Tag: news

Authored by Michael Snyder via The Economic Collapse blog,

The U.S. Census Bureau has just released their annual report on how the U.S. population is shifting, and there are some very clear patterns in the data.  If you look at this Census Bureau map, you will see lots of purple (areas where the population is growing) in the west and the south, and you will see lots of orange (areas where the population is declining) in the north and the east.  Of course this is a continuation of a pattern that we have been seeing for decades.  Given the ability to choose, many Americans would rather live in areas of the country that are warm and sunny, and that makes a lot of sense.  But that is not the only pattern that we see in the data.

From July 1, 2017 to July 1, 2018 seven of the ten counties that had the largest percentage increase in population were either in Texas or Florida…

• McKenzie County, ND: 7.1 percent

• Williams County, ND: 5.9 percent

• Comal County, TX: 5.4 percent

• Kaufman County, TX: 4.7 percent

• Brunswick County, NC: 4.6 percent

• Walton County, FL: 4.5 percent

• Midland County, TX: 4.3 percent

• Osceola County, FL: 4.3 percent

• St. Johns County, FL: 4.2 percent

• Hood County, TX: 4.1 percent

Texas and Florida do not have a state income tax, and so that could help to explain these numbers.

The top two counties on the list are both in North Dakota, and a lot of people are being drawn up there for energy industry jobs.  McKenzie County produces more oil than any other county in the state, and even though it can get bitterly cold, many workers find the very high wages paid by the industry very alluring.

Meanwhile, some of the biggest cities in the entire nation are shrinking.

New York City is losing people for the first time in a decade, and the population of Chicago has now fallen for four years in a row…

The Chicago area’s population declined for the fourth year in a row in 2018, according to the latest Census Bureau estimates.

There were 22,000 fewer residents in the 14-county metro area than in 2017, a drop of 0.2 percent, and the first time since 2010 that the area’s population has slipped below 9.5 million people. Cook County, which accounts for 55 percent of the population in the metro area, lost 24,000 residents.

Considering all of the gang violence, the absolutely insane politicians and the oppressive levels of taxation, it doesn’t take a genius to figure out why people would want to leave the Windy City.

I guess the real mystery is why so many people would want to stay.

According to a report put out by North American Moving Services, Illinois is actually the top state for outbound moves, and Idaho is actually the top state for inbound moves…

Every year, roughly 14% of the US population moves from one state to another, according to Census Bureau data. But after a careful analysis of the data from 2018, North American Moving Services published its latest report on American migration patterns…and it contained some surprising conclusions.

For example, while Illinois was once again the top state for outbound moves (thanks, we imagine, to its dysfunctional state government, high taxes and massively underfunded pensions), the top state for inbound moves was…Idaho?

A quick glance at the data reveals a familiar pattern: Americans are leaving high-tax blue states in favor of red states with low taxes and low cost of living.

Hopefully the secret about how great Idaho is won’t get around too widely, because all the people from California that are moving up here have already driven home prices through the roof.

Another city that is seeing people leave in droves is Baltimore…

“Thousands of people are fleeing the city each year as total population plummets to 100-year lows. There are about 46,000 vacant rowhomes scattered throughout the area, or roughly 15% of the housing stock is dormant. On a per capita basis, the city has the highest rate of homicides per 100,000 in the country. Opioids from Johns Hopkins and the University of Maryland Medical Center continue to flood the poorest of neighborhoods, leaving the African American communities in a perpetual state of addiction, along with the need for constant government assistance programs. With the local economy basically a black market, gangs roam the streets like a third world country.”

I remember going to Orioles games as a kid, and at that time Baltimore was still somewhat of a vibrant city.

But now it is a rotting, decaying, drug-infested nightmare that is slowly dying right in front of our eyes.

And of course we continue to see an exodus from the California coastline, and one of the big reasons for that is because housing has gotten way too expensive…

A full 43 percent of Californian voters, and an astounding 61 percent of those aged 18 to 34, feel they can’t afford to live in the state, according to a recent Quinnipiac University poll. And over three-quarters of voters agree that there’s a “housing crisis.”

The median value for a house in the Golden state is about $550,000, according to real-estate website Zillow. That’s more than twice the national median.

