS
“Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability … Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.” -Fed press release following Wednesday FOMC meeting
The reality of the FOMC meeting on Wednesday and its subsequent – and sudden – dovishness generated considerable speculation.
From our perspective, the statement is one more piece of evidence regarding the creation of a new kind of central-bank oriented economy.
This New “21st Century Economy” features a tripartite stool of emergent monetary policies.
The stool is supported by three legs.
One is low or negative interest rates. The second is the “cashless” society. The third is the “basic income.”
These policies represent a fundamental shift in how economies operate. It changes the way we think about money and use it.
We will need to consider it regularly when making plans for generating and retaining wealth.
The recent FOMC meeting showed clearly that this stool is under construction.
Why? Let’s start with the most obvious.
The harsh realities of the US economy simply dictate that the Fed must be very careful about higher rates.
The Fed did try to hike late last year. As it turned out its single 25 basis point hike triggered a considerable market swoon.
Of course, the Fed remains committed to more such hikes in 2016.
But the Fed is stuck in zero-bound. It is only loose credit that galvanizes America’s distorted and increasingly bankrupt economy.
A recent ZeroHedge post summed it up well.
The Zero Hedge analysis centered around the word “accommodative.” As in, “the stance of the monetary policy remains accommodative, thereby supporting further improvement in labor market conditions …”
In fact, rate hikes are antithetical to an “accommodative” policy of low interest rates.
Janet Yellen had spent most of 2015 threatening to raise rates but now it seems that LOWER rates are more accommodative to growth.
ZeroHedge jumped on this contradiction with both feet.
Either hiking rates supports the expansion or perpetual low rates “accommodate” it. Not both.
Either the Fed was “spooked” by something, or FOMC was hewing to a larger professional consensus.
“The second possibility being discussed is that some type of central bank accord was reached at the G20 meeting in Shanghai February 25-26… It is not difficult to envision an agreement where central banks agreed to provide more stimuli, if the Fed agreed to pause in order to not offset the effects of such moves.”
This point confirms observations we have often made regarding the cartel-like aspects of central banking and the domination of its organizing facility, the Bank for International Settlements.
In any other business or industry, such overt monopoly activity would result in the prosecution and perhaps incarceration of those involved.
But central banks have always been exempt from legal ramifications of their dirty deeds. There is little or nothing that justifies such a wretched system.
In this Internet era, its wretchedness has become clearer.
A recent post at Business Spectator eloquently explained the ramifications of central bank failure within the EU. The article is entitled An ECB Dead End.
Here’s a pertinent excerpt:
“Let there be no doubt about it: Europe has maneuvered itself into a dead end … Let’s put it this way: If the ECB decided tomorrow, next year or in 10 years’ time that now was the time to return to more normal monetary circumstances, it could no longer do so. With its policies, the ECB has made itself indispensable. It is only the ECB and the ECB alone that can keep the great illusion of European Monetary Union alive.”
This is clearly a reason as to why such “dead end” policies are being applied. Central bankers are in the process of ensuring that their banking facilities directly support the general economy in such a way that they cannot be removed.
As we’ve suggested, a new monetary stool is under construction.
Cashlessness, negative interest rates and a basic income – each one of these policies reinforces the other and centralizes the power and influence of central banks even more.
To further cement cashlessness, central banks are even starting to create their own digital currencies, such as the Bank of England’s RScoin.
But unlike decentralized bitcoin, these currencies will be issued directly by the central bank. Soon people may be opening accounts directly with their central bank, bypassing the savings and commercial banks entirely.
Between depriving people of circulating money (cash), forcing people to consume via NIRP and providing people with a basic income for their lifestyle needs, central bankers intend to entrench the system so thoroughly that it will never be rooted out.
And as indicated by the recent FOMC minutes, major central bankers are singing in harmony. They are working from the same play book.
Worse is coming and none of this will be settled soon. But please understand: It is not possible that the full panorama of elite monetary solutions will ever be fully implemented.
Such a fundamental deprivation of freedom on a worldwide level is not possible.
Conclusion: Your duty to yourself and your family is survive during this increasingly chaotic interregnum. On the other side awaits a happier day and a brighter future. Make sure you have the resources to get there.
Another financial institution joins the rebellion stockpiles cash and gold
Last year, amid all the madness in financial markets, financial historian and strategist Russell Napier joked about creating a “European high-yield capital guarantee fund.”
His “high-yield” fund was nothing more than a secure room filled with physical cash, and a guy standing outside with a gun to guard it.
As jokes tend to be, this was a sad reflection on reality.
Though physical cash bears no interest, it is considered “high yield” compared to bank balances and government bonds that carry negative rates.
Napier’s joke is now coming true.
Earlier this week, the CEO of Munich Re, the largest reinsurance company in the world, announced that they would start holding 8-digit sums of physical cash and gold in their vaults.
Insurance companies tend to be boring, staid institutions that follow the rules and play the game along with the rest of the financial establishment.
But this move from Munich Re is an all-out rebellion against the central banks who are destroying the financial system with negative interest rates.
A few months ago I wrote to you about the different forms of money in our financial system.
Physical cash, which each of knows and understands well, is one form of money.
Bank deposits are another form of money, and one that is almost exclusively digital. The days where banks held customer deposits in cash inside their vaults are long gone.
Instead, the vast majority of the consumer financial system today is electronic. Credit card payments, bank transfers, etc. all take place in the cloud.
In reality your savings account balance is nothing more than an entry in a bank’s database, stored on a server somewhere in a building with no windows.
So while cash exists in the physical world, bank balances exist only in the digital world.
These are two fundamentally different forms of money. And at the moment they have a 1:1 exchange rate.
You see this every time you go to the ATM machine or make a cash deposit at your local bank. $1 in cash is the same as $1 in your savings account.
But that 1:1 exchange rate is not set in stone. It absolutely can break down.
Think about it—back in 2013 when the government of Cyprus froze ALL of its citizens’ bank accounts, bank balances became instantly worthless.
It didn’t matter how much money you have in your account. If you can’t access, it isn’t worth squat.
Cash became enormously valuable; having the money in your hand was worth far more than a frozen bank account, and demand for physical cash soared.
This is what we’re seeing now.
Negative interest rates are pushing people out of the financial system. Munich Re is only the latest example.
A few weeks ago, I told you about the German Savings Bank Association advising its member banks to hold physical cash in their vaults, instead of paying negative interest to the European Central Bank.
Demand for cash is increasing. More importantly, the rebellion against negative interest rates and central bank madness is increasing.
And this trend has the clear potential to break that 1:1 exchange rate between physical cash and bank balances.
But by the time it happens, it will be too late to get your hands on cash. That’s why holding some now is an absolute no-brainer.
Bear in mind, there are still risks, so holding cash not a 100% solution.
Civil Asset Forfeiture is on the rise and the calls to ban cash are growing louder all the time.
But in conjunction with precious metals and an account at a highly liquid, well-capitalized foreign bank, you can radically reduce the risks that this insane financial system poses to your savings and livelihood.
Simon Black is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.