4 ms·
Negative rates are scary if they go low enough, where an inverse of the problems with high inflation come about. Rather than try to collect payments as fast as
by atomic77 11y ago
Negative rates are scary if they go low enough, where an inverse of the problems with high inflation come about. Rather than try to collect payments as fast as possible due to the eroding value of money, there will be an incentive to delay receipt of payment as long as possible. Taxes will be overpaid to be reclaimed in the following year. How would your local telco handle being treated as an implicit temporary checking account?
I don't claim to understand all the implications, but it's an odd experiment we would probably be better off not trying. What's worse, how do we ever get back to some range between [-2,2] once we've gone that far negative?
- roymurdock 11y agoRight, hyper [inflation, deflation] is bad and usually ends in the governing body losing all power over the economy as people switch over to another country's currency (Zimbabwe) or a new government's currency (Germany). That's a discussion we should have when we get to -2.0% interest on long-term assets.
- atomic77 11y agoFair enough, luckily we're not there yet, but what's concerning is that the title of the article uses the words "way, way lower"!
- gozur88 11y agoIt's also going to push people into equities, which I believe to be the real motivator for these kinds of articles. With negative interest rates why wouldn't you buy, say, gold ETFs instead of losing a bit of money every month (even before inflation) to the bank?