ZIRP Morphs to NIRP

Never in my wildest dreams did I envision having a job where I wrote about acronyms like "ZIRP" and "NIRP". But, I guess, never in my wildest dreams did I think that the world would get as utterly screwed up as it is.

First, just to make sure we're all on the same page...

ZIRP: http://en.wikipedia.org/wiki/Zero_interest-rate_policy

ZIRP is the official policy of The US Federal Reserve and it has been since The Great Financial Crisis of 2008...which I might remind you was SIX FREAKING YEARS AGO.

NIRP: http://www.zerohedge.com/news/2014-06-05/nirp-has-arrived-europe-officially-enters-monetary-twilight-zone

NIRP is still so new that there's not a even Wikipedia page for it yet. Maybe we should start one? If we don't, someone will. NIRP is Negative Interest Rate Policy and it's here to stay. This is where you pay interest to the bank or some other "lender" like a government for the privilege of having them hold your cash for you.

Why does this matter and why I am bringing this up again today? Because it's just another reason that gold (and silver) are NOT going dramatically lower from here. All of the TA-only fools who count their waves and draw their lines are simply checking their brains at the door and not using common sense. Just as the laws of supply and demand will prohibit another steep drop in price, a world of NIRP will do the same. For when the world is so awash in fiat currency that lenders are actually able to charge interest to their borrowers, that's a pretty telling sign that the devaluation of paper money continues at a breakneck pace. "Investors" may, so far, be slow to return to the safety of precious metal. With NIRP as the new norm, that won't last much longer.

As we've been chronicling since January, U.S. rates have been falling all year...dramatically. Though nearly every "analyst" was projecting higher rates in 2014 due to the alleged "taper" of QE, long-term rates have instead fallen nearly 25%! The 10-year Note, which began the year at 3.0%, has a yield this morning of 2.37% and the 30-year Long Bond, which began 2014 at 4.0%, sits at 3.13%.

But that's just the U.S. Did you know that, in Germany, rates are now negative out to three years and that the 10-year Bund is now yielding just 0.90%? http://www.zerohedge.com/news/2014-08-27/greatest-depression-german-yields-now-negative-through-2017

And to give you some idea of the scale and magnitude of all of this, take a quick look at Portugal. Yes, that Portugal...the one with worst banking system in all of western Europe...the one that just saw its second largest bank get wiped out. Yes, that Portugal...the "P" in "PIIGS, for heaven's sake! Two and a half years ago, the yield on a 10-year Portuguese Note surpassed 15%. One year ago, it was still near 7%. Today? It's now near 3% and falling!



What in the name of Jim Grant is going on here?

It's simple, really. After 5+ years of global QE, the world is awash in cash. It's everywhere and permeating everything, from stocks and bonds to luxury real estate. And when you're a hedge fund that is flush with cash and desperately looking for a "safe place" to park it, you'll actually pay the German government interest to hold onto it for you. You might even be outright crazy enough to think that earning 3% from the Portuguese government is a good deal.

And, in this environment, where the cash is going to keep flowing and the fiat devaluation is only going to continue, do you really expect higher U.S. interest rates anytime soon? And, as you know, despite all of the Fed and CNBS jaw-boning, the U.S. can't afford higher rates anyway because of the near-immediate impact on the interest payments of the accumulated $17T+ national debt.

Therefore, the charts below are extraordinarily important as you assess the future trend of precious metals prices. Will prices fall below The Double Bottom of $1180 and head to $900 as some of the chartreaders are saying or will real world practicality take over? I know that these charts aren't perfect and that the scales for each side aren't exact but, nonetheless, you can plainly see the long-term correlation between interest rates and paper gold trading. As rates fall, gold prices rise. Why? Primarily because your classically-trained hedge fund manager recognizes that low and negative rates/real rates are, and have always been, a solid rationale for owning precious metal.

"So, I'm confused. What's the point of all this, Turd?"

Look, if you accept the notion that:

  1. Global interest rates are not headed higher, and
  2. Low/negative interest rates historically cause gold and silver prices to rise

Then you can rightly assume that gold prices ARE NOT headed lower, regardless of what some Wave Counter might think. In fact, should rates continue falling in the very near term, we should expect a sudden reversal in the short-term trend of gold, very likely as soon as market participants and depth return following the end of summer holidays. You can see it in this 2014 chart of the Long Bond vs gold:

And you can see it in this chart of just gold by itself. Price has bottomed again at the intersection of the long-term trendline from May 2013 and the short-term support line for 2014:

So, don't let your heart be troubled by this current decline. As you know, this is all playing out as predicted back in June after price first broke through the long-term trendline. And, for all of calendar 2014, the price action is proceeding along nicely toward the goals we laid out back in January. Again, recognize all of this for what it is and plan/prepare accordingly.



