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> Next, the bank starts applying negative interest rates when they need to "stimulate" asset prices and keep the stock market from crashing. No longer worried t
by bsdz 4y ago
> Next, the bank starts applying negative interest rates when they need to "stimulate" asset prices and keep the stock market from crashing. No longer worried that people will pull cash out of their account to stuff under a mattress, your bank account starts dropping by 5% or 10% per year...
Can't they do this already by increasing money supply or QE? Central bank's can already create inflation which isn't dissimilar to negative interest rates.
- mitthrowaway2 4y agoQE is effectively an interest-rate cut but for long-term bonds rather than short term. It would typically be used in conjunction with control of the overnight rate, which still struggles with the zero-lower-bound unless the ability to hold cash is removed from the system.
- deleted 4y ago[deleted]