Imagine a bank that pays negative interest. Yup, that means depositors are actually charged to keep money in their accounts. I was always taught the borrower was supposed to pay interest, not the lender. As crazy as it sounds, many European central banks have cut key interest rates below zero. For some, it’s a bid to reinvigorate an economy with other options being exhausted. Others want to push foreigners to move their money somewhere else. Either way it’s an unconventional, unproven choice that distorts the financial markets and could have deleterious economic effects if it backfires. In order to keep this post brief I will limit my discussion on the “why’s” but if you want to learn more there is a good article in “The Economist” here
In a world of beggar thy neighbor and a race to see who can devalue their currency the fastest in an attempt to invigorate growth, the US dollar is king. For now, there is little reason to see it abdicating its throne any time in the near future. As such, it continues to play a prominent role in our investment strategy. How about yours?