Strongsidejedi's picture

zirp = hegemony?

So, if the interest rate is zero, does it mean that the issuing party has so much strength that they do not need to pay you interest?  I guess it says that the issuer is so strong, you will just give them your money because either (a) they can seize it anyway and (b) there is no where to run to...no where to hide.

CPE's picture


the NIRP!

Lunatics run this parade.  I'm glad gold is still offered for FRN's....

Turd Ferguson's picture

Nope. Nothing to see here...


Unbelievable. Literally.

ArtL's picture

Butler's Silver Bubble

If the price of silver does explode because of the investment and industrial demand, Butler says he will sell silver. He does not seem to have any concept of the collapse of the US dollar or he might suggest he'd trade some of his silver for other real assets. Has he focused so much of his attention on silver and might be missing the larger picture, of which silver is a part. Please don't think I am bashing Butler, I value his insights and work over the last several decades, however, silver is not the entire picture.

What would you trade your silver for when the Silver price explodes?

Turd Ferguson's picture



I think I'll make this public and send it over to GATA tomorrow.

marchas45's picture

My Stack Is Gaining

Interest. (From Me and I Guard It With My Life) Keep Stacking

SS121's picture

Turd, that was good

even i (not too savvy on interest rates, banking and such) see your point with their interest rate dilemma. i think.

with NIRP the system is saying, "don't keep cash in banks".  and then with the stock charts (up up up) they're saying "instead put it in the stock market" ??

wow, then if they want to destroy all the public's extra fiats (fiats  that might have started moving toward Silver and Gold) all they have to do is drop the stock market and 'poof', it's gone.

in the stock market they're (sheeple) penned up, and can all be fleeced with the drop of a chart.

sheep: Don't worry - these sheep are only penned in whilst they are being sold at this market. Soon they will all be back grazing in lovely English countyside. (Although I admit that later they become Sunday lunch).  However, I am vegetarian, so I only photograph them.

It would take these sheep several days to get out of the stock market and get to Silver and Gold.

But before, when they were in cash, they were free to roam... and could jump to Silver and Gold with a phone call..

New Zealand Grazing Sheep

aahhh...  so the bankers made the open range pasture grass ZIRP, and now even NIRP!  ...all while filling the feed trough in the stock market pen all the way up to DOW 17,000/ S&P500 2000.  

And in those six years since 2008 most of the sheeple have all been led back into the pen where the system can now shear them all with the drop of a chart.  Not a pretty picture.

AGAU's picture


One currency, one bank so we can monitor and control all their spending and savings, the savings must be spent cannot have the peasants holding their precious too close, we need it, no interest paid, we can charge them a tax on thei savings, whoops  I mean NIRP, and we can print money out of thin air to lend 'em when they get their arse's in a crack!  let high real estate and pretty pictures go to the moon, the working class can't afford them anyway so we can keep our precioussss's safe !

Shit  keep that gold down - can't have the unwashed hide that up or make a profit there, oh no!  we can't print that!  

Now what are we gonna do about them pesky Russkies and Chinee? they don't want our scrip anymore, maybe a nice war, we should check with the Rothschildes , need a big one though, all these minor skirmishes are starting to tell,  fire up the propaganda machine , issue orders to Obama and Merkel etc and prepare the Presstitutes and  its on like stank on shite!

Damn there's that gold price trying to rise again  -   Elites to Monkeys  -  "get moving its 3 am you know the drill!"

Hey there seems to be a run on Pitchforks and Rope anyone know why?

freemarkettrader's picture

@Turd - Why interest rates can never be allowed to rise

Turd - really appreciate you continuing to hammer the fact that despite what the Fed says in public, interest rates can never be allowed to rise.

What if in contrast to the consensus view that interest rates will be trending higher over the next four years, the US follows Japan and Europe into NIRP.

I've come up with a basic look at interest expense under a scenario where we assume that unicorns and rainbows still rule the economic day. If we assume that there is no major recession and that the US avoids WW3, then we can assume that the increase in US debt would be about $600 billion per year. Take a look at what happens to interest expense should the US head towards NIRP. Interest expense actually decreases. What if I am conservative on how slow the path to NIRP is? What if avg interest rates get down to 1.75% on $20 trillion on debt? The interest expense would only be $350 billion. This could conceivably continue for a decade as long as TPTB hold things together (no war and no major recession).

