{"id":13270,"date":"2015-10-11T20:56:09","date_gmt":"2015-10-12T01:56:09","guid":{"rendered":"http:\/\/olduvai.ca\/?p=13270"},"modified":"2015-10-11T20:56:09","modified_gmt":"2015-10-12T01:56:09","slug":"the-mindless-stupidity-of-negative-interest-rates","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=13270","title":{"rendered":"The Mindless Stupidity of Negative Interest Rates"},"content":{"rendered":"<h3 class=\"entry-title\"><a href=\"http:\/\/wallstreetexaminer.com\/2015\/10\/the-mindless-stupidity-of-negative-interest-rates\/\" target=\"_blank\">The Mindless Stupidity of Negative Interest Rates<\/a><\/h3>\n<p>Here we are in the midst of The Great Stagnation Middle Class Elimination\u00a0and some central bankers and mainstream economists are promoting negative interest rates. One economist was quoted in a Marketwatch piece by Greg Robb as saying,<\/p>\n<p>\u201c\u2026pushing rates into negative territory works in many ways just like a regular decline in interest rates that we\u2019re all used to.\u201d<\/p>\n<p>OK. That\u2019s false. We know exactly what negative interest rates do since Europe has made a fine case study of it. They don\u2019t work just like a \u201cregular decline in interest rates.\u201d I mean not that a \u201cregular decline in interest rates,\u201d does what economists think it does, but that\u2019s another story. The issue here is how negative interest rates work.<\/p>\n<p>Negative interest rate proponents ignore the basic tenets of double entry accounting.<\/p>\n<p>Because\u00a0there are two sides to a bank balance sheet, negative interest rates\u00a0are the mirror image of positive rates. The move to negative rates imposes new costs on the banks, unlike low positive rates or ZIRP\u00a0which reduce bank costs.<\/p>\n<p>The greater the negative interest rate, the higher the cost imposed, which is the same as a central bank\u00a0<strong>raising<\/strong>\u00a0interest rates when they are positive. When the Fed lowers a positive interest rate, it lowers the bank\u2019s cost. But when\u00a0there are trillions in excess reserves held by the\u00a0banks as deposits at the Fed and the Fed lowers the interest rate to below zero, that becomes a cost to the banking system which it cannot avoid, except by using those cash assets\u00a0to pay down debt.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Mindless Stupidity of Negative Interest Rates Here we are in the midst of The Great Stagnation Middle Class Elimination\u00a0and some central bankers and mainstream economists are promoting negative interest rates. One economist was quoted in a Marketwatch piece by Greg Robb as saying, \u201c\u2026pushing rates into negative territory works in many ways just like [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[1154,6202,2137,1768,1389,2096,9785,1940,1939],"class_list":["post-13270","post","type-post","status-publish","format-standard","hentry","category-economics","tag-interest-rate-policy","tag-lee-adler","tag-middle-class","tag-negative-interest-rate-policy","tag-nirp","tag-stagnation","tag-wall-street-examiner","tag-zero-interest-rate-policy","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13270","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=13270"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13270\/revisions"}],"predecessor-version":[{"id":13271,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/13270\/revisions\/13271"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=13270"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=13270"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=13270"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}