Negative Interest Rates Will Lead to Increased Interest Rates for Existing Borrowers - Economist Prof. Steve Keen
"The Stupidest Economic Policy Dreamt up in the Past 100 Years"
In my earlier criticism of New Zealand's impending negative interest rate policy (NIRP) I speculated that rates for existing borrowers wouldn't change, but I hadn't looked at the problem through the lens of double-entry book-keeping. Fortunately economist Prof. Steve Keen has. He says what will happen, in fact has happened, is interest rates for existing borrowers will increase. And he was saying this while the world economy was supposedly in good shape.
In this 2016 interview with Macro Voices (download the MP3 file [33.15 MB] here) Keen described negative interest rates as
the stupidest economic policy dreamt up in the past 100 years
The whole interview (1hr 12min) is worth a listen if for nothing else than Keen's biting criticism of the neoclassical economists who rule our financial system and economy, but his discussion on negative interest rates starts at 47:33.
“ ... they think that by putting negative rates on the reserve-deposits that private banks have at the central banks ... that will then lead to the private banks putting negative rates on their deposit rates ... which will then stimulate you and me to spend more money which will cause the economy to start increasing in size ... ”
“... [in double-entry bookkeeping terms] if central banks impose negative rates on the ... excess reserves [an asset] that banks have that means that particular asset is now a negative asset [a liability] for private banks ... they [the private banks] know if they try put a negative yield ... their depositors will [take their money out] ... so they’re not going to give negative rates to depositors."
What they’ll do instead is increase the rate they charge to their current borrowers
"... banks are putting up the rates ... making the rates you and I are paying higher in response to the negative rates being imposed by the central bank ... we’ve already seen this in Switzerland ... so it just shows how little the central banks actually know about the monetary system they’re supposed to manage ...”
Happy days ...
See also:
From www.interest.co.nz (12 April 2020)
Steve Keen talks about New Zealand debt levels
New Zealand's Alternatives to Negative Interest Rate Policy (22 August 2020)
New Zealand Reserve Bank Signals Impending Negative Interest Rates (15 August 2020)
The Biggest Financial Story Since the Great Depression: How's NZ's Media Covering It? (18 August 2020)
Negative Interest Rate Policy and the Federal Debt - AIER - 20 Sept. 2019
How Debt Zombies Like China Will Cause A Credit Crisis (w/ Steve Keen) | Real Vision Classics (24 Aug. 2019)
What's The Impact Of Negative Interests Rates On the Average Person? (w/Guest: Prof. Steve Keen) (15 Sep 2016)
Image from: https://says.heise.com.au/negative-interest-rates-for-new-zealand/