2013 US debt outstanding: $16.74 trillion
2013 avg. interest rate: 2.46%
2013 interest expense: $416 billion

2014 proj. US debt outstanding: $17.8 trillion
2014 proj. avg. interest rate: 2.41%
2014 proj. interest expense: $430 billion

2015 proj. US debt outstanding: $18.4 trillion
2015 proj. avg. interest rate: 2.35%
2015 proj. interest expense: $432 billion

2016 proj. US debt outstanding: $19.0 trillion
2016 proj. avg. interest rate: 2.2%
2016 proj. interest expense: $418 billion

2017 proj. US debt outstanding: $19.6 trillion
2017 proj. avg. interest rate: 2.05%
2017 proj. interest expense: $402 billion

Good link below:

Dr Jerome's picture


Now some people pay a vaulting service to store their gold--I suppose that is kind of like NIRP, if you feel that they offer a safer location for you metal. And if I trust that service, I see the sense in storing metals there rather than in my pond

But the bank stores your ones and zeroes on their computer, then charges you money? Where is the safety in that--especially when the biggest threat of theft is a Bail-In from that same bank.

Crazy world, getting crazier and we are stuck in it.

If you like, you can come to my place, engrave your name on each of your bars, and toss them in the pond for safekeeping. I don't charge much. But it is kind of dry out here in AZ. I'll have to get more water somewhere if this keeps up. I think I can see the tops of some bars after a really hot day.

Hey! Stop rolling your eyes. Its better than a bank!

Turd Ferguson's picture

Yep, that would be the idea


And, in your data, you can clearly see HOW and WHY rates can't be allowed to "normalize", regardless of the endless BS that streams from your television.

At 2016 4.4% instead of 2.2, you get an interest line item of $836B.

At 2017 6.15% instead of 2.05, you get an interest line item of $1.2T.

The deficit explodes and this accelerates the demise of The Ponzi as greater and greater supply of fresh fiat is necessary to float the US government.

SilverX3's picture

Sooner or later rates will rise. Fed delaying the inevitable..

Turd, what will it take for rates to "normalize"? Does it need a catalyst such as a black swan event, or if/when we go into global hyperinflation?

kardnul's picture

Excellent post Turd

>>>But that's just the U.S. Did you know that, in Germany, rates are now negative out to three years and that the 10-year Bund is now yielding just 0.90%? http://www.zerohedge.com/news/2014-08-27/greatest-depression-german-yields-now-negative-through-2017<<<


The charts in that ZH article boggle the mind. NIRP driving money into an already bloated equity market, screams of desperation.....NOT for my tastes.

Gold and silver, the only true money, makes stackin the only viable alternative

Turd Ferguson's picture

Maybe only a global


Maybe only a global realization that the jig is up would cause the bond market to go bidless. Even then, I highly doubt that The Fed, through the PDs, would allow rates to rise/spike.

Turd Ferguson's picture

Palladium still climbing higher


And zeroing in on a new, closing high above $895. I've got a last of $894.20

jaw777's picture

NIRP - In what Universe does this work?

Let me go on the record and say that if anyone wants to pay me to hold your money for you, I have your back.  In fact, if it makes you feel better, I'll charge more.

And since we are going down this path, if anyone has a nice house on the beach that you would like to pay me to live in for you, I am your man.

BTW - I sure would like to have you pay me to use your Ferrari and yacht too.  Let's get right to it.


Turd Ferguson's picture

Thanks for the compliment


Perhaps you overlooked that the link you added was already in the post?

Regardless, you are 100% correct in your conclusion. smiley

Response to: Excellent post Turd
Turd Ferguson's picture

I hear ya, jaw


If anything shows just how Fd up the QE-era system is, it's NIRP. And, again, with QE continuing NIRP gets worse and vice versa.

SilverX3's picture

Cos of my grim outlook on global economy

I took on a 10-year fixed mortgage rate of 3.99% in Canada in 2013. Perhaps I should've gone with a variable rate or a shorter term fixed. However, that 10 year rate is as low as it's been in a long long time. Historical 10 year fixed are closer to 5-6%. Plus it's never a good thing to guess when this whole Ponzi schemes gonna blow up. I've no choice now; anyhow just digressing.

Pseudozero's picture


when you posted the actual numbers for the 10 and 30 year, i nearly spit out my juice...then germany!!! wow.

how does that even happen? i'm at a loss for words.

great post turd.

DeaconBenjamin's picture

Fractures in Arab Gulf alliance a greater threat to oil security

Break up of the Gulf Co-operation Council could threaten world's largest oil fields as Saudi Arabia and Qatar lock horns over alleged support for Islamists

In 1981  the Sunni Arab sheikhdoms of the Gulf peninsula - Saudi Arabia, Oman, United Arab Emirates (UAE), Kuwait, Bahrain and Qatar - originally came together in theory to form a Middle Eastern  version of the European Union. Although the group has no formal political charter like the EU, it still provides the only official forum where all six leaders of these oil-rich countries can sit down together to debate and agree on mutually beneficial policies in the region.

