Russell Napier Forecasts Negative Rates in the US as Deflationary Pressures Spread
FinancialSense.com
02/17/2016
Russell Napier, author of Anatomy of the Bear and co-Founder of the Electronic Research Interchange (or ERIC), explains why he sees further deflation and deleveraging moving forward, and why he thinks this will ultimately lead to the spread of negative interest rates into the US.
Here’s some of what he had to say in Wednesday’s podcast:
“I believe we are in for a deflationary deleveraging, which actually began some time ago with emerging markets but just in the last few months has begun to feed into the developed world…
It’s very difficult to imagine anyone running a bank today looking at what’s happened to their equity price and the price of their bonds that would be extending their balance sheet. The whole capital structure has been priced to say it’s time to contract and if they do that, that does not create money, that destroys money—one of the joys of our fractional reserve banking system…
It’s very easy to look at the markets today and say they are disassociated from the real world; they have no contact with the real world; they’re ignoring the real world; well, the cost of credit in Europe is going up pretty dramatically because the banks are being forced to contract their balance sheet and in the United States the same thing is happening but through the bond market…particularly through the high yield bond market…
Central banks never imagined it would get this far because they imagined at some stage they would get some help from the politicians in terms of reflating the economy but we have political paralysis particularly in Europe and the United States. So the central bankers are trying to achieve something with the price of money and it’s not working so they are being forced further and further than they wanted to go.”
The Rest…HERE
