Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

The World Is Awash in Easy Money

  by    0   0

The Federal Reserve isn’t the only central bank cutting interest rates. In fact, the world is awash in easy money.

The Fed met market expectations during the September FOMC meeting and lowered interest rates another 25 basis points. It was the second cut of the year and pushed the interest rate down to the range of 1.75 – 2%. Meanwhile, the European Central Bank took a decidedly dovish turn over the summer. It has even hinted at another round of “shock and awe” stimulus.

And it’s not just the big central banks slashing rates.

Eleven emerging market central banks cut rates in September. That follows on the heels of 14 rate cuts by emerging market central banks in August. September was the eighth straight month of net cuts by emerging market bankers. according to a Reuters report.

Emerging markets went through a tightening cycle that ended in early 2019, following the lead of the Fed’s “Powell Pause.” Emerging market tightening lasted a mere nine months.

In effect, we’re seeing a race to the bottom in interest rates around the world.

The following central banks have cut rates in recent months.

Mexico, Egypt, the Phillippines, Paraguay, China, Hong Kong, Indonesia, Jordan, Saudi Arabia/UAE/Qatar, Brazil, Vietnam, Azerbaijan, Turkey, Armenia, Russia, Ukraine, Chile, Dominican Republic, Botswana, Jamaica, Mozambique, Nambia, Mauritius, Peru, Serbia, India, Belarus, Thailand,  South Africa, South Korea, Costa Rica, Sri Lanka, Tajikistan, Kyrgyzstan, Angola, Malaysia, Rwanda, and Malawi.

A few countries have raised rates recently, including Kazakhstan, Moldova, Pakistan, Zambia, the Czech Republic, and Georgia,

We’re seeing the impact of all this easy money. Negative-yielding debt exceeded $15 trillion globally for the first time ever in August and quickly climbed to around $16 trillion. This pile of negatively yielding paper includes government and corporate bonds, along with some euro junk bonds. WolfStreet called it a “race to hell.”

Central bank interest rate manipulation has longer-term ramifications. It encourages debt and discourages savings. Lower savings rates ultimately mean less money available to invest in capital goods. This does not bode well for long-term real economic growth.

In the US, we’ve seen a massive pileup of debt as the Fed has held interest rates artificially low for decades. In August alone, the US government added $450 billion to the national debt. Forty of the 50 US states don’t have enough money to pay their bills.  C0rporate debt and consumer debt have also hit record levels.

Rate cuts may create the illusion of economic growth, but building an economy on borrowing and debt simply isn’t sustainable.

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

European Central Bank Takes Bond Market Manipulation to the Next Level

Peter Schiff recently explained how the Federal Reserve has rigged the US Treasury market. Well, the European Central Bank has taken bond market manipulation to the next level. According to a Bloomberg report, the ECB is buying bonds to control the yield spread between debt issued by various EU countries. As a result of this […]

READ MORE →

Indian Gold Market Shows Signs of Revival

India ranks as the second-largest gold consuming country in the world, second only behind China. But over the last couple of years, the gold market in India has languished due to a combination of record-high gold prices in rupee terms and the economic impacts of the coronavirus pandemic. But were signs of revival in the […]

READ MORE →

ETFs Charted Record Gold Inflows in 2020; Holdings Hit All-Time High

Gold-backed ETFs recorded record net gold inflows, pushing holdings globally to record levels in 2020. On net, ETFs globally added 877 tons of gold last year worth about $47.9 billion. Gold holdings rose by over one-third, ending the year at a record 3,752 tons, according to data released by the World Gold Council.

READ MORE →

US Government Runs Biggest December Deficit in History

The US government ran the biggest December budget deficit in history last month. The December budget shortfall came in at $143.6 billion. That compares with a $13.3 billion deficit in December 2019, according to the Monthly Treasury Statement.

READ MORE →

Demand for Silver in Automobile Production Expected to Rise

Last month we reported that the surge in solar energy use could power a strong demand for silver. Now analysts say demand from another sector could also benefit the white metal. A report by the Silver Institute projects that the automotive industry will absorb nearly 90 million ounces of silver annually by 2025. That would […]

READ MORE →

Comments are closed.

Call Now