Of course there are many other reasons to leave California as well.  For much more on that, please see my previous article entitled “Nobody Does It Better: The Amount Of Human Feces On San Francisco Streets Is Going Up Every Single Year”.

Before I wrap up this article, I want to also say a bit about retirement migration.

As the Baby Boomers retire, millions of them are moving from cold weather states to warm weather states.

For ages, the state of Florida has been the number one destination for retirees, but now that has apparently changed.  According to Fox Business, this is the very first year that New Mexico is on top of the list…

This was the first year New Mexico topped the list. Forty-three percent of moves to New Mexico were related to retirement, while 60 percent of people moving there were between the ages of 55 and 74. The cost of living in the state is 3 percent less than the national average, while income taxes are low.

I never would have guessed that.

Perhaps the cost of housing is low and that is why a lot of retirees from California see it as a good option.

And yes, lots of Baby Boomers are still retiring in Florida, and the state is still number two on the list…

While it did not make the top spot this year, Florida ranked second with 39 percent of moves into the state being retirement related. Aside from the warm weather and beach communities, Floridians are not subject to state income taxes.

In addition to everything that I have just shared, many Americans are migrating across the country for more ominous reasons.  They can see the direction this nation is headed, and they want to be positioned for what America is going to be like in the coming years.

The fabric of our society is unraveling right in front of our eyes, and a lot of people just want somewhere safe, secure and sane to raise their families.

Unfortunately that is not so easy to find anymore, and the social decay that is eating away at our country like cancer is spreading a little bit more with each passing day.

via ZeroHedge News http://bit.ly/2Pocm4b Tyler Durden

Authored by Caitlin Johnstone via Medium.com,

Julian Assange’s mother reported yesterday that the WikiLeaks founder has not been permitted any visitors during his detention in Belmarsh Prison, including from doctors and his lawyers. Doctors who visited Assange in the Ecuadorian Embassy have attested that he urgently needs medical care. Belmarsh is a maximum security prison sometimes referred to as “the UK’s Guantanamo Bay”.

And yet we’re asked to believe that this has something to do with an alleged bail violation and a US extradition request for alleged computer crimes carrying a maximum sentence of five years. If you zoom out and listen to the less-informed chatter of the overt propagandists and the brainwashed rank-and-file western mass media consumers, you will also see that people believe this has something to do with Russia and rape allegations as well.

Actually, none of these things are true.

Assange is being imprisoned under draconian conditions for journalism, and for journalism only. The Obama administration declined to prosecute him after WikiLeaks’ publication of the Manning leaks out of concern that doing so would endanger press freedoms, and the Obama administration didn’t have any more evidence at its disposal than the Trump administration has now. The “crime” Assange is accused of consists of nothing other than standard journalistic practices that investigative journalists engage in all the time, including source protection and encouraging the source to obtain more material. The only thing that has changed is an increased willingness in the White House to prosecute journalists for practicing journalism, and there are an abundance of reasonsto believe that he will be hit with far more serious charges once extradited to US soil. They’re not going to all this trouble for a bail violation and a five-year maximum sentence.

But if you zoom out even further, in the grand scheme of things this barely even has anything to do with Assange. Sure, he has of course been a thorn in the side of those who operate the transnational western power alliance, and given the choice they would of course prefer him to be locked up or dead than free and alive. But that’s not what the corrupt influencers who are strangling our world are shooting for here. They are making a grab for something much, much bigger. Assange just happens to be a stepping stone along the way.

As we’ve discussed previously, the prosecution of Assange is really designed to set a legal precedent which will enable the US government to imprison journalists for trying to hold it to account using journalism. The reason you are seeing the phrase “Assange is not a journalist” bleated constantly by empire lackeys all around the world today is because they need a counter-narrative for the indisputable fact that this precedent poses a threat to journalists around the world, the argument being that since Assange isn’t a journalist (pure bullshit by the way), this isn’t setting a precedent for journalists. As though their personal definition of what a “real journalist” is will be the one used by the US government when determining whether or not to prosecute other people for doing things similar to what Assange did, instead of whatever definition happens to suit US government agendas in that instance.

But in order to get the really, really big picture perspective of what these bastards are going for, we need to zoom out even further than that.

