Back just over a decade ago, The Global Financial Crisis of 2008 was in full swing. To combat the devastation caused by the international financial system nearly collapsing, the U.S. Federal Reserve chose to slash American interest rates all the way to zero percent and to print out literally trillions of dollars to grease the system.
The results became readily apparent as an unprecedented 10 year long bull market resulted in every asset class imaginable from stocks and bonds to real estate and cryptocurrencies. Some observers claimed that they went too far in their prescribed cures to save the economy.
Yet now it seems that with another slowdown on the way, several key players at the Federal Reserve feel in retrospect that they did not do enough. A recently released paper from the San Francisco Federal Reserve Bank claims that the previous policy should have focused on negative interest rates (specifically at -.75 percent) in order to engineer a stronger and quicker recovery.
Internationally, this monetary policy trend is already in agreement with these rising voices in the Fed. The Bank of Japan and the European Central Bank have been in easing mode until recently, claiming that they would begin to tighten up their policy in 2019. Yet they have now decided to stay neutral and potentially cut rates again still more into negative territory. Meanwhile India and China continue to ease. This graph below shows the long-term global interest rate trend:
And the Federal Reserve now appears to be back on board the preferred global monetary policy trend as they are now softening their rate hike language for the future in the wake of the December rate hike that crushed markets around the U.S. and the globe.
“As central banks thrash around for new tools, I have long thought the next recession would trigger the adoption of helicopter money and deeply negative Fed Funds. Clients have been skeptical of the latter because of the negative impact on bank margins, but now I am more convinced than ever that we will see negative Fed Funds.”
This trend will only accelerate and be exacerbated by the success of socialist politicians who are vying to gain control of Washington. This would spell still additional government spending for creating jobs, expanding the economy, and providing free universal higher education. They are all noble goals, but hopelessly not affordable ones for a government that is more than $21 trillion in debt.
Is Your Retirement Portfolio Prepared for the Arrival of Negative Interest Rates in the U.S?
The sad truth is that when the important international central banks attempted raising interest rates, the key economies of the world could not handle it. This was while global economies were supposedly roaring too. What will happen when the next recession hits? At the end of the artificially manipulated golden bull market, where will policy makers turn then?
The good news is that you do not have to lie awake at night worrying about such difficult questions as these. Gold is the answer for how you will stabilize your portfolio in such perilous financial times. The world’s best-loved and proven safe haven has thousands of years in successful track records for safeguarding the wealth of savvy individuals all over the world.
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Will your portfolio weather the next financial crisis?
