Negative Yields and the End of Deposit Insurance
The Madness of Negative Bond Yields
As we have frequently discussed in these pages, time preference must always be positive on a society-wide basis – it is a praxeological law that future goods and/or satisfactions are valued at a discount to identicalpresent goods. We emphasize “identical” here because sometimes people are asserting that there are exceptions, such as in the famous example that men would prefer having ice in the summer over having it in the winter (thus, in wintertime, ice available in the future would be valued more highly). However, “summer ice” is not identical to “winter ice”, even though it has the same physical properties. The reason is that the satisfaction if provides is not the same.
As an aside, this also explains why the assertion that the prices of goods will tend to equalize across the entire market economy (excl. transportation and other extraneous costs) is not disproved by the fact that a cup of coffee in Hicksville can be bought at a lower price than e.g. an identical cup of coffee offered by the Sacher coffee house next to the opera house of Vienna. In spite of the physical properties of the two cups of coffee being the same, they are not the same good. In the latter case one pays a premium for the view of the opera house and the general atmosphere of the location.
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