In the sci-fi novel Ender’s Game, the young protagonist applies a vicious beating to one of his bullies, killing him. When asked why he did this by his handlers, the boy, who has been bred and raised to become a strategic savant, explains that he did it not out of malice toward the bully, nor only to win the fight, but to win all future fights as well. If the kids at school see what savagery he’s capable of and know he’s not to be trifled with, he won’t ever have to fight them.

If this sounds a bit sociopathic to you, that’s because it is. And, with the notable difference of the bully and victim roles being reversed, this is exactly the principle we are seeing exercised with Assange.

The entire world is watching what is being done to Assange currently. No matter how propagandized you are, no matter how much you hate the man personally, you’re watching that happen and learning a lesson from it. And that lesson is, never do anything remotely like what that guy did, or you’ll meet the same fate. This is the real goal of Assange’s persecution, and it doesn’t impact merely one Australian publisher in a UK jail cell, nor even merely the investigative journalists around the world who are interested in practicing the lost art of holding power to account using journalism, but everyone in the world who consumes news media.

And it works. I know it works because it works on me. I’ll say right here and now, if you’ve got information that incriminates the most powerful people in the world, keep it the hell away from me. Give it to someone else, literally anyone else, because I myself am far too cowardly and have far too much to lose by getting involved in anything that could lead to me rotting in some overseas prison cell. I’ve got kids. I’m in love. I cannot and will not go down that path. And if this is true for me I know for certain that it’s true for countless others as well. They’ve brutalized whistleblowers to the point that it’s surely had a severe chilling effect on those who would otherwise become key leak sources, and now they’re brutalizing the journalists who publish those leaks as well. The odds of someone willing to blow the whistle on real power meeting a journalist who is willing to help them are rapidly diminishing to zero.

They’re trying to win this fight against Assange in brutal fashion to ensure that they win all future fights as well.

Which is why it’s absolutely stupid that this conversation so often gets fixated on Assange the man, whether it’s smears or praise.

The other day I published a massive mega-article attacking the major smears about Assange I’ve encountered. There are 27 of them in total so far, and I’ll be adding more soon. This mountain of smears exists because instead of paying attention to the world-shaping dangers I just outlined which threaten to make it impossible to oppose the leaders of the US-centralized empire who are marching us towards either extinction or dystopia, people are babbling about Assange’s personality, or whether or not he cleaned up after his cat while at the embassy.

The flip side of this is people who fixate on Assange as a hero, which can of course help draw attention to his plight and therefore be of some benefit, but ultimately that’s also missing the forest for the trees. This is so very, very much bigger than Assange, and we need to oppose it for reasons that are far, far more significant than the individual characteristics of one man who, depending on what we’ve heard, we may or may not believe is a nice person.

Never lose sight of this: the intimidation of whistleblowers and leak publishers threatens to stop truth from informing the behaviors of our entire species, leaving only the whims of the most powerful to decide our fate. The most powerful people are those most dedicated to pursuing power, those sociopathic enough to step on anyone’s head and do whatever it takes to secure as much control as possible over as many humans as possible. That’s who we’re handing the steering wheel of our world to if we allow truth to be intimidated into silence.

And never lose sight of this, either: with the imprisonment and prosecution of Julian Assange, these same sociopathic oppressors have exposed themselves. They have ripped off the friendly Big Brother mask and exposed the dark infernal entities which squirm and hiss underneath. This sudden interest in the legal technicalities of bail protocol and journalistic source protection protocol happen to look exactly the same as prosecuting a journalist for publishing facts because that is exactly what is happening. Don’t ever let anyone gaslight you into believing otherwise, and don’t you dare miss this rare opportunity to point out to your fellow humans how our oppressors have revealed their true nature.

*  *  *

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via ZeroHedge News http://bit.ly/2ILLs56 Tyler Durden

Just as US-North Korea nuclear negotiations have remained in a stalled low point, with North Korea’s Leader Kim Jong Un days ago demanding that Secretary of State and former CIA chief, Mike Pompeo, should be replaced for any future negotiations with the US, the Kremlin has confirmed it’s in the “final stages” of preparations to host Kim for talks with President Putin by the end of this month.  

