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Demand For Big Bills Soars As NIRP-Fearing Japanese Stuff Safes With 10,000-Yen Notes

February 25, 2016

Demand For Big Bills Soars As NIRP-Fearing Japanese Stuff Safes With 10,000-Yen Notes

Earlier this week, we were amused but not at all surprised to learn that Japanese citizens are buying safes like they’re going out of style.

The reason: negative rates and the incipient fear of a cash ban. “Look no further than Japan’s hardware stores for a worrying new sign that consumers are hoarding cash–the opposite of what the Bank of Japan had hoped when it recently introduced negative interest rates,” WSJ wrote. “Signs are emerging of higher demand for safes—a place where the interest rate on cash is always zero, no matter what the central bank does.”

Put simply, the public has suddenly become aware of what it means when central banks adopt negative rates. The NIRP discussion escaped polite circles of Keynesian PhD economists long ago, and now it’s migrated from financial news networks to Main Street.

Although banks have thus far been able to largely avoid passing on negative rates to savers, there’s only so long their resilience can last. At some point, NIM will simply flatline and if that happens just as a global recession and the attendant writedowns a downturn would entail occurs, then banks are going to need to offset some of the pain. That could mean taxing deposits.

As we noted on Monday, circulation of the 1,000 franc note soared 17% last year in Switzerland in the wake of the SNB’s plunge into the NIRP Twilight Zone. As it turns out, demand for big bills is soaring in Japan as well.

“Demand for 10,000-yen bills is steadily rising in Japan, even as the nation’s population falls and the use of credit cards and other forms of electronic payment increases,” Bloomberg writes.

…click on the above link to read the rest of the article…

Your Do-It-Yourself Page Financial Armageddon Story

February 23, 2016

YOUR DO-IT-YOURSELF FRONT PAGE FINANCIAL ARMAGEDDON STORY

“The media select, they interpret, they emotionalize and they create facts.. The media not only reduce reality by lowering information density. They focus reality by accumulating information where “actually” none exists.. A typical stock market report looks like this: Stock X increased because.. Index Y crashed due to.. Prices Z continue to rise after.. Most of these explanations are post-hoc rationalizations.. An artificial logic is created, based on a simplistic understanding of the markets, which implies that there are simple explanations for most price movements; that price movements follow rules which then lead to systematic patterns; and of course that the news disseminated by the media decisively contribute to the emergence of price movements.”

– Thomas Schuster, ‘Meta-Communication and Market Dynamics; Reflexive Interactions of Financial Markets and the Mass Media’.

Monday 15th February 2016. Our silver-haired trader, in front of a panel of random prices, clutching his head and grimacing, probably because he’s hungover, brings you the latest from a dealing room in the same stock photo that the Telegraph have used at least three times in the last five years:

Yes, it’s [Monday / all over / a bowel-clenching orgy of blood-soaked insanity] as [negative interest rates / China devaluation fears / lower oil prices / higher oil prices / sideways oil prices] strike [like junior doctors / pant-wetting horror / sharpened blades of doom-laden Götterdämmerung] into [the soft, pulpy hearts of innocent pensioners staring wide-eyed in stunned horror at the untimely end of their sheer financial existence / the markets].

• [Fed chair Yellen / BoE governor Carney / CoCo the Clown] seeks to reassure [investors / someone / anyone / turn those machines back on !]

• Gold makes biggest one-day gain since [yesterday]

Global financial markets endured a day of [you think I could stand this butcher’s yard more than once / mind-shattering turmoil beyond the edge of imagination / light winds and scattered showers] as investors’ fears rose over [China / global currency wars / negative interest rates everywhere / more QE / widespread banking failures / Take That reforming].

…click on the above link to read the rest of the article…

Why Did Japanese NIRP Cause Such Surprise In the Currency Market and Is It More Dangerous?

February 18, 2016

WHY DID JAPANESE NIRP CAUSE SUCH SURPRISE IN THE CURRENCY MARKET AND IS IT MORE DANGEROUS?

  • The Bank of Japan announcement of NIRP sent shock waves through currency markets
  • The Yen has strengthened on capital repatriation since the BoJ move
  • JGB 10 year yields turned negative this week
  • Longer-term the Yen will weaken

At the end of January the Bank of Japan (BoJ) shocked the financial markets by announcing that they would allow Japanese interest rates to become negative for the first time. USDJYP reacted with an abrupt rise from 118 to 121 which was completely reversed a global stock markets declined USDJYP is currently at 112.06 (11-02-2016). The three year chart below shows the extent of the move:-

USDJPY_-_3yr

Source: Big Charts

Here is an extract from the BOJ Announcement:-

The Introduction of “Quantitative and Qualitative Monetary Easing (QQE) with a Negative Interest Rate” 

The Bank will apply a negative interest rate of minus 0.1 percent to current accounts that financial institutions hold at the Bank. It will cut the interest rate further into negative territory if judged as necessary.

The Bank will introduce a multiple-tier system which some central banks in Europe (e.g. the Swiss National Bank) have put in place. Specifically, it will adopt a three-tier system in which the outstanding balance of each financial institution’s current account at the Bank will be divided into three tiers, to each of which a positive interest rate, a zero interest rate, or a negative interest rate will be applied, respectively.

“QQE with a Negative Interest Rate” is designed to enable the Bank to pursue additional monetary easing in terms of three dimensions, combining a negative interest rate with quantity and quality.

The Bank will lower the short end of the yield curve and will exert further downward pressure on interest rates across the entire yield curve through a combination of a negative interest rate and large-scale purchases of JGBs.

…click on the above link to read the rest of the article…

Moneyweek: Hands Off Our Cash Petition

October 21, 2015

Moneyweek: Hands Off Our Cash Petition

Andy Haldane recently floated the idea of abolishing cash so that radical monetary policy like negative interest rates can be implemented.

You can sign the Moneyweek petition against this here:

http://moneyweek.com/wp/hands-off-our-cash-petition

Whereas the Bank of England’s Chief Economist Andrew Haldane announced on 18th September 2015 his intention to abolish use of cash in Britain in order to allow the bank to impose negative interest rates on savers;

Whereas this would allow banks to charge you to keep your money on deposit and make it impossible to remove your money as cash in response;

Whereas Denmark, Sweden and Switzerland have already imposed negative interest rates;

Therefore, we the undersigned, as concerned savers and investors of Great Britain, do call on Her Majesty’s British Government to:

1 Guarantee that cash will not be abolished from use in the UK
2 Guarantee that negative interest rates will not be imposed undemocratically on British savers
3 Establish a form of public consultation on the specific mandate and monetary policy limitations of the Bank of England

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