Something Needs to be Done – A Glimpse of the Future

In the summer of 2016, US and global economic growth rates are nowhere close to estimates.  In fact, a global recession, or worse, is imminent.  At home, student loan defaults are now close to 100%.  The unemployment rate is climbing, as minimum wage workers finally realize that the financial pain of working or not working is identical.  In Euro-land, as the weather warms up, the never-ending flotillas from Northern Africa resume swamping the Southern shores.

 

NIRPA black hole opens up in the world of centrally planned money

Illustration by Denis Cristo

 

By now, the Treasury has long given up on the idea of privatizing the agencies.  Freddie and Fannie will soon be part of HUD, surviving for the sole purpose of providing affordable housing for all – whatever that is supposed to mean.  Policymakers have determined that the real estate market is stalling.  Desperate times require desperate measures.  Something needs to be done.

After an intense pow-wow between the administration, Congressional leaders and the Federal Reserve, the Negative Mortgage Rate Program (NMRP) is born. The program is simple.  Homeowners will be paid to borrow.  The Federal Reserve declares that the NMRP is a brilliant extension of NIRP (negative interest rate policy), because it will benefit everyone, not just the 1%ers.

 

fannie-mae-cartoonA good reason to break into song…

Cartoon by cartoon by Steve Breen

Here is how it works:

 

No downpayment needed.  100% financing.

No payments needed.  This is the reverse of the negative amortization loans during the subprime era.  In other words, it is a negative negative amortization, or neg-neg-am loan.  The loan balance will decrease instead of increase.

No need for mortgage insurance since, with no payments, there can be no defaults.

No qualifying needed, hence removing the entire cumbersome loan application process.

 

Say you borrow $100,000 at -1% interest.  Here is the math:

 

Your interest cost will be -$1,000 per year.  In other words, your loan balance will be $99,000, if you make no payments at all.

Using a commonly accepted 30 year term, the loan balance at the end of 30 years would be around $50,000, all without the borrower having to pay a dime in mortgage expense.

In fact, instead of charging around 4% for a mortgage, reverse that to -4% interest.  In 30 years, the mortgage will be totally extinguished.

 

Freddie and Fannie will originate these loans, package them as neg-neg-am-MBS and sell them all to the Federal Reserve.  Housing recovers overnight and the Feds declare “mission accomplished.”

 

locationWhat can possibly go wrong? It’s free money!

Cartoon by Jack Ohman

 

Get Out the Straight Jackets

Before you call me nuts, this is actually already reality.  The governments of Germany, Switzerland, Japan and others are charging savers for the privilege of lending them money.  Why stop there?  Let the people enjoy negative interest rates when they buy a house, or a car, or borrow for a college education.  In fact, why bother with taxes.  Just let the government borrow to operate.  The more it borrows, the more it makes.

 

Germany, 2 year yieldGermany’s 2-year note yield has been negative since the summer of 2014 – currently it is at a new low of minus 50 basis points – click to enlarge.

 

Watching Ms. Yellen answer questions during the “Humphrey-Hawkins” testimony the last two days was painful.  It is time to put the central bankers of the world in straight jackets and throw them into the cuckoo’s nest where they belong.

 

Draghi HolderGet Out the Straight Jackets – This heavy duty model might even hold Draghi!

Photo via ebay.com

 

Chart by: BigCharts

 

Chart and image captions by PT

 

 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

It is that time of the year again – our semi-annual funding drive begins today. Give us a little hand in offsetting the costs of running this blog, as advertising revenue alone is insufficient. You can help us reach our modest funding goal by donating either via paypal or bitcoin. Those of you who have made a ton of money based on some of the things we have said in these pages (we actually made a few good calls lately!), please feel free to up your donations accordingly (we are sorry if you have followed one of our bad calls. This is of course your own fault). Other than that, we can only repeat that donations to this site are apt to secure many benefits. These range from sound sleep, to children including you in their songs, to the potential of obtaining privileges in the afterlife (the latter cannot be guaranteed, but it seems highly likely). As always, we are greatly honored by your readership and hope that our special mixture of entertainment and education is adding a little value to your life!

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

4 Responses to “The Negative Mortgage Rate Program (NMRP)”

  • sufganiyah:

    Negative mortgage rates already exist in Spain.

  • Hans:

    Effective today, I shall refer to “it” as Off-Center Bank(ers) or
    even better Crank Bank(ers).

    Too many brain cells and time are being wasted or destroyed, discussing
    this economic and monetary destroying, wholly man made institution.

    And for those Fed-o-philes, please by all means, continue your instructive
    debates about the valve of this agency and it’s monetary policies and hence
    being so enlightened as to provide light and a sanctuary for the ignorant masses.

  • Crysangle:

    Although we doubt it would reach that extreme it is good to understand the parameters that monetary authority are working with . In the above example there would have to be associated laws that deny multiple applications for pure profit , so in effect property ownership would become legislated whereby application for negative rated loans would require full disclosure of assets – we are looking at a fully statist distribution of wealth according to dictat with little room for any incentive to enterprise except gaming the system , or for socio-paths the acquisition of political position .

    I don’t think we are even able to imagine a lite version properly , where society’s values are erased as the population plug into the new norm . In that case , leverage will be maintained , maybe reduced to token , and yet still carrying some recognition of superiority or worth or submission to the issuer … just enough to displace the old set of values while being able to deny the structure has fundamentally changed . Maybe after that it will be the ‘most loyal’ that finally take the position of social attributors , as per your example , for the last token of generosity would be to remove monetary obligation, while simultaneously stepping into the ideal of direct rule for ‘to the fairness of all’ . Who could say or prove better of that than those who removed the chain of payment and replaced it with direct access by decree . Unfortunately as a principle that approach does not work , for we cannot decree a field bear harvest , nor that people produce without using coercion – who will listen when they are already well off , and when they find they are no longer so they are likely to have found every motive to blame the authors, or join them in blaming others . We know what that produces of mankind . When you take away the concept of the worth of trade and the pursuit of an end by that means , then there is only theft left to recompense what is lacking .