“Russia’s President Vladimir Putin and North Korean leader Kim Jong Un are on track to meet by the end of April,” Kremlin spokesman Dmitry Peskov confirmed on Monday, according to Reuters. The summit was initially revealed last week, in a first such bilateral summit since Kim came to power in 2011. 

Peskov stopped short of giving a precise date for the summit, but reaffirmed it will occur within the next week, in the remaining days of April. 

“Indeed, the meeting is being prepared and the preparations have entered the final stage. The encounter will take place before the end of April,” the Kremlin spokesman said.

Though the precise venue has also yet to be revealed,  South Korea’s Yonhap news agency, hinted that the summit would place in Vladivostok in the Russian Far East.

Kim Jong Un’s first summit with Russian President Vladimir Putin could include a visit to a naval vessel of Russia’s Pacific fleet, according to a Japanese press report.

Kyodo News reported Monday Kim could also attend a performance of the Mariinsky Ballet and stop by the largest aquarium in the Russian Far East during the summit this week. Kim Chang Son, vice chairman of North Korea’s state affairs commission, has been inspecting various sites, according to the report. — UPI

Over the past year two summits between U.S. President Donald Trump and North Korean leader Kim Jong-un, the first in June 2018 and the second in February 2019, have failed to reach an agreement over the denuclearization of the Korean peninsula.

And now it appears Putin is prepared to step in and capitalize at a moment when Washington’s engagement with Pyongyang is uncertain and in disarray. The question remains: can Putin unlock the stalled nuclear dialogue between the US and Pyongyang?

There’s another key factor to the timing of Kim’s historic trip to Russia, as Asia Times notes: “News analysis of satellite imagery had indicated renewed activity at the Yongbyon nuclear facility, and then North Korea earlier this month tested its first new tactical guided weapon with a ‘powerful warhead’ signaling the onset of brinkmanship with Washington.”

Russia has long supported the lifting of North Korea sanctions, and thus Kim is expected to find a more sympathetic ear in Putin. 

via ZeroHedge News http://bit.ly/2GAYEbC Tyler Durden

Authored by Mac Slavo via SHTFplan.com,

Once the global debt bomb explodes, there won’t be much left for anyone.  Governments will fall, individuals will be impoverished, and businesses will implode.  The elitists in power have tried to keep everyone in the dark, but maybe there’s an answer to this devastation.

Global debt now stands at a terrifying $243 trillion according to a report by the Institute of International Finance this week. That’s quarter of a quadrillion. We’re in the realms of the absurd and the unsustainable. That’s money that will never be repaid. The debt-based system is irrevocably broken and is still propped up by the lies told by central bankers and governments in order to remain in positions of power over others.

The record debt figure stands at three-times the world’s total gross domestic product (GDP). In other words, it’s three times larger than the value of all products and services on the planet.  And the United States is contributing massively to this problem, propping up a debt bubble that will crush everyone when it finally bursts. It’s pretty safe to say that if you aren’t concerned, you simply aren’t paying attention and will be hurt when it all collapses.

An irresponsible monetary system addicted to printing money and issuing credit is destroying the standard of living almost everywhere on the planet. It’s time to admit that we, as human beings, need a new alternative to the control, wealth redistribution, theft, and slavery that’s overtaken humanity. And one website dares to say that while it’s far from perfect, bitcoin offers a viable solution with its fixed supply.

According to CCN, Bitcoin, the decentralized cryptocurrency, is a way out of the poorly designed monetary system forced down all of our throats by power-hungry sociopaths. When economic growth is insufficient, governments and companies borrow more money.  But this is nothing more than a cycle of addiction, writes  John Mauldin inForbes:

“This is classic addiction behavior. You have to keep raising the dose to get the same high… Central banks enable debt because they think it will generate economic growth. Sometimes it does. The problem is they create debt with little regard for how it will be used.”

When the next global financial crisis occurs, and the world realizes organizations with $20 trillion in debt can’t possibly ever pay it back, and thus must print it instead, and thus fiat is doomed… watch what happens to crypto.

— Erik Voorhees (@ErikVoorhees) November 8, 2018

Bitcoin could be the answer to a fiat currency because there is a fixed amount.  No one can magically print a bitcoin out of thin air. In our current fiat system, central banks create money in a process called quantitative easing. The central banks issue new money and use it to buy bonds and assets. This has the effect of introducing more money into supply, lowering the purchasing power of your money, and encouraging low-cost lending.

