Learning to Love Negative Interest

[thriftyandboringinohio]

So I found this economics website.

http://www.naturalmoney.org/

The proprietor is a Dutch computer programmer and amateur economist who has clearly been thinking long and hard about the nature of money and interest.
His thesis is :

- negative interest rates are inevitable
- negative interest rates area good thing

His thinking is pretty interesting, and there's a chance he might even be correct on both counts.

I have railed against ZIRP and NIRP here for years, but still they hang around.
Perhaps I should think a little more deeply about how to thrive under these conditions if they refuse to go away, rather than waiting for the world to change.

[jk]

Re: Learning to Love Negative Interest

i'm no expert in these matters, so what i've written below are just my musings:

negative rates are a device for goosing velocity. if the fed stopped paying interest on excess reserves, and instead charged for them, there would be an enormous tide of money loosed. banks, lacking sufficient opportunities for loans, would refuse or even return deposits and would likely purchase back their bonds and preferred stock, shrinking their balance sheets.

iirc negative nominal rates have been implemented in [i think] denmark or the netherlands, with mortgage holders being paid interest monthly, instead of paying interest. more generally, negative real and nominal rates in europe have not had much success in stimulating economic activity.

[thriftyandboringinohio]

Re: Learning to Love Negative Interest

jk you put your finger right on one of his important concepts -the velocity of money.

[Mega]

Re: Learning to Love Negative Interest

When this all hit in 2008 rates started to rise.....demand for REAL money was gaining...............however that would have crashed EVERYTHING!
"They" would have lost out, so we had a flood of "Phoney money" ....the central banks arranged that it could not gain velocity......& we had "Japan".

Back in the day here in England we had a guy who raced cars & bikes called Mike Hailwood............"When the flag drops, the bulsh1t stops" was his saying. WE are now VERY close to another collaspe. The Central banks balance sheets are full of Bad Debt.............they MUST hyper inflation....perhaps the IMF might then come in once inflation is ripping & SRD the system...........