You may have heard of Negative Interest Rates. The Banking sectors of Japan and some European countries have been subject to these rates for years. With a quarter point rate hike announced by the Federal Reserve is it no longer a thing the those Banking in the United States of America should expect to effect them? Despite what you may consider them negative to growth or a positive necessity, did by definition they can not exist?
Patrick Barron, discuses with Jeff Deist in this episode of Mises Weekends.
Patrick Barron: Negative Interest Rates Demystified
from misesmedia :
We’ve all heard about negative interest rates, but we may not really understand how and why they arises in recent years. Here to explain is our returning guest Dr. Patrick Barron, a longtime professor in the graduate school of banking at the University of Wisconsin.
How and why would interest rates ever be negative, when everyone prefers current consumption to future consumption? Can the “natural” or market rate of interest ever be negative? What going on in Europe that would make negative-rate government and corporate bonds attractive to investors? Will the ECB be forced to raise rates back into positive territory if Janet Yellen continues to raise the Fed Funds Rate here in the US? And will Congress resist steady rate hikes that could radically spike its annual budget outlay for debt service?
Excellent video. Mses Weekends is something i’ll regularly share in the I See Good Things series but early into this video I heard the following and thought it needed its own independent post.
“What is the thing that is being called a negative interest rate and like a lot of things that we hear from the mainstream press and out of the Keynesians mouth it’s a [sic] I just call it a misuse of language it is not an interest rate but I think they do that for the same reason that they call that we now call Statists policies, Liberal policies is because they want to take one of liberalism favorite term and turn around and one of the favorite terms of that [sic] real economics is the interest rate.
We look at an interest rate as something that is vastly important to the economy. The interest rate has not to be manipulated, but by calling something a negative interest rate, you know it kind of gives the aura that ‘oh look it’s really an interest rate, you know, it just happens to be negative’ and this really isn’t the case”