ALBERT EDWARDS WARNS: The next US recession will surprise investors, and a desperate Fed's next move will be unprecedented

We have another call for negative interest rates in the US. 

Societe Generale's Albert Edwards believes that the Federal Reserve should lower its benchmark rate below zero during the next economic downturn. 

Negative rates are a last-resort monetary policy tool that central banks use to crush deflation and encourage consumer spending. 

In a note to clients on Thursday, Edwards wrote (emphasis added): 

The next US recession will probably arrive a lot sooner than most investors expect and will likely see more desperate monetary experimentation from the Fed. Bob [Janjuah of Nomura] and I thought that this time we would see deeply negative interest rates in the US (and Europe). Sweden has led the way, dipping their toe below the water line with their current -0.35% policy rates but there will be more, much more along these lines. For if -0.35% is possible, why not - 3.5% or less? It goes without saying that deeply negative interest rates would be accompanied by a massively expanded QE4 in the US. The last seven years of exploding central bank balance sheets will seem like Bundesbank monetary austerity compared to what is to come.

 

DYI