ECB’s Draghi Considering One-Upping Fed, Launching NEGATIVE Interest Rates! (NIRP)

June 27, 2012 By 7 Comments

ZIRP is so 2008 (-2015).  Bloomberg reports ECB head Mario Draghi is considering cutting ECB interest rates BELOW ZERO from their current 0.25%.
That’s right, Draghi is considering one-upping The Bernank himself, bypassing ZIRP, and going straight to NIRP (negative interest rate policy)!

Nothing like the smell of desperation in the morning.  Perhaps Draghi was listening when Soros stated yesterday that Europe has 3 days to solve the crisis?
Anyone remain unconvinced QE Will Go to Infinity??

Draghi May Enter Twilight Zone Where Fed Fears to Tread
European Central Bank President Mario Draghi is contemplating taking interest rates into a twilight zone shunned by the Federal Reserve.
While cutting ECB rates may boost confidence, stimulate lending and foster growth, it could also involve reducing the bank’s deposit rate to zero or even lower. Once an obstacle for policy makers because it risks hurting the money markets they’re trying to revive, cutting the deposit rate from 0.25 percent is no longer a taboo, two euro-area central bank officials said on June 15.
“The European recession is worsening, the ECB has to do more,” said Julian Callow, chief European economist at Barclays Capital in London, who forecasts rates will be cut at the ECB’s next policy meeting on July 5. “A negative deposit rate is something they need to consider but taking it to zero as a first step is more likely.”

Should Draghi elect to cut the deposit rate to zero or lower, he’ll be entering territory few policy makers have dared to venture.
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Comments

  1. Avatar of Neo Neo says:
    June 27, 2012 at 10:50 AM

    Talking about the Twilight Zone I came across this today:

    JP Morgan Managers Being Told Trade Loss is $9 Billion

    http://www.teribuhl.com/2012/06/26/jp-morgan-managers-being-told-trade-loss-is-9-billion/

  2. Avatar of Luigi Luigi says:
    June 27, 2012 at 10:54 AM

    If I will get fiat anywhere near 1% consumer interest, I’ll take a multi – K loa and buy silver. Just to keep breaking the system.

  3. Avatar of Cloaked says:
    June 27, 2012 at 10:55 AM

    These algos are getting to be a bit much.

  4. Avatar of Cloaked says:
    June 27, 2012 at 10:58 AM

    Nice update on commenting DOC… Editing.

  5. Avatar of AGXIIK AGXIIK says:
    June 27, 2012 at 10:59 AM

    Luigi  Your statement expresses the exact problem with ZIRP   Of course, with us stackers we use stupid bankers low rate loans to buy assets with a near certain increase in value such as gold and silver.  If a lender is willing to make you a loan at 1% and silver returns 10-30% in a year, the banker loses and you win.   Negative interest rates are fated to be the last refuge of ignorant, moronic investors like bankers, but I repeat myself   The well  informed borrower will take the moronic banker’s money and get a decent return such as PMs.  For once a borrower can play the banker at their own game and win.

  6. Avatar of ich1baN ich1baN says:
    June 27, 2012 at 12:56 PM

    It is also interesting to note that precious metals soar the most when real rates are negative b/c when this happens you are losing money on your investment when inflation is greater than the risk free rate. This report lays it out clearly and shows you on page 13 a chart of when gold soared during negative real rates:

    http://www.stansberryresearch.com/pub/reports/gold_bible.pdf

  7. Avatar of spore spore says:
    June 27, 2012 at 2:20 PM

    WOW! This shit is hilarious!!

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