The ONLY concern with Bitcoin, is that it only has value if someone wants it. It’s a commodity. If there’s any kind of ultimate cataclysmic event and no power grid to access your Bitcoin, it’s going be of no use.  If the system collapses and people begin to starve, they can’t eat a bitcoin any more than they could eat a bar of gold. That’s why diversification is key – and a point far too many tend to overlook.

If investing in cryptocurrency makes sense for you, consider also storing some extra food, and maybe picking up some precious metals.  It’s almost impossible to tell what will happen exactly when the debt bubble explodes, and you may want to have several options at your disposal.  Expect the best, but prepare for the worst.  The more options you have in your arsenal, the better.

via ZeroHedge News http://bit.ly/2PrMMeH Tyler Durden

In another sign of strengthened ties and increased cooperation between the militaries of two countries which spent much of the 20th century as bitter rivals, Russian warships are taking part in China’s 70th anniversary of the People’s Liberation Army (PLA) Navy.

The four-day showcase in naval power this week will also feature India and other regional navies, including Japan, Australia, and the Philippines. Crucially, the 70th anniversary exercise appears an occasion for Beijing to reassert its own vision of “freedom of navigation” and maritime security issues with “major naval leaders” from the region at a time when the US is challenging Chinese territorial claims in the South and East China Seas. 

After the past year involving multiple incidents with US naval vessels and aircraft passing through contested areas, the PLA touted its non-threatening presence on the seas to enforce freedom of navigation as well as sovereign boundaries. 

“With its growth, the PLA Navy has provided the world with more and more security products,” Chinese Navy deputy commander Qiu Yanpeng stated upon the opening of the naval exercise. “The PLA Navy is always a force of peace, and will never pose a threat to any other country.

Qiu added that such international exercises “create opportunities for navy leaders of different countries to discuss maritime security cooperation.”

Beijing plans to showcase its newest vessels alongside other nations’ advanced warships such as a stealth guided-missile destroyer of the Indian Navy, INS Kolkata, and the Russian Caliber cruise missile-equipped frigate, the Admiral Gorshkov.

During the parade staged in Qingdao and its nearby sea areas and airspace, the vessels will sail in six groups: submarines, destroyers, frigates, landing ships, auxiliary ships, and aircraft carrier.

The planes will fly in 10 echelons, showcasing aircraft for early warning, reconnaissance, anti-submarine patrol, as well as bombers, fighters, carrier-based fighters, and carrier-based helicopters. — Xinhua News

In all, 32 Chinese warships are scheduled to participate, including the Liaoning aircraft carrier and nuclear subs. 

Deepening Military-to-Military Relations.
The Indian Navy’s frontline destroyer, INS Kolkata reached the Qingdao Port today to participate in the PLA Navy International Fleet Review. She is accompanied by the tanker INS #Shakti.
Press Release: https://t.co/sHLTtZekYU@MEAIndia pic.twitter.com/JEyesKNj6Q

— India in China (@EOIBeijing) April 21, 2019

Dozens of more countries which are not directly participating in the naval exercises, are expected to send delegations to both observe PLA capabilities and engage with Chinese military leaders.

In total some 60 countries are expected to be represented, with the main naval parades to take place on April 23, the day of the PLA’s founding. 

via ZeroHedge News http://bit.ly/2GruIgN Tyler Durden

Authored by Adrian Zmudzinski via CoinTelegraph.com,

Fundstrat Global Advisors founder Tom Lee pointed out that the value currently reported by his company’s bitcoin (BTC) sentiment indicator Bitcoin Misery Index (BMI) has never been seen in a bear market. Lee made his comments during an interview with Cointelegraph published on April 19.

image courtesy of CoinTelegraph

During the interview, Lee noted that through 2018, the BMI has not been over 50, while it now recently touched a value of 89. According to Lee, values over 67 have never taken place in a bear market.

Lee concluded:

“It means that a bull market is likely starting.”

Still, he also explained that when the indicator reported such a high value, “six out of six times, there was a drawdown in the market.” Lee claims the drawdown averaged to 25% in such instances, and that in the short term, the market could see a headwind. Moreover, he also stated that this could also mean that investors could be moving their capital to altcoins instead.

