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Weekly Touchpoint – German Banks Break Negative Interest Taboo

Posted By Isaac Nuriani |

 

Negative interest rates are no longer an anomaly. Sweden, Switzerland and Japan are just a few of the nations that, along with the European Central Bank, have set deposit rates below zero. The practice of commercial banks passing along those negative rates to retail bank depositors has remained a rarity. However, in a worrisome sign of things to possibly come, commercial banks in some nations with negative interest rate policies are beginning to impose those rates on retail customers. Banks in Germany are now assessing negative rates on a scale rarely seen before. This week’s Touchpoint news roundup for retirement savers begins with more on German banks’ shift to a new and costly account paradigm for depositors.

  • When central banks adopt negative rates, commercial institutions in the corresponding nation or region are charged by the central bank for storing reserves there, but that’s usually as far as the fees go. Now, however, more banks are passing along those negative rates to regular customers as the institutions struggle to remain viable while absorbing the central banks’ costs. In Germany, banks now are not only passing along the negative rates to customers for money being deposited, they’re assessing those rates on every euro in the customers’ accounts. It’s a move Bloomberg refers to as “breaking the last taboo” of negative rates. Historically, European banks have refrained from assessing negative rates on customer deposits under 100,000 euros ($111,000), but the increasingly precarious climate for banks is changing that posture. How long before even the smallest U.S. depositors must pay negative interest rates on their hard-earned savings?
  • According to John Hancock Investment Management analysts, the most profound risk to markets is the possibility that the Federal Reserve will stop juicing the markets through accommodative monetary policy. Despite accusations that the Fed’s aggressive bond-buying this year was a poorly disguised fourth round of quantitative easing (QE) designed to further energize markets, the Fed has vigorously denied implementing “QE4” in 2019. Speaking to Axios, Hancock strategists Matthew Miskin and Emily Roland say they expect the Fed to continue throwing money at the markets and to expand its balance sheet above the current record of $4.5 trillion. However, notes Roland, “If we run into a recession, they [the Fed] could be out of tools.” If that happens, savvy retirement investors who pack a portfolio “parachute” made of gold and silver could find themselves feeling very grateful for their own foresight.
  • Gold may be taking a break from the tremendous upward surge that managed to capture financial news headlines earlier this year, but one of Wall Street’s best-known chart-watchers wants to be sure “you don’t fall asleep on” the yellow metal. “The noise around gold during its big run in the summer has certainly quieted down as the metal has been consolidating for over three months,” says Jeff deGraaf, chairman of Renaissance Macro Research. However, he notes, “The charts are too good” for anyone to give up on gold in the near term. He stresses that the recent reduced interest in gold is to be expected – and actually a good thing. “A drop in extreme sentiment during a period of consolidation as the overbought condition works off after breaking out of a large basing pattern is exactly the type of action you want to see,” clarifies the analyst. “Gold may be gearing up for another run and we think it’s worth owning here.” For a look at one of the charts that has deGraaf so excited about gold’s near-term prospects, head over to MarketWatch.
  • One of the biggest mistakes retirement savers can make is to conclude the economy is good because financial markets are strong, and then slow down on gold ownership. On the one hand, it’s understandable that so many see the markets and overall economy as one. The mainstream media showers constant attention on famous equities indexes. On the other hand, markets are not the economy and there’s no shortage of evidence to that effect. Refer to Augusta’s latest blog article for a look at two charts that show just how detached the souring economy is from exuberant markets. You’ll also learn which asset could help secure your portfolio in the event that even the markets are no longer capable of ignoring the real economy’s condition.

Will the time come when you’re charged fees by your bank for keeping money deposited there? It certainly could happen. The global monetary regime, including central banks and governments, are clearly more comfortable now than ever before with drastically loose monetary policies. But even more important is the degree to which such policies could further debase the already-withered inherent value of the dollar. If you’re not currently protecting your dollar-denominated assets against these economic stressors by including tangible, safe-haven assets in your portfolio, it may be time to learn more. Call Augusta Precious Metals at 800-700-1008 and ask about our new web conference for qualified savers, with an up-to-the-minute eye-opening look at how the economy and financial markets whittle away your ability to save. It’s the same conference hall of fame quarterback Joe Montana saw before he became an Augusta customer and our corporate ambassador. Or visit us at Augustapreciousmetals.com.

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