Business

Submitted by Erico Matias Tavares of Sinclair & Co., and reposted from the original as of May 19, 2015 in light of the recent decision by the Bank of Japan to launch negative interest rates.

What A Cashless Society Would Look Like

Calls by various mainstream economists to ban cash transactions seem to be getting ever louder, while central bankers have unleashed negative interest rates on economies accounting for 25% of global GDP, with $5.5 trillion in government bonds yielding less than zero. The two policies are rapidly converging.

Having urged "don't panic" just 4 short months ago, it appears Nigeria just did just that as the global dollar short squeeze forces the eight-month-old government of President Muhammadu Buhari to beg The World Bank and African Development Bank for $3.5bn in emergency loans to help fund a $15bn deficit in a budget heavy on public spending amid collapsing oil revenues. Just as we warned in December, the dollar shortage has arrived, perhaps now is time to panic after all.

Excerpted from Doug Noland's Credit Bubble Bulletin,

While everyone else is considering the implications of a -25 bps rate it is time for the astute to look down the road.  New forms of bonds with larger and larger negative coupons will emerge.  Governmental entities that are quick to adopt this new type of bond will see their deficits evaporate.  Which large investment house will be the first to offer a High Extortion Bond fund?  Diversifying was important with High Yield Bonds and there is no doubt that financial advisors would urge using a High Extortion Bond fund in order to control risk.  If a High Extortion Bond goes belly up your check

Now that Japan has let the negative rates genie out of the bottle, or as DB put it, 'opened the Pandora's Box' and in the process unleashed the latest global "silent bank run" and capital flight, prepare to hear a whole lot more about NIRP in the coming weeks because as Citi's Steven Englander put it, "Why are Negative Rates like Potato Chips? No one can have just one."

This is what else Englander said: