{"id":4199,"date":"2016-07-29T13:41:09","date_gmt":"2016-07-29T11:41:09","guid":{"rendered":"https:\/\/clusterfamilyoffice.com\/blog\/?p=4199"},"modified":"2016-07-29T13:41:09","modified_gmt":"2016-07-29T11:41:09","slug":"intereses-negativos-y-darwin","status":"publish","type":"post","link":"https:\/\/clusterfamilyoffice.com\/en\/intereses-negativos-y-darwin\/","title":{"rendered":"Negative interests and Darwin."},"content":{"rendered":"


\n\"\"<\/a>The essence of our economic and market system is efficiency and competitiveness driven by profit. It seems a somewhat convoluted phrase, but it assumes that the System is based on concepts as logical and simple as the fact that all the agents that make up the Market and the global Economy want to make money. For this obvious - and at the same time necessary - reason, we try to progress in our jobs, either as employees or as entrepreneurs. We all want to achieve greater well-being, and to do so, we need to progress and our work must be not only well done, but better done than that of our competitors. This is the only way to improve our salary or our company profits, and thus also our ability to enjoy that money, i.e. our present and future well-being.
\n<\/p>\n

.<\/span><\/p>\n

The fact that some do not know how to transform this greater economic capacity into present and future well-being, or that they prefer to work less in exchange for earning less, having less material comfort and greater future economic uncertainty, is the exception that proves the rule. The system rewards the most efficient and extinguishes or hampers the most inefficient. To do this, it uses an essential tool called money. Money is the coveted good, and as such it must have a price, because if it does not, the System catastrophically loses all meaning. Let us see what happens when money ceases to have a price, as is currently happening thanks to the action of the main central banks of the planet.<\/p>\n

.<\/span><\/p>\n

If money no longer costs money, i.e. the interest rate is zero or even negative, the holder of the money loses the incentive to lend it to others. If the lender is a professional (banker), his profit margins shrink dangerously, and he has to pursue them in activities that are far from his core business, which are even more dangerous and\/or immoral. And if the lender is a private individual, also known as an investor, he will have to assume greater risks in exchange for little or no profit. The more persistent and deeper the negative interest rates are, the more the lethal effects for lenders\/investors will become more acute. Incentive is once again essential, for without it, money stops flowing and the economy grinds to a halt at all levels.<\/p>\n

.<\/span><\/p>\n

But what about the borrowers, those who borrow money for free or even earn money? A priori it would seem that this is an optimal scenario for them, and in a way it is, but at the same time it is a lethal scenario for the whole system, since not only are the most inefficient being particularly favoured, but the efficient are also being driven into inefficiency. With rates at zero or negative, indebted companies, which should improve or be extinguished to make way for more efficient competition, last indefinitely as they pay off their previous debt maturities with more debt, and not with the profits resulting from their competitiveness and efficiency. And they do so without the slightest effort, because the money is more than free. This leads to the point where a company, in its headlong rush, finds it easier to take on more debt and buy out\/absorb its competitors than to compete with them. The result of this absorption is a much larger business monster with little competitiveness. Because we know what happens when we put a healthy apple and a rotten apple together, and in this case it is also the rotten apple that buys - and therefore rules and imposes its way of working - and in this case it is the rotten apple. The same happens with banks, which are still companies that the Central Bank supports with injections of free money, if not at negative rates.<\/p>\n

.<\/strong><\/span><\/p>\n

Financial repression<\/a><\/strong> The effects on lenders, borrowers, investors and businesses of central banks with their zero or negative rates are as damaging as the same radical change in the rules of Monopoly. Imagine how the game would change if falling into another opponent's built-up square could be paid for simply by taking as much money from the bank as we wanted, taking money even to buy and build our own properties. The free bar is aberrant and lethal to the System. It is as if an employer were to change his essential criteria and reward his least productive employees with pay rises. It would never throw them out of their jobs, no matter how inept and inefficient they were, and would also allow them to move up the company's management ladder. Disaster after a few years would be inevitable, wouldn't it? The same aberrant effects free money has on the economy.<\/p>\n

.<\/span><\/p>\n

Thus, the economic scene is rotting away. Darwin's natural selection stops working in the economy. The business fabric becomes inefficient and competitiveness declines over time. The natural consequence of such a disaster, despite the creation of more and more free money out of thin air, is low wealth creation and anaemic economic growth or recession. The problem with zero or negative rates is that it undermines the foundations on which the whole System rests: Incentives, efficiency, competition, wealth creation... in short Progress. And of course it also undermines other essential agents in the system, such as pension funds (public and private) and insurance companies, which need money to be paid out at a reasonable price in order to achieve a minimum future income. If money no longer has a cost, if it is no longer worth anything, projections of future values, compound interest, incomes, valuations... everything goes up in smoke. And the states, manufacturing more banknotes out of thin air to alleviate the collapse, only aggravate the situation and make it more absurd and unsustainable, while recklessly undermining confidence in fiat money. fiat money<\/strong><\/a>.<\/p>\n

.<\/span><\/p>\n

More than 7 years ago, in the midst of the stock market crash of 2008, with the financial system collapsed and the credit tap completely closed, we predicted a corporate purge that would leave only the most efficient companies standing. The article was entitled \u00abDarwin, credit and Keynes<\/strong><\/a>\u00abIn it we predicted that Darwinian natural selection would cleanse from the system those who benefited most from the credit bubble of the years 2000-2007. However, we made an exception for the banks, which we predicted at the time would be bailed out with public money. We said in that now distant February 2009 that the process of cleaning up credit abuse was going to be painful but healthy in the medium and long term. But it was not. The central banks decided to do the unthinkable, not only rescuing banks but the entire economy and its business fabric. In the last 9 years, in a suicidal manner, we have skipped the laws of natural selection defined by Darwin in our financial system. And those who have decided to do so have not taken into account that giving money away indefinitely and continuing to play Monopoly are incompatible. We are still sitting in front of the board, of course, but if money does not soon return to a reasonable price, we will no longer be playing Monopoly but another game that no one has ever played before. An unknown game that will end in a few years' time in a very bad way for the vast majority.<\/p>\n

.<\/strong><\/span><\/p>\n

\u00abIf there is no doubt, there is no progress\u00bb.\u00bb<\/strong><\/p>\n

.<\/span><\/p>\n

Charles Darwin.<\/p>","protected":false},"excerpt":{"rendered":"

La esencia de nuestro sistema econ\u00f3mico y de Mercado es la eficiencia y la competitividad incentivada por los beneficios. Parece una frase un tanto alambicada, pero supone que el Sistema se basa en conceptos tan l\u00f3gicos y simples como que todos los agentes que conformamos el Mercado y la Econom\u00eda global queremos ganar dinero. Por […]<\/p>\n","protected":false},"author":6,"featured_media":6390,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[51,45,41,42,39,40,52,37,48],"tags":[],"class_list":["post-4199","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banca","category-asesoramiento-deportistas-artistas","category-economia-y-finanzas","category-estrategia","category-crear-mi-propio-family-offices","category-gestion-financiera","category-asesoramiento-patrimonial-multi-family-office","category-reflexion","category-asesoramiento-patrimonial-multi-family-office-crear-mi-propio-family-offices"],"_links":{"self":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/4199","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/comments?post=4199"}],"version-history":[{"count":0,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/posts\/4199\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media\/6390"}],"wp:attachment":[{"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/media?parent=4199"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/categories?post=4199"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clusterfamilyoffice.com\/en\/wp-json\/wp\/v2\/tags?post=4199"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}