I think you have the causality backwards. Negative interest rates are due to central bank policy. It seems in Denmark they are trying to keep the Krone pegged to the Euro. That is, preventing it from rising.
That's kind of the thought, yes. Negative rates should not be sustainable for any significant period of time and most interest rate models are built on that assumption.
You mean artificially high interest rates. If interest rates fell negative then the money supply would shrink and there would be less unneeded money to speculatively buy houses with. Alas, we live in a world in which negative interest rates were banned and therefore the money supply and economy must constantly grow to raise interest rates above 0%.
I find it frustrating that people ignore basic market principles when it is inconvenient for them. Like, people get richer (everyone is saving incredible amounts of money), the population is no longer growing, there are fewer and fewer investment opportunities and yet for some reason, people think they have a god given right to high interest rates anyway, even when those are impossible to pay without inflation.
The prevailing consensus is that interest rates and inflation are inversely correlated, so "negative interest rates worked out fine" isn't a rebuttal to that.
I agree. I look forward to seeing how this is reported in the Economist which for several years insisted as a matter of fact that negative interest rates were impossible (I suspect this represented the view of one particularly dogmatic editor).
And even then, you would still be able to buy stocks, expensive jewelry, gold, houses and so on.
Yes, that's the idea! The point of negative interest rates is to force people to buy things, thus jacking economic growth like caffeine to a coffee addict. So this is hardly any solution.
i want to point out just one thing - the problem is not in banks per se, the problem is merely in the expectation that interest rates have to be positive ;)
Both are evidence of competing regulatory systems, which is why I consider it fascinating.
reply