{"id":18551,"date":"2016-03-07T12:15:47","date_gmt":"2016-03-07T17:15:47","guid":{"rendered":"http:\/\/olduvai.ca\/?p=18551"},"modified":"2016-03-07T12:15:47","modified_gmt":"2016-03-07T17:15:47","slug":"deutsche-bank-discovers-kurodas-nirp-paradox","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=18551","title":{"rendered":"Deutsche Bank Discovers Kuroda’s NIRP Paradox"},"content":{"rendered":"

Deutsche Bank Discovers Kuroda’s NIRP Paradox<\/a><\/h3>\n
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Last October, BofA looked at Europe\u2019s \u20ac2.6 trillion in negative-yielding debt and\u00a0discovered something<\/a>\u00a0\u201cstunning\u201d: Savings rates were going\u00a0up<\/em>\u00a0not down.<\/div>\n
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Don\u2019t believe us, just have a look at these three charts:<\/p>\n

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But how could that be? By all accounts – or, should we say, by all conventional Keynesian\/ textbook accounts – negative rates should force people out of savings and into higher yielding vehicles or else into goods and services which \u201crational\u201d actors will assume they should buy now before they get more expensive in the future as inflation rises or at least before the money they’re sitting on now yields less than it currently is.<\/p>\n

Well inflation never rose for a variety of reasons (not the least of which was that QE and ZIRP actually contributed to the global disinflationary impulse) and nothing will incentivize savers to keep their money in the bank like the expectation of deflation.<\/p>\n

Well, almost nothing. There\u2019s also this (again, from BofA): \u201cUltra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain.<\/strong>\u201d<\/p>\n

Why that\u2019s \u201cperverse,\u201d we\u2019re not entirely sure. Fixed income yields\u00a0nothing<\/em>, and rates on savings accounts are\u00a0nothing<\/em>. Which means if you\u2019re worried about your nest egg and aren\u2019t keen on chasing the stock bubble higher or buying bonds in hopes that capital appreciation will make up for rock-bottom coupons (i.e. chasing the bond bubble), then as Gene Wilder would say, \u201cyou get nothing<\/em>.\u201d And that makes you nervous if you\u2019re thinking about retirement. And nervous people don\u2019t spend.\u00a0Nervous people save<\/strong>.<\/p>\n

Deutsche Bank has figured out this very same dynamic. In a note out Friday, the bank remarks that declining rates\u00a0have<\/em>\u00a0generally managed to bring consumption forward.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Deutsche Bank Discovers Kuroda’s NIRP Paradox Last October, BofA looked at Europe\u2019s \u20ac2.6 trillion in negative-yielding debt and\u00a0discovered something\u00a0\u201cstunning\u201d: Savings rates were going\u00a0up\u00a0not down. Don\u2019t believe us, just have a look at these three charts: But how could that be? By all accounts – or, should we say, by all conventional Keynesian\/ textbook accounts – […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[1719,124,1839,291,6038,2854,1768,1389,702,1615,4318],"class_list":["post-18551","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bond","tag-central-banks","tag-deutsche-bank","tag-fail","tag-fixed","tag-haruhiko-kuroda","tag-negative-interest-rate-policy","tag-nirp","tag-savings","tag-spending","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18551","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=18551"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18551\/revisions"}],"predecessor-version":[{"id":18552,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18551\/revisions\/18552"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=18551"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=18551"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=18551"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}