Lee also pointed out that bitcoin recently broke the 200-day moving average, which he believes means that bitcoin’s recovery is happening faster than they expected. This is in line with what he stated in mid-March, when Lee said that he thinks “the key number to watch is the 200-day moving average.”

Lee noted that this breakout could also mean that this time, the recovery won’t be different than it has been in the past, and that bitcoin could easily recover to new highs. Still, when asked if new highs for the coin will be achieved this year, Lee answered that while he believes they will be reached, he does not know when.

According to Lee, there are various reasons for the recent trend inversion in the crypto market. For instance, he mentioned that old and wealthy bitcoin wallets have recently started adding BTC, and that transaction activity has begun increasing along with crypto exchange volumes.

As Cointelegraph reported in January, the number of active bitcoin wallets, many of which have long been dormant, has seen an uptick.

Earlier this week, digital assets fund Adamant Capital published a report claiming that thecryptocurrency bear market is winding down and is in its final stage.

via ZeroHedge News http://bit.ly/2PrxGGi Tyler Durden

Earlier this month, we reported that Textron Systems’ AAI Corporation delivered its Next Generation Squad Weapon-Technology (NGSW-T) prototype demonstrator to the U.S. Army Combat Capabilities Development Command (CCDC) Armaments Center and Joint Services Small Arms Program (JSSAP). A new report from Defense Blog shows the Army will purchase approximately 100,000 units of the next-generation weapon that fires 6.8-millimeter ammunition.

Chief of Staff of the Army Gen. Mark A. Milley on April 10 announced the Army would order 100,000 units, mainly purchased for infantry units which engage in close-quarters combat.

U.S. Army Contracting Command (ACC) officials said the new weapons would include the Next Generation Squad Weapon-Rifle (NGSW-R) and the Next Generation Squad Weapon-Automatic Rifle (NGSW-AR).

The NGSW-R is expected to replace the M16 rifle and M4 carbine. The NGSW-AR is also expected to replace the M249 light machine gun in the Automatic Rifleman Role in the Close Combat Force.

The new rifles chamber a 6.8mm cartridge, known as the XM1186. The round has greater range, increased accuracy at longer distances, and better armor penetration capability than 5.56x45mm and 7.62x39mm ammunition. The 6.8mm round is expected to be the most advanced ammunition on the modern battlefield for the next 25 years.

In October, the Army selected the 6.8mm as the official requirements for the NGSW. The new bullet is designed to penetrate the world’s most advanced body armor at a range of up to 600 meters.

“Moving from contract award to delivery of a revolutionary, next-generation weapon in just 15 months not only demonstrates the maturity of our Cased-Telescoped technology, but also the project execution excellence our team possesses to rapidly fill critical warfighter needs on schedule,” said Textron Systems Senior Vice President of Applied Technologies & Advanced Programs Wayne Prender.

“Our Cased-Telescoped weapons and ammunition offer the growth path to a true next-generation small arms weapon for U.S. warfighters, including increased lethality at longer ranges, while also delivering significant weight reductions to the warfighter.”

The Pentagon’s current shift from urban warfare in Iraq and Syria to the mountains and open terrain of Afghanistan have been the driving force behind modernizing standard issue weapons for infantry units. While standard rifles are well-suited for close combat in cities like Mosul and Raqqa, it lacks the range to kill adversaries in open stretches.

The Army is expected to test AAI’s NGSW weapon at firing ranges this summer. Full contract award could be upwards of 250,000 units and 150 million rounds. The expected field date is early 2020. 

via ZeroHedge News http://bit.ly/2vi7eFC Tyler Durden

Authored by Jim Quinn via The Burning Platform blog,

The ruling oligarchs are running out of time.

This teetering edifice of debt is going to collapse, and they know it.

Those with cash and precious metals are enemies of the state at this point.

They will be making an all-out effort to ban cash and force all transactions to be electronic. This will further enrich the banking cabal, as they get a hefty slice of every transaction.

It will also allow the ruling class to inflict negative interest rates on savings to force you to spend.

I don’t think there will be enough guillotines to dispense justice when the shit hits the fan.

