The global plan to ruin cash
The RBA is on the brink of slashing rates.
It didn’t happen on Tuesday.
With the May meeting done and dusted, the guessing game of ‘when’ begins again.
I’ve always believed that the second half of 2019 is when we will see rate cuts. Although the speculation around the May meeting found me second-guessing myself.
For now, I’m thinking July could be the month we see the interest rate change. Why?
By then, Australia’s second-quarter data will have rolled in, giving Martin Place decision-makers a ‘complete’ economic picture.
Is it one they’ll like?
The race to the bottom
July feels like a long way off.
But the July meeting is effectively less than 60 days away.
And central banker sentiment can change in that time.
However, I’d be counting down the days until our central bankers join their global counterparts in dropping rates or holding back on increases.
Two weeks ago, Bloomberg said there had been a sudden change among the money manipulators, writing: ‘Three months since the Federal Reserve put US interest rates on a prolonged pause, more and more central bankers around the world are getting nervous about tightening monetary policy.’
Because worldwide economic data isn’t as healthy as they’d like us to believe.
Sure, there has been some positive growth data from both China and the US. But it’s fleeting. Other economies around the world are struggling. And central bankers are beginning to react to that.
Take this, for example.
South Korea’s economy caught the market off guard by shrinking this week. It’s the biggest reduction in more than 10 years.
Over in Germany and France, key confidence indicators dipped to 100 points. Once they fall below the 100 mark, it means people are pessimistic about the economy…
Then there was Australia’s Consumer Price Index, which read 0.0% for March 2019. That brings year-on-year CPI to 1.3%.
And behind all of this are the central banks themselves, reacting to the not-so-rosy numbers.
Japan said last month week that its central bank will keep rates at the rock-bottom level of -0.1% until at least May 2020.
The Turkish central bank has dropped its promise to increase rates if needed. The Bank of Canada reckons there’s no more rate hikes coming from them, either.
And over in Eastern Europe, the Ukraine central bank — the one with Europe’s highest cash rate — cut its rate by 0.5% to 17.5% just last week…
The point is, globally central banks are making policy decisions that are detrimental to your wealth. Lowering the cash rate effectively erodes the value of the dollars in your wallet, and your cash at the bank. So each year, your money buys less and less.
Two institutions control your money
Of course, there is another side to this.
Not only do we have central banks around the world actively working to destroy the value of your wealth through low rates, but we have the lender of last resort — the International Monetary Fund (IMF) — pursuing its own agenda.
At the end of Easter, I wrote about the fact that the Bank for International Settlements (BIS) said central banks have allowed us to fall into a ‘debt trap’.
Well, there’s another layer to this. Not only are we globally indebted, but the IMF is working to herd everyone into the digital financial system.
This is a two-pronged attack for investors, from two powerful institutions.
The value of your dollars is being wiped out by low rates.
And the IMF is pushing people into a digital banking system, making your money vulnerable to control.
Now I’ll hand you over to Jim, who’ll explain what the IMF is up to, and, more importantly, what the IMF can’t control.
Until next time,