JUST FOR FUN: Negative Interest Rates have unexpected consequences

August 22, 2019

It’s a bit scary. It looks like the US is headed toward zero interest rates, joining the rest of the world in that endeavor – or should we say, “large-scale experiment”.

 

What kind of world is it where you lend money to a government and you’re assured that you'll get back less than they borrowed? When interest rates cease to exist, bond markets cease to exist, except for the lowest quality borrowers. When basic financial principles are twisted and fundamental economic rules are bent, unintended consequences begin to proliferate and soon enough the whole system goes topsy-turvy.

 

 

 

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