Negative real interest rates on the way

Just as I have been observing recently, Bloomburg reports The European Central Bank (ECB) is seriously considering turning interest rates negative. (article)

"Policy makers would reduce the rate for commercial lenders who park excess cash at the ECB to minus 0.1 percent from zero, said the people who asked not to be identified because the talks aren’t public. It would be the first time the central bank has adjusted interest rates by less than a quarter of a percentage point. The concept, which has been discussed by Governing Council members, doesn’t yet have a consensus, the people said."

This reveals their inflationary expectations which they have likely been considering in private for some time.  I have been asked about this increasingly over the last 12 months, as the perceived difference between real and nominal inflation widens. Part of the problem I think they overlook is the increasing liquidity across the globe as capital sloshes around from one investment sector to another. Time will of course tell all.

New Site "Craig Duling"

Craig Dulings personal site under construction

I recently wrote a brief summary of how I got into collecting pocket watches and a personal website. Here is the link go ahead and check it out if you are interested:

http://craigduling.com/

Fractional Reserve Banking

Fractional-reserve banking is the current form of banking in all countries in the world, unfortunately few people understand how it functions. 

When you go to the bank and put in your money as a deposit, the bank takes your funds, sticks it in their coffers and then lends out many multiples of that dollar  amount, keeping only a small portion of what it actually has on hand. These funds it has on hand are called reserves. The reserves are what the bank then uses to satisfy withdrawals when people ask for their money back. 

Here is a graphic depicting the process, as you can see the bank takes the customers deposit and loans out many multiples of what it actually has. 

This is a system many of our founding fathers fought vehemently against, shown in this historical illustration depicting Andrew Jackson as a heroic knight, sword in hand trying to chop heads off the hydra representing the fractional reserve banking system. 

Weather or not Andrew Jackson was right in opposing it, the fractional reserve system is what we have today as the defacto worldwide standard. 

In response to several requests I will elaborate on this more over the next few days. Please bookmark this page and check back if you are interested!

You can find more info about me at the following sites:
http://www.yelp.com/biz/craig-duling-redwood-city (Craig Duling)

http://www.merchantcircle.com/business/Craig.Duling.650-366-8900 (Craig Duling )

http://www.quora.com/Craig-Duling (This is my Quora account for Craig Duling) 

https://plus.google.com/106162658888491146345 (Feel free to come over and say hello on my Google+ personal account )

Hyperinflation not likley

I see no real evidence we will experience hyperinflation here in the United States as many others seem to be saying. Time will tell! The path we are going down now is called Stagflation, a combination of low economic growth and hard asset DEFLATION, which we are watching already across commodities, especially in the precious metals over the last year. Look at any chart of metals over the last year.  I belive those preparing for hyperinflation will be disappointed.