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When interest rates are negative it's inherently inflationary. It won't destroy the universe but it encourages people and businesses to borrow to get additional

• imtringued 4y ago
  >When interest rates are negative it's inherently inflationary. Is this supposed to be some kind of joke? When you have 3% deflation then a -3% negative rate just sets real returns back to 0% like one would expect in a functioning market. Also, a negative interest rate on cash allows the abolishment of inflation as central banks no longer need to target a positive inflation rate and can instead do price level targeting which is the complete destruction of the concept of inflation itself. Lower interest payments mean most of the payments go towards the principal which means the money supply shrinks given a sufficient debt brake on government spending. Negative rates allow 100% reserve requirements to function and mitigate almost all the problems with the loanable funds model which means the central bank doesn't have to control the interest rate anymore. If anything it is the opposite, if interest rates exceed returns in the real economy, the government has to borrow and spend to stimulate the economy until there is enough inflation to pay the interest rates expected of it.