Negative interest rates put the global economy on a razor’s edge

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We are slipping into an economic Twilight Zone. Across the globe, in different countries, the poles are shifting along with banking math. Negative rates of interest are creeping over the planet.

Negative rates will encourage debtors while robbing what is left from savers at an accelerated rate. It is foolishness. It is unwise. Negative rates will extend the malaise (malaise is a nice way of putting it) that the world seems unable to shake even 8 years on from 2008.

(From Market Watch)

Several of the world’s central banks have crossed the Rubicon, commencing a high-risk experiment with negative interest rates. The intent is clear: reduce debt by confiscation and transfer wealth from savers to borrowers. This is ultimately an admission of defeat, as traditional means of bringing excessive debt under control have failed…

…Most economies with negative rates are caught in a credit trap. Credit demand is weak and credit supply is constrained. Policy measures such as negative rate and additional QE are increasingly ineffective…

…In effect, negative rates delay essential restructuring to remove the detritus of previous crises. It restricts the supply of credit to the wider economy, affecting economic activity. Misallocation of capital deepens the malaise, and an ultimate resolution to this global problem becomes even more costly and difficult.

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