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • snake-charmerGold Price Skyrockets in India after Currency Ban – Part III
      When Money Dies In part-I of the dispatch we talked about what happened during the first two days after Indian Prime Minister, Narendra Modi banned Rs 500 and Rs 1000 banknotes, comprising of 88% of the monetary value of cash in circulation. In part-II, we talked about the scenes, chaos, desperation, and massive loss of productive capacity that this ban had led to over the next few days.   Indian prime minister Narendra Modi – another finger-wagger, as can be seen in this...
  • wads-of-cashGold Price Skyrockets in India after Currency Ban – Part II
      Chaos in the Wake of the Ban Here is a link to Part 1, about what happened in the first two days after India's government made Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes illegal. They can now only be converted to Rs 100 (~$1.50) or lower denomination notes, at bank branches or post offices. Banks were closed the first day after the decision. What follows is the crux of what has happened over the subsequent four days.     India's prime minister Nahendra Modi, author of the...
  • shopGold Price Skyrockets in India after Currency Ban – Part IV
      A Market Gripped by Fear The Indian Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes would no longer be legal tender. Linked are Part-I, Part-II and Part-III updates on the rapidly encroaching police state. The economic and social mess that Modi has created is unprecedented. It will go down in history as an epitome of naivety and arrogance due to Modi’s self-centered desire to increase tax-collection at any cost.   Indian jewelry...
  • very-bad-boyA Note on Gold and India – What is Driving the Gold Price?
      Hidden Motives It is well-known that India's government wants to coerce its population into “modernizing” its financial behavior and abandoning its traditions. The recent ban on large-denomination banknotes was not only meant to fight corruption.   Obviously, this very bad Indian has way too much cash. Just look at him, he looks suspicious! Photo via thenewsminute.com   In fact, as our friend Jayant Bhandari has pointed out, fresh avenues for corruption ...
  • sittingWill Trump Do What Reagan Couldn’t?
      Depravity and Degeneration BALTIMORE – Finally, it’s over. We were both delighted and appalled by the news. A smile spread over our face... and our steps lightened... as we looked ahead to four years without Hillary Clinton’s know-it-all mug in the news.   Praise be! This mug will be largely missing from the airwaves and the intertubes in coming years. And your caption scribbler PT won't have to look for a fall-out shelter! We thank the Lord and the American public for...
  • gold-pm-fixIndia's Currency Debacle – An Interview with Jayant Bhandari
      A Major Crisis Last week Jayant Bhandari related the story of the overnight ban of certain banknotes in India under cover of “stamping out corruption” (see Gold Price Skyrockets In India after Currency Ban Part 1 and Part 2 for the details).   Banned 500 rupee banknotes   The problem is inter alia that the sudden ban of these banknotes has hit the Indian economy quite hard, given that 97% of all transactions in the country are cash-based. Not only that, it has...
  • winInflation Expectations Rise Sharply
      Mini-Panic Over Inflation After Trump's Election Victory We have witnessed truly astonishing short term market conniptions following the Donald Trump's election victory. In this post we want to focus on one aspect that seems to be exercising people quite a bit at present, namely the recent surge in  inflation expectations reflected in the markets. Will we have to get those WIN buttons out again?   A 1970s “whip inflation now” button. The only thing that was actually needed...
  • santorinigreeceThere Are Two Types of Credit — One of Them Leads to Booms and Busts
      Stumped by the Bust In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs.   What has caused the bust? The modern-day economic orthodoxy continues to be unable to provide...
  • vigilantesWill the Swamp Swallow Trump?
      Permanently Skewed TRUMP HOTEL, New York – Trump’s rambling army – professionals, amateurs, camp followers, and profiteers – is marching south, down the I-95 corridor. There, on the banks of the Potomac, it will fight its next big battle.   Lieutenants in Trump's army: Bannon, Flynn & Sessions Photo credit: Drew Angerer / AFP   Here at the Diary, we do not like to get involved in politics. But this is a special time in the history of our planet – a...
  • yellen_duct_tape_7-16-2014_largeGold Bull Market Remains Intact – Long Term Fundamentals Outweigh Short Term Market Gyrations
      A Strong First Half of the Year, Followed by Another Retreat In early 2016 gold had a big bull run. The precious metal rose close to 25% this year, pushed higher in a summer rally that peaked on July 10th. Gold experienced a bumpy ride over the remainder of the summer though, as investors became increasingly concerned about a potential rate hike by the Federal Reserve. Uncertainty returned to gold market and has intensified further since then.   Initially, gold rallied sharply...
  • david_stockman_0Too Early for “Inflation Bets”?
      The Trump Trade After 35 years of waiting... so many false signals... so often deceived... so often disappointed... bond bears gathered on rooftops as though awaiting the Second Coming. Many times, investors have said to themselves, “This is it! This is the end of the Great Bull Market in Bonds!”   The long bond's long cycle – red rectangles indicate when the post 1980 bull market was held to be “over” or “over for sure” or “100% over”, etc.  We have...
  • train-to-hellAll Aboard! Trump’s Express Train to the Future
      Free Money! BALTIMORE – Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999.   Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com