Be Careful What You Wish For

While listening to a roundtable discussion on negative interest rates and their consequences for real economic growth, I was staggered by the actual statistics in countries employing such tactics. Japan, which has seen negative interest rates off and on since the mid 80’s has seen its banking index fall 85% during this time period. Europe, since employing negative rates post financial crisis, has seen its banking index fall 90% over the ensuing time period. So, when you hear talk of negative rates coming to these shores, be aware that these rates place the entire banking system at risk. Someone needs to remind The Donald that negative rates of interest are not a prize, in fact quite the opposite as they encourage confiscatory practices by Banks which effectively breaks down the entire credit mechanism.

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