Formed in the shadow of war, its initial purpose was to help guarantee security mainly from larger Pan-Arab nationalist despots such as Saddam Hussein and the threat posed by the Shiite Mullahs in Tehran. But after the US invasion of Iraq in 2003 its focus became increasingly economic. Initiatives such as interconnecting electricity networks across the GCC, regional transportation projects including a railway and the possibility of a formal currency union took hold.

However, the populist forces unleashed by the Arab Spring uprisings of 2010 and the rise of extremists under the banner of either the Muslim Brotherhood in Egypt, or the Islamic State of Iraq and the Levant (Isil) now threaten to tear it apart.

Tensions between Saudi Arabia, the UAE and Qatar were understood to have again come to head this weekend with an emergency meeting of foreign ministers in the Red Sea city of Jeddah described by the Saudi newspaper Asharq Al-Awsat as being “critical”. Riyadh and Abu Dhabi have accused authorities in Doha of supporting terror related groups such as the Muslim Brotherhood and meddling in the internal affairs of other GCC states.

The meetings could eventually lead to Qatar - the world’s biggest shipper of liquified natural gas - being ejected from the GCC. They also come at an awkward moment in the group’s history when a number of its leading ruling dynasties are in transition.

“People in the region say the GCC is effectively over as an organisation,” said Christopher Davidson, a reader in Middle East politics at Durham University. “Cracks are now appearing in the half-century old client state system in the region.”

In Oman - where rumours over the health of the country’s childless leader Sultan Qaboos have brought decision making to a halt in recent months and caused growing speculation over the succession - the country has slowly moved closer to Iran. Bilateral talks between Muscat and Tehran over a number of energy deals have deviated from the GCC’s naturally hawkish line on Iran. Meanwhile in Iraq, Isil is reported to be earning $2m (£1.2m) per day from oil fields it has already captured.

Kuwait has become the latest Arab Gulf state to deepen its oil trading relationship with China as the US gears up its own exports of ultra-light crude.

Oil-rich Gulf states are increasingly turning to China for new energy deals as the West led by the US seeks to reduce its dependence on Middle East oil and instead focuses on developing domestic energy sources such as shale.

Earlier this year, state-owned China National Petroleum Corporation agreed a landmark deal with the Abu Dhabi’s government to help exploit energy resources in the emirate.


Owtovit's picture



most definitely make this post public

should get ya more subscribers...

Thanks for this forum

DeaconBenjamin's picture

Swiss engaged in NIRP in the 1970s

Are they returning to the practice?


See also  When FX wars become negative interest wars

Dr Jerome's picture

Butler and silver

I will trade half my silver for a home for my family and paying the property taxes.  $100 silver is my target for either paying off the current home or buying a different one.

But I have to hold on to the rest. We may need it for barter, or simply to prosper if somehow, the evil plotting, sociopathic, "unenlightened," NWO, system planners manage to hold onto power through a currency reset. I hear that China values silver as well.

Kryger's picture

Some ST Good TA News

Not only did we bounce back exactly where Craig forecasted we would, but the IT oscillators have now gone from being  a headwind to Tailwind.

I know there are millions of them and none are fool proof.. but It feels nice to see the Stochastic, ROC and the RSI finally turn up from oversold levels and move back up.. after they rolled over last time we dropped $40.


EDIT: Realized now this post is OT and maybe should have been yesterdays Podcast thread and not the ZIRP/NIRP thread?

luv2stak's picture

Good Trades

Metal For :

• Productive Farmland

• Business With Income = Not Subject To Decrease In Depression (Good Luck!)

• Rental Housing =LocationLocationLocation

​• Solar Power

Things that GENERATE income and/or lower day-to-day expenses...

And possibly... second citizenship/passport... 

4 oz's picture


Holiday Weekend: We gettin' some JackAss??

{Don't Worry about length---- him go 'n go  & we'll take it in sections!}

Darth Smoker's picture

Financial Repression

1-4 Completed

  1. Explicit or indirect capping of interest rates, such as on government debt and deposit rates (e.g., Regulation Q).
  2. Government ownership or control of domestic banks and financial institutions with barriers that limit other institutions seeking to enter the market.
  3. High reserve requirements
  4. Creation or maintenance of a captive domestic market for government debt, achieved by requiring banks to hold government debt via capital requirements, or by prohibiting or disincentivising alternatives.
  5. Government restrictions on the transfer of assets abroad through the imposition of capital controls.


Dr. P. Metals's picture

From ZH


​their comment is short and succinct: "someone is going to be wrong"

its not USUALLY the bonds, and if not, extraordinarily bullish for contracting they gap in the bond/gold chart, in favor of gold rising to close the gap.

Turd Ferguson's picture

Take this for what its worth


But Carl Bildt is the Foreign Minister of Sweden...basically the Swedish John Horseface Kerry:


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