Jim’s Mailbox

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Courtesy of Wolfgang.

Jim

Chief Economist Loses It After Historic Rate Cut, Slams Fed In Epic Rant
July 31, 2019

The following epic rant from MUFG chief economist Chris Rupkey hardly needs any commentary, as it is about as close to a perfect reaction to the idiocy unleashed by the Poiwell Fed as can get.

Congratulations to all of you down in Washington who have lowered the boom on interest rates today. We guess you must be feeling pretty proud of yourselves. US central bank policymakers have learned nothing from the experience of low interest rates in Japan or Europe. The economies of Japan and Europe aren’t going up like a rocket ship and it is doubtful economic growth will see any greater liftoff here in the good old USA.

Go ahead and eliminate interest rates. Wall Street is already eliminating thousands of jobs in sales and trading and more rate cuts mean reduced margins and less volatility and thousands more will be told to go. Hedge interest rate risk. What interest rates?

Countries with low rates have economies with low growth. The Fed’s decision today is like in the days when doctors bled their patients to heal them. Fed officials made a very unwise decision today and buckled to the president’s demands by manufacturing reasons to cut interest rates despite a strong economy with no recession signs apparent anywhere out on the horizon.

The stock market may be partying today, but it will wake up with a huge hangover tomorrow as the Fed alters the way the country saves and spends and borrows and invests forever. I think they are probably proud of themselves, but they should really be more ashamed.

The Federal Reserve threw away their independence today and with each future rate cut they will gradually eliminate their relevance to the economy forever.

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Courtesy of JB.

Jim

UBS To Start Charging Rich Clients With Negative 0.75% Interest Rate
July 31, 2019

For years, European banks were leery of passing on the ECB’s negative -0.40% deposit rate to their clients for fears of deposit flight and other unintended consequences, in the process being forced to “eat” the difference and impacting their interest income.

However, after five years of NIRP, and with the ECB set to unleash even more negative rates in the immediate future, one bank has finally taken a stand: according to the FT, UBS plans to charge a negative interest rate on wealthy clients, those who deposit more than CHF 2 million with the largest Swiss bank.

While several, mostly smaller, banks in Switzerland and the eurozone already pass on the cost of negative official rates to corporate depositors, most large players have refrained from doing so with individual clients. But with the ECB expected to adopt a “lower for longer” stance as soon as the next central bank meeting, starting in November, UBS Switzerland will charge -0.75% a year on individual cash balances above 2 million Swiss francs, the same rate as the SNB’s rate.

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