{"id":15149,"date":"2015-12-10T07:05:59","date_gmt":"2015-12-10T12:05:59","guid":{"rendered":"http:\/\/olduvai.ca\/?p=15149"},"modified":"2015-12-10T07:05:59","modified_gmt":"2015-12-10T12:05:59","slug":"stephen-poloz-considers-negative-interest-rates","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=15149","title":{"rendered":"Stephen Poloz Considers Negative Interest Rates"},"content":{"rendered":"

Stephen Poloz Considers Negative Interest Rates<\/a><\/h3>\n
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\"boc_chief\"<\/a>Price controls on interest rates are the latest fad.<\/p>\n

A 100-year-trend that\u2019s picked up steam in the last 15 years, where central banks have been confident enough to blatantly ignore the supply and demand for loans and keep rates as low as possible.<\/p>\n

How low can you go?<\/p>\n

For Bank of Canada Governor Stephen Poloz, it\u2019s below zero.<\/p>\n

In a four-page pamphlet,<\/a>\u00a0the BoC makes its case for negative interest rates because, \u201cthe nominal return for holding currency is negative, due to storage, transportation, insurance and other costs associated with securing and storing bank notes, particularly in large quantities. These costs make it possible for nominal interest rates to fall somewhat below zero.\u201d<\/p>\n

Poloz makes it sound inevitable.<\/p>\n

In his worldview, interest rates are like playing with the shower faucet. Sometimes too much water is coming out, sometimes it\u2019s not enough. Sometimes the water is too hot, sometimes it\u2019s too cold.<\/p>\n

It is the Bank of Canada\u2019s job, so goes the thinking, to regulate this flow of water as to \u201cpromote the economic and financial well-being of Canada,\u201d or even more hilarious, \u201cto preserve the value of money by keeping inflation low and stable.\u201d<\/p>\n

That\u2019s not what interest rates are for.<\/p>\n

Interest rates coordinate production and consumption decisions over time. Some sectors are more sensitive to rates than others.<\/p>\n

If interest rates rise, people won\u2019t spend less in general. They will spend less on particular things, most likely real estate.<\/p>\n

Low oil prices and a \u201cweak\u201d loonie (73 cents to the American dollar at the time of this writing) are not the fault of some mysterious force in capitalism.<\/p>\n

It is the belief of central banks and governments that cutting rates is a fine way to get oneself out of an economic recession.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Stephen Poloz Considers Negative Interest Rates Price controls on interest rates are the latest fad. A 100-year-trend that\u2019s picked up steam in the last 15 years, where central banks have been confident enough to blatantly ignore the supply and demand for loans and keep rates as low as possible. How low can you go? For […]<\/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":[942,103,431,7617,558,1389,943],"class_list":["post-15149","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-canada","tag-canada","tag-interest-rates","tag-mises-institute","tag-negative-interest-rates","tag-nirp","tag-stephen-poloz"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15149","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=15149"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15149\/revisions"}],"predecessor-version":[{"id":15150,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/15149\/revisions\/15150"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15149"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15149"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15149"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}