Nick Szabo  🔑

End central banking! End the fed!

It may be nearing the end of the long road of ending itself.

I should point out, though, that at least a few negative interest rate folks have some very ambitious plans for extending the journey even further into unknown territory, in the form of "deeply negative" interest rates and extreme anti-cash measures.

Bond market thinks they go even lower. Dec bond skew 30 tics to the call

I'm reminded of Taleb's lessons about individual banks that lost more than they cumulatively earned, in a single downturn. Is it possible the entire sector could lose more than it has ever earned/accumulated? A "Once in 3,000 year event" kind of has that ring to it.

We are in very uncharted territory, almost anything is possible.

Is that true even when you account for inflation? Is this the most negative we’ve ever been?

There have undoubtedly been brief periods when inflation temporarily so outstripped positive nominal interest rates that it produced more deeply negative real interest rates. It's often hard to measure inflation, though, and thus the level of "real" rates.

The OT refers to negative nominal rates, which are a special hell of their own due, in order for them to even purport to work as advertised, to suppress or, as this goes on longer or deeper, try to ban cash, gold, cryptocurrency, & other such liquid spot markets.

Makes sense. Lenders might also hope the rate of inflation would drop to make a loan profitable or they might have made the loan when inflation was lower. So even if we had the same real negative interest rates the effects wouldn’t necessarily be equal on the economy.

It’s quite a prominent tool that has been used prior to the 90s. First time the term ‘negative interest rate’ was used is by the Swiss central bank in the 70s. But as a concept it has been used over history, as it’s essentially paying a “credit worthy” entity to hold your money.

Right. Paying someone to store value does not seem insane.

But it doesn't cost any more to store bits now than it did when interest rates were positive. That metaphor is a preposterous lie.

Yes maybe. It’s mostly used as an incentive mechanism by central banks to drive investors to not hoard cash, which would drive a price hike and thus attempt to stabilise it’s value. I can’t argue one way or the other if it’s good or bad, as there’s not enough data.

Yup. There are regulatory limits to hoarding cash, but no one is forced to buy bonds unless that's how they set up their fund. There's always gold, cash under the mattress, barrels of oil...

"Hoarding". You know somebody wants to take your hard-earned savings when they start calling it "hoarding", as if you were trying to stuff too many fire hazard cardboard boxes in your apartment.

"Hoarding" can be a sign that you're a far right anti-government prepper, who meets the criteria for a red flag law confiscation order.