What are the deepest explanations for negative interest rates? It's most curious, to put it mildly; it seems not unlikely to be a sign of some epochal societal transition.https://twitter.com/sama/status/1215450930293817345 …
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I've wondered a lot about this too. To anyone who's read much history, it's a huge anomaly.
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Equities are the new fixed income. Given the wealth dependency and share of household savings invested in public equities in advanced economies, governments will do whatever they can to prop up stocks. Motivated by electoral considerations.
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A money regime where asset holders get penalized for not taking risks with investment. Not necessarily a bad thing, but brings up questions about pensions which should not be risky.
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Incidentally Alphavilla has just blogged about this today:https://ftalphaville.ft.com/2020/01/07/1578397650000/Against-secular-stagnation/ …
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Paul Schmelzing will disagree ("Eight centuries of global real interest rates, R-G, and the ‘suprasecular’ decline, 1311–2018")
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Why is it an anomaly? What’s wrong with the argument “people have to store their wealth somewhere, some organizations will charge you for storing it”?
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Here is an interesting take.https://twitter.com/gavinsbaker/status/1208816567716319232?s=21 …https://twitter.com/GavinSBaker/status/1208816567716319232 …
1) Best thread of 2019. Idea that rates are low because humans are on the brink of functional immortality, thereby reducing the value of time, is fascinating. And yes, there are *many* other drivers for rates. Tweets 4-5, 10-11, 13-15, 29, 30, 32, 33, 51, 53, 56, 73-75 are
https://twitter.com/Lizquidity/status/1205981236960714754 …Show this threadThanks. Twitter will use this to make your timeline better. UndoUndo
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1. Capital no longer most important asset to optimize for 2. Countries are bankrupt– start of the great transition (crypto/societal arrangements) 3. Wealth is no longer scarce– making (sorta) sense to charge storage for a commodity. Rooting for a peaceful #2
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Negative interest rates I would guess is due to central banks and having a fiat money. The market is suppose to determine what’s sound money, not a central authority. The US dollar used to be backed by gold, until Nixon took us off the gold standard. Now the Fed can simply..
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Print money and increase the money supply. Our whole economy is based on stimulating demand and that’s what negative interest rates do. It charges you to keep it at a bank so you’re incentivized to put it to work or consume. This new phenomenon I would guess is due to the
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Wide acceptance of central banking. Is a natural market, interest rates would fluctuate. If banks reserves were running low, they would increase the rate to incentive saving. If reserves were high, they would lower rates to incentive borrowing and thus an ebb and flow of rates.
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