The horizon is not so far as we can see, but as far as we can imagine

Five Hundred Million Dollar Negative Yield Bond Issued

No, central banks aren’t screwing the economy up with their purchases:

Veolia (Paris:VIE) has issued a 500 million three-year EUR bond (maturity November 2020) with a negative yield of -0.026 percent, which is a first for a BBB issuer.

To be clear: Central banks didn’t buy those bonds, investors did. But central bank purchases of government debt are a large part of what is causing this issue.

The ECB (European Central Bank) has been buying SEVEN times the issuance of government bonds. Seven times. Seven times.

They are straight up financing governments (which, done right, could be a good thing, but isn’t in this context).

The problem in the world today is the same as it was 15 years ago, before the financial collapse: There is too much money chasing not enough returns. Because there isn’t enough real growth, so money moves into bubbles and fraud, and destroying companies through leveraged buyouts and so on. This also means that, if there isn’t enough fraud or predation going on, it sits and stagnates and does nothing worthwhile.

What the developed world actually needs is stuff to invest in: high marginal tax rates (higher on capital gains than on earned income), distributive policies to the bulk of the population to create wide-spread demand, and moderate inflation of about five percent a year to motivate people to actually invest in new businesses, as opposed to financial speculation.

The problem with this solution set is that it must also include effective regulation, otherwise it can have environmentally devastating effects; for instance, because solar is not fully online, the above solution set could lead to oil price spikes.

Those problems, however, are not why people are ignoring the suggestion solution set. These solutions are not being implemented because current leadership does not believe in high taxes, wide distribution, or regulation. They are neoliberals, and 40  years of neoliberal disasters cannot convince them to engage in anything other than neoliberalism– because neoliberalism has made them and their friends very, very rich.

But the game is coming to an end. Normally, they want to tax the middle class and poor people, sparing the rich. But now, they are now starting to tax the rich through the back door of negative interest rates. Meanwhile, the poor and middle class, especially the young ones, are losing patience and are willing to go either straight-up socialist or straight-up fascist (see: the Polish 50K rally).

This is going to get a lot uglier before it gets better.

There will be three choices for countries: Fascism, left-wing populism, or dystopic surveillance/police states.


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  1. dude

    I am not the sharpest tool in the shed, so I admit upfront your article on negative interest rates is hard for me. In trying to understand, I ran across this from the Fed Reserve Bank of St Louis which baffles me more in light of what you seem to be saying. The author sums up his explanation for negative interest rates in this way (with emphasis on his last sentence):

    “The above examples of negative central bank policy rates are newsworthy because they are unusual. Some analysts have argued that such examples suggest that central banks should consider setting negative policy rates, including negative rates on deposits held at the central bank. Such proposals are foolish for a number of reasons. First, a policy rate likely would be set to a negative value only when economic conditions are so weak that the central bank has previously reduced its policy rate to zero. Identifying creditworthy borrowers during such periods is unusually challenging. How strongly should banks during such a period be encouraged to expand lending? Second, negative central bank interest rates may be interpreted as a tax on banks—a tax that is highest during periods of quantitative easing (QE).3 Central banks typically implement QE policies via large-scale asset purchases. Sellers of these assets are paid in newly created central bank deposits, which, in due course, arrive in the accounts of commercial banks at the central bank. It is an axiom of central banking that the banking system itself cannot reduce the aggregate amount of its central bank deposits no matter how many loans are made because the funds loaned by one bank eventually are redeposited at another. Is it reasonable for the central bank to impose a tax on deposits held at the central bank when the central bank itself determines the amount of such deposits held by banks and the banking system? Perhaps these and other considerations caused European Central Bank President Mario Draghi in a recent press conference to label negative deposit rates “uncharted waters” and dismiss any possibility that the ECB would consider it.

    In summary, in normal economic times, both nominal and real interest rates are positive. But in unusual times, negative nominal and real yields are not unusual. Both often reflect investors’ flight to safety. The existence of negative yields, however, provides no support for the argument that central banks should consider negative policy rates as a monetary policy tool.

    Yang Liu is a senior research associate at the Bank.

    Formulas for exact yield calculations are beyond the scope of this article. [back to text]
    Additional information regarding prices and yields on Treasury bonds is available at [back to text]
    See Anderson et al. (2010) and Anderson (2012). [back to text]

    Anderson, Richard; Gascon, Charles; and Liu, Yang. “Doubling Your Monetary Base and Surviving: Some International Experience.” Federal Reserve Bank of St. Louis Review. November/December 2010. Vol. 92, No. 6, pp. 481-505.

