{"id":1978,"date":"2014-11-23T19:15:03","date_gmt":"2014-11-24T00:15:03","guid":{"rendered":"http:\/\/olduvai.ca\/?p=1978"},"modified":"2014-11-23T19:15:03","modified_gmt":"2014-11-24T00:15:03","slug":"the-consequences-of-imposing-negative-interest-rates","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=1978","title":{"rendered":"The Consequences of Imposing Negative Interest Rates |"},"content":{"rendered":"<p><a href=\"http:\/\/www.acting-man.com\/?p=34365\">The Consequences of Imposing Negative Interest Rates |<\/a>.<\/p>\n<h3 style=\"font-family: Verdana, Geneva, Arial, Helvetica, sans-serif; font-size: 14px; color: #9c8d4f; padding: 0px; margin: 19px 0px 19px 0px;\"><strong>Negative Interest Rates and Capital Consumption<\/strong><\/h3>\n<p style=\"padding: 0px; margin: 12px 0px 12px 0px;\">Ever since the ECB has introduced negative interest rates on its deposit facility, people have been waiting for commercial banks to react. After all, they are effectively losing money as a result of this bizarre directive, on excess reserves the accumulation of which they can do very little about.<\/p>\n<p style=\"padding: 0px; margin: 12px 0px 12px 0px;\">At first, only a small regional bank,\u00a0<a style=\"font-family: Verdana, Geneva, Arial, Helvetica, sans-serif; text-decoration: none; color: #9c7f16; padding: 0px; margin: 0px;\" href=\"http:\/\/www.sovereignman.com\/offshore-banking-2\/it-begins-german-bank-charging-negative-interest-to-its-customers-15524\/\">Deutsche Skatbank, imposed a penalty rate on large depositors<\/a>\u00a0\u2013 slightly in excess of the 20 basis points banks must currently pay for ECB deposits. It turns out this was a Trojan horse. Other banks were presumably watching to see if depositors would flee Skatbank, and when that didn\u2019t happen,\u00a0<a style=\"font-family: Verdana, Geneva, Arial, Helvetica, sans-serif; text-decoration: none; color: #9c7f16; padding: 0px; margin: 0px;\" href=\"http:\/\/www.zerohedge.com\/news\/2014-11-20\/wrath-draghi-bailed-out-german-megabank-imposes-%E2%80%9Cnegative-interest-rates%E2%80%9D\">Commerzbank decided to go down the same road<\/a>.<\/p>\n<p style=\"padding: 0px; margin: 12px 0px 12px 0px;\">However, there is an obvious flaw in taking such measures \u2013 at least is seems obvious to us. The Keynesian overlords at the central bank who came up with this idea have failed to consider a warning Ludwig von Mises once uttered about the attempt to abolish interest by decree.<\/p>\n<p style=\"padding: 0px; margin: 12px 0px 12px 0px;\">Obviously, the natural interest rate can\u00a0<em>never<\/em>\u00a0become negative, as time preferences cannot possibly become negative:\u00a0<em>ceteris paribus<\/em>, consumption in the present will always be preferred to consumption in the future. Mises notes that if the\u00a0<em>natural<\/em>\u00a0interest rate were to decline to zero, all consumption would stop \u2013 we would die of hunger while investing all of our resources in capital goods, i.e., while directing all of our efforts and funds toward production for future consumption. This is obviously a situation that would make no sense whatsoever \u2013\u00a0<em>it is simply not possible for this to happen in the real world of human action<\/em>.<\/p>\n<p style=\"padding: 0px; margin: 12px 0px 12px 0px;\">&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Consequences of Imposing Negative Interest Rates |. Negative Interest Rates and Capital Consumption Ever since the ECB has introduced negative interest rates on its deposit facility, people have been waiting for commercial banks to react. After all, they are effectively losing money as a result of this bizarre directive, on excess reserves the accumulation [&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":[124,1390,558,1389],"class_list":["post-1978","post","type-post","status-publish","format-standard","hentry","category-economics","tag-central-banks","tag-monetary-policies","tag-negative-interest-rates","tag-nirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/1978","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=1978"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/1978\/revisions"}],"predecessor-version":[{"id":1979,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/1978\/revisions\/1979"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1978"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1978"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1978"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}