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I understand that policy makers think that low interest rates will encourage people to put their money into investments like the equities or a business by forci

I understand that policy makers think that low interest rates will encourage people to put their money into investments like the equities or a business by forcing people out of saving. But, have they ever considered that they may actually be achieving the opposite? Someone who just turned 65 (like aging Europe), really really needs to save in safe assets. Negative yielding bonds don't change that need! So, instead of investing in risky assets, they may simply take the negative yield and save even harder to make up for the negative yield thus reducing spending even further and hurting the economy.

elcomet 7y ago
I think that's the point isn't it? To provide extra-safe assets for people who need it.
- thorwasdfasdf 7y ago
  Their objective is that people won't save the money. They want people to spend the money, the sooner the better, but that goal completely contradicts what a retiree (and aging population) needs/wants to do.
ThrustVectoring 7y ago
The extra saving means higher prices for the assets of current retirees, which should end up resulting in them selling assets and spending the extra money.
imtringued 7y ago
There is also the risk that injecting additional cash into companies that don't need it further disconnects them from the actual economy. Investors can now make money simply through the appreciation of stocks, housing and dividend payments funded by negative interest mortgages. Since companies no longer need to sell more products, services or participate in the economy the end result is that you are not only not stopping deflation, you are actually mildly increasing it.
tachyonbeam 7y ago
Another thing to consider: the average Joe has little or no cash savings. Rich people already are into stocks, real estate and other asset classes. There might not be much juice left to squeeze.

elcomet 7y ago

I think that's the point isn't it? To provide extra-safe assets for people who need it.

thorwasdfasdf 7y ago
Their objective is that people won't save the money. They want people to spend the money, the sooner the better, but that goal completely contradicts what a retiree (and aging population) needs/wants to do.

ThrustVectoring 7y ago

The extra saving means higher prices for the assets of current retirees, which should end up resulting in them selling assets and spending the extra money.

imtringued 7y ago

There is also the risk that injecting additional cash into companies that don't need it further disconnects them from the actual economy. Investors can now make money simply through the appreciation of stocks, housing and dividend payments funded by negative interest mortgages. Since companies no longer need to sell more products, services or participate in the economy the end result is that you are not only not stopping deflation, you are actually mildly increasing it.

tachyonbeam 7y ago

Another thing to consider: the average Joe has little or no cash savings. Rich people already are into stocks, real estate and other asset classes. There might not be much juice left to squeeze.