Cashing In: How to Make Negative Interest Rates Work

By Ruchir Agarwal and Signe Krogstrup

Many central banks reduced policy interest rates to zero during the global financial crisis to boost growth. Ten years later, interest rates remain low in most countries. While the global economy has been recovering, future downturns are inevitable. Severe recessions have historically required 3–6 percentage points cut in policy rates. If another crisis happens, few countries would have that kind of room for monetary policy to respond.

To get around this problem, a recent IMF staff study shows how central banks can set up a system that would make deeply negative interest rates a feasible option.

How low can you go?

In a cashless world, there would be no lower bound on interest rates. A central bank could reduce the policy rate from, say, 2 percent to minus 4 percent to counter a severe recession. The interest rate cut would transmit to bank deposits, loans, and bonds. Without cash, depositors would have to pay the negative interest rate to keep their money with the bank, making consumption and investment more attractive. This would jolt lending, boost demand, and stimulate the economy.

When cash is available, however, cutting rates significantly into negative territory becomes impossible. Cash has the same purchasing power as bank deposits, but at zero nominal interest. Moreover, it can be obtained in unlimited quantities in exchange for bank money. Therefore, instead of paying negative interest, one can simply hold cash at zero interest. Cash is a free option on zero interest, and acts as an interest rate floor.

Because of this floor, central banks have resorted to unconventional monetary policy measures. The euro area, Switzerland, Denmark, Sweden, and other economies have allowed interest rates to go slightly below zero, which has been possible because taking out cash in large quantities is inconvenient and costly (for example, storage and insurance fees). These policies have helped boost demand, but they cannot fully make up for lost policy space when interest rates are very low.

Breaking through zero

One option to break through the zero lower bound would be to phase out cash. But that is not straightforward. Cash continues to play a significant role in payments in many countries. To get around this problem, in a recent IMF staff study and previous research, we examine a proposal for central banks to make cash as costly as bank deposits with negative interest rates, thereby making deeply negative interest rates feasible while preserving the role of cash.

The proposal is for a central bank to divide the monetary base into two separate local currencies—cash and electronic money (e-money). E-money would be issued only electronically and would pay the policy rate of interest, and cash would have an exchange rate—the conversion rate—against e-money. This conversion rate is key to the proposal. When setting a negative interest rate on e-money, the central bank would let the conversion rate of cash in terms of e-money depreciate at the same rate as the negative interest rate on e-money. The value of cash would thereby fall in terms of e-money.

To illustrate, suppose your bank announced a negative 3 percent interest rate on your bank deposit of 100 dollars today. Suppose also that the central bank announced that cash-dollars would now become a separate currency that would depreciate against e-dollars by 3 percent per year. The conversion rate of cash-dollars into e-dollars would hence change from 1 to 0.97 over the year. After a year, there would be 97 e-dollars left in your bank account. If you instead took out 100 cash-dollars today and kept it safe at home for a year, exchanging it into e-money after that year would also yield 97 e-dollars.

At the same time, shops would start advertising prices in e-money and cash separately, just as shops in some small open economies already advertise prices both in domestic and in bordering foreign currencies. Cash would thereby be losing value both in terms of goods and in terms of e-money, and there would be no benefit to holding cash relative to bank deposits.

This dual local currency system would allow the central bank to implement as negative an interest rate as necessary for countering a recession, without triggering any large-scale substitutions into cash.

Pros and cons

While a dual currency system challenges our preconceptions about money, countries could implement the idea with relatively small changes to central bank operating frameworks. In comparison to alternative proposals, it would have the advantage of completely freeing monetary policy from the zero lower bound. Its introduction would reconfirm the central bank’s commitment to the inflation target, rather than raise doubts about it.

Still, implementing such a system is not without challenges. It would require important modifications of the financial and legal system. In particular, fundamental questions pertaining to monetary law would have to be addressed and consistency with the IMF’s legal framework would need to be ensured. Also, it would require an enormous communication effort.

The pros and cons of the system are country specific and should be carefully compared to other proposals, such as higher inflation targets, for increasing monetary policy space in a low-interest environment. We consider these issues, and more, in our research.

via ZeroHedge News http://bit.ly/2W8B0by Tyler Durden