Central banks going full Zimbabwe! "The central message of this paper is that there are set of readily available approaches to enable DEEP NEGATIVE RATES that empowers the central bank"https://www.imf.org/en/Publications/WP/Issues/2019/04/29/Enabling-Deep-Negative-Rates-A-Guide-46598 …
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Imagine the exodus from savings accounts then
Their theory is that people will thereby be incentivized to spend the money as the alternative to having it stolen. Same as the Keynesian argument for inflation, only a more direct theft. They don't even mention gold, cryptocurrency, real estate, art, etc. as alternatives.
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Ah, interesting stimulus package
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As in "may you live in interesting times." :-(
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I feel sick. If I'm comprehending this well enough, this whole thread deserves to be in all caps.
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Despite their idiotic rhetoric making the unprecedented sound routine, there are many hurdles, especially here in the U.S., where they will face a flurry of lawsuits to be heard by judges who studied contract and property law, not macroeconomic superstitions, in law school.
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If I were in Europe I might well be worried though.
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Relax
@NickSzabo4! They're specifically engineering the negative interest rates so that they only affect the wealthy!https://twitter.com/mileskimball/status/1155471449626296325 … -
Negative interest rates benefit the rich more. Even if you exclude them. They own assets too. Do the price of those assets increase while rates go lower. The rich will get richer dumping their bags on you.
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If the US ever attempts this I'll just start taking my whole paycheck in Bitcoin via Bitwage and bypass the fiat bank account all together. I'll then use my CashApp card to pay bills.
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If these draconian policies come down there is a good chance that they be enforced in a draconian way, which means you will probably need to use more trust-minimized services than these, but you are headed in a generally good direction.
End of conversation
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We talk about other assets like "gold, cryptocurrency, real estate, art, etc." in our earlier paper. See links to both papers and to blog posts here: https://blog.supplysideliberal.com/emoney Many other assets, like bitcoin, have a fluctuating price. They can't create a lower bound on rates.
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They also do not recognize that coercion (spend or else) is not really conducive to productive investment and productivity.
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Here you are effectively calling the entire price system coercion. Are people being "coerced" to only have a few diamonds instead of many diamonds by the high prices of diamonds? Are people being "coerced" to buy a lot of inexpensive washing machines and refrigerators?
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neg rates are a tax. good for financial asset prices, ineffective for the credit channel (potentially adding supply constrains to demand ones). they do not create opportunities or lower risks in the real economy, they aid financialization (hope that is a word ;)).
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Take a look at our two papers. We have a big section about the transmission mechanism. https://blog.supplysideliberal.com/emoney A lot of what you are talking about is what happens if interest rates are cut, but not enough to get the economy back the natural level of unemployment.
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The best way to get interest rates back up is to get economic recovery. Very temporary deep negative rates will often be the fastest route to economic recovery.
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Y on point 1. N on point 2 (progress?) Find this sinister actually (shall read your papers).1) economist overestimating impulse power of lower IR at these levels (bias is to think monetary policy is a panacea as they have a say into it?) & 2)policy incentives need to be rethought
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The main thing I disagree with is "at these levels." If the paper currency problem and the bank profits problem are handled, there is no reason interest rate cuts in the negative region won't have the same kind of effect as in the positive region. We discuss "the reversal rate."
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Shall read. See structurally low growth not addressed (EU not having rate cycle at all), global trade slowing. Lacking policies to increase the pie, incentives are to capture a larger slice. But it is a Pareto situation. Coordination in CBs group-think follows. Race to bottom.
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