US Monetary Policy Dangers – ZIRP or NIRP Will Mean Bailouts or Implosion

a reply to: MichiganSwampBuck

I think people would invest in something with a negative return only when it seems clear to them that all other available investments are even worse. For example, when currency becomes devalued and when business is in recession/depression and there's nowhere to park their money that isn't going to decline at a faster rate.

I would think that if investment in negative yielding bonds becomes popular, that this is evidence of a simultaneous decline in the faith of the currency being used to invest, which of course can and has happened.

I don't personally believe it spells doom for the majority of people or the economy in general, rather perhaps a deflating of a balloon that is on the verge of bursting. Which, if given the choice, I'd rather see a bit of deflation as a correction than the collateral damage of an economic bubble bursting like we saw in 08-09.

Then again, I'm not economist, but I did stay at a Holiday Inn...

Ok, think I'm getting it. They invest in something with a small negative return that will actually do better than other things that have a greater negative return. Seems like there should always be something with at least a zero return if not a very small positive return though.

I'll be giddy with glee watching the whole system implode. The rich will finally be brought down to my level. They'll get what they deserve. I have enough hunting and fishing gear to survive the apocalypse. You could dump me off in the article circle with my gear and I'll be just fine.

There is a clue in the 'cash for clunkers' scheme you mentioned. The eligibility requirements were that cars has to be fully registered and insured, in good running order, under 25 years old, under 18mpg efficient. The vehicles were then immediately destroyed and reduced to scrap. The scheme wasn't about getting old cars of the road. It was about destroying physical capital and real world wealth in order to change symbolic numbers and make balance sheets look different on paper. A similar event happened during the great depression when entire fields of food were burnt to raise food prices.

Economic and monetary events since the 1930's have been about this fixation on symbolic paper numbers and electronic digits. All at the expense of the real world around us that is our actual wealth. Water became bottled drinks, parks became entertainment venues, markets became supermarkets. The increasing monetization of everything tricks us into thinking that we get paid more and hides that we have less real wealth in the process.

ZIRP and NIRP is a continuation of this ongoing process into the final stages of symbolic digits destroying the physical wealth that we have in life. Money and other symbolic units are really important and provides so much value to our lives. But we are about to learn that the physical world is slightly more important still. The illusion that money is wealth and even better than wealth is about to die. Money, dollars, credit cards are not going away, they are too valuable in their utility. But most debts, investments and currency systems will not survive fully intact.