So far these are the main effects of NIRP:
1. Banks holding money with the FED will get penalized, they want them to loan out the money and stimulate the economy (real world effect, banks hoard money and pass the penalty on down to the consumer, hurting savers).
2. Huge outflows in the banking sectors (Japan, safes are going for a mint right now), mean under-capitalized banks are imploding due to our banking system being a fractional reserve system and there is less physical cash than what the electronic money is out there.
3. This forces countries to go to a purely electronic system which China, Australia, and the Euro are contemplating. If people can't take their money out cause everyone has these new chipped cards, then banks can charge people whatever they want to hold their money, which hopefully in their Keynesian mindset will force people into either A. Risky over leveraged markets or B. Spend it in the economy because if you don't the value of your money is happening every day incrementally.
4. Savers are charged a premium for saving, and borrowers are paid to borrow, which is in the form of the negative interest rate mortgage happening over in Finland. So in effect you get paid to borrow, so your mortgage is eventually less. Unless there's a mandatory electronic currency, there will be less savers to break even on paying interest on the mortgage which means higher fees for mortgages in general. What the effect on real estate is can be mixed. People will rush into real estate to avoid having their money rot in a bank, so then you will have a artificially stimulated real estate boom (another one). There are many in our treasury department and other agencies (cough: Fannie) that are gearing up for a re-booming real estate market. When our stock market pops people will move back into real estate artificially propping up prices (George Soros is getting back into REITs) again.
5. Effects on Life Insurance is interesting. The markets will only become more volatile as time goes on due to A. Algo's B. Pension fund liquidations C. 401k fun liquidations D. China. So options could get more expensive which means indexed universal life insurance charges could get more expensive. You possibly will see longer crediting strategies meant to smooth out the market volatility, or crediting strategies containing VIX itself. As far as effects on Par WL not sure.
6. Annuities have a double-whammy, the DOL altering possible commission structure and forcing only trail commissions (Madison), and the sucking sound of NIRP. Savers for future annuities will be forced to pay money at a lesser negative interest rate than banks or be forced into more exotic crediting strategies to earn a return.
At a time where advisors won't be talking to the majority of the broke ass population due to the DOL rule, you will consumers enrolled into robo-broker accounts. The future is grim indeed for our savers and our elderly.
"Do you think the demographic trends of 10,000 people per day turning 65, virtually no increase in their Social Security, the vaporization of interest income to save Wall Street bankers, and real inflation in the real world of 5% or more, has anything to do with the terrible retail sales and stagnant economy? Don’t ask a CNBC talking head or Fox News bimbo. Their job is to convince you all is well, while your grandmother is forced to eat Fancy Feast for dinner."
Senior Price Index is a Joke
My recommendations (personal): I still like indexed annuities for retirement along with a permanent life insurance policy to skirt taxes (they are going up). Getting these policies will peg an interest rate in times where they could effectively be the highest they will be for generations (Ben Bernanke: "interest rates won't normalize in my lifetime"), so atleast take out a policy in case you need a place to squirrel away nest eggs.
I also recommend a life policy or private annuity, there will be mandatory percentage allocations to US Treasuries meant to spin it as providing for a stable retirement for seniors/future youth (always for the kids!!!). This will prop up some demand for the dollar at a time when all currency liquidations are happening and dollars are coming back to the motherland USA
. Also oil companies were huge dollar holders, they are all liquidating right now while EM's like China are selling dollars which acts like a reverse QE, forcing us to walk back the miserable rate increase of a .25. (how weak is our economy when .25 is enough to add volatility to the market?).
I also recommend precious metals (pm's) including jewelry. Also farm land will be a premium assuming private property isn't outlawed or real estate taxes make it so only the wealthy are able to afford home-ownership (lows).
Gist? Expect more volatility....