    Anderson, Richard G. “Quantitative Easing the Swedish Way.” Federal Reserve Bank of St. Louis Economic Synopses. Nov. 16, 2012, No. 33. See

    Draghi, Mario. Introductory statement at the press conference. Aug. 2, 2012. See

  2. It is good to be rich.

  3. bob mcmanus

    “There will be three choices for countries: fascism, left-wing populism or dystopic surveillance/police state.”

    Or one or more of these three with an additional underground and informal economy/society that is not worth the trouble to police or control.

    Mumbai, Sao Paolo, Internet Piracy, Dark Net Drug Shops, illegal gun traffic, home schooling

    Maybe gov’t for the top 30% and anarchy for the 70%. Gibson’s future

  4. Chiron

    “dystopic surveillance/police state.”

    It’s already here.

  5. Jejdiddj

    A dystopic surveillance/police state seems to cone with the other 2 also

  6. Thoma Valiant

    Hate to say it, but I’ll take the fascist/right wing populism over the left’s variety. At least mine won’t seek to abolish my people. But I’m a bit of a racist, your mileage may vary.

  7. Hugh

    The Yang Liu piece dude cites is wonderful gobbledygook. It is best understood this way. Is any central bank/finance policy really going to be stimulative which does not put money in the hands of ordinary people rather than the rich and investors? Supply side has been tried again and again over the last nearly 40 years and it has never worked. Only demand side, as coming out of the Great Depression clearly showed, is truly stimulative. So I agree with Ian.

    I like Liu’s hidden neoclassical assumptions like normality/normal times or use of terms like “assets” without spelling out what these are, how they are being priced, to whose advantage, and who owns them. But my favorite example of weaselry is “negative central bank interest rates may be interpreted as a tax on banks”. Not “are” but “may be interpreted as”, by whom? And if this is accepted what about any regulation or law that has any cost to banks?

    I mean it all sounds very authoritative and everything, but if you want to bother to deconstruct it, it is stupid layered on stupid. But my thanks to dude anyway for his time in presenting it. It is a useful, if negative, example of current economic thinking.

  8. Ahhh… Thoma, it is the reichwing who has a history of “abolishing people”. Dystopic police state, your jack-booted NWO, is Fascism. Left-wing populism, unionism, is of course what made “America” great.

  9. There will be three choices for countries: fascism, left-wing populism or dystopic surveillance/police state.

    I think fascism and dystopic surveillance/police state go hand-in-hand these days. So we’re already half way, or more, there.

  10. Tom

    Utter systemic collapse is where we’re going. Followed by years of warfare as new successor states arise.

  11. V. Arnold

    November 18, 2017

    Probably the closest to the reality of today.
    If one truly sees/understands today’s, on the ground, reality; then the future is obvious.
    Most don’t/won’t see it; that eventuality will play out very badly for the majority…
    For most of you; you’ve suckled on the tit for so long; that when the tit dries up you’ll die; for lack of knowing how to cope in a world gone mad…

  12. Think afrensis. Not necessarily the strong survive.

  13. Willy

    Thoma Valiant,
    Why does populism always have to be so extreme? Why does it always have to be either gulags or ghettos? A quick death or a slow death. Isn’t there a competent moderate center (not a dissembling turd way “center” entirely subservient to one corrupt extreme) which gives rise to the healthiest possible combination of group integrity and empathy, where power-crazed nutjobs are kept in check?

    Wasn’t that more the way of things years ago, in better economic times, when America was far more “great”?

  14. Rangoon78


  15. Yes, the omnivore. The vicious little solitary or semi-solitary hunter who would eat anything. Unlike the larger more robust though pastoral herbavore herds of the larger Klingon looking boisei.

  16. I will post all my fiction – almost no one reads it, and I have no money.

    Bye all.

  17. I read it. Been a long time man, don’t let it get you.

  18. Peter

    Paying people to borrow money is a strange type of stimulus and 10 countries in the EU have been trying this experiment for a few years already.

    This along with pumping about $60 billion a month into debt producing stimulus for years has kept them from sliding further behind. This hasn’t produced much of a recovery from their debt crisis and I’ve read that this Keynesian type stimulus has never produced a recovery just stopped the slide and added a huge amount of debt.

    The ECB usually follows the Fed on interest rate policy but not this time and that’s not a good sign for the future.

  19. kj1313

    Seems like Thoma’s feelings were hurt that people no longer believes the lies told since grade school.

    Anyway I’m pretty sure surveillance state goes hand in hand with a fascist government so there is a bit of overlap there.
    @Willy No because centrism relies on incremental changes when the system itself needs a shock.

  20. Peter


    You missed the warning in Thoma’s words that the extreme globalist agenda may push people to embrace the opposite extreme for protection from that real threat.

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