(PRWEB) MARCH 30, 2016
Financial Advisor Tim Hayes highlights in his new article in SOCO Magazine how “Negative interest rates are another misguided attempt by the Central Banks of these countries to increase bank lending. What they are hoping for is, if they charge banks for depositing money, banks will decide to make more loans to earn more interest and not leave their money at the Central Bank and watch it deplete from deposit fees.”
I’m Positive Negative Interest Rates Won’t Work
Another Misguided Economist
The article discusses how “A Central Bank penalizing banks for having too many reserves, when it was the Central Bank’s bond purchases (quantitative easing) that had credited the banks with the reserves in the first place, brings to mind a quote from a famous but misguided economist, Karl Marx, that history repeats itself “the first time as a tragedy [the financial crisis], the second time as farce [negative interest rates].”
The European Central Bank, Sweden, Denmark, Switzerland, and Japan have all implemented some form of ‘negative interest.’ None of these countries or regions, however, has seen commercial banks charging their customers for depositing money
Wake-up Call
Hayes hopes that the folly of negative interest rates will hopefully, be the wake-up call needed to move the economy from one over-reliant on finance and banking for debt-fueled growth to an economy “built on the blocking and tackling of economic growth: entrepreneurship, education, manufacturing, investment, and infrastructure.”
The Fed Is Living Dangerously With All These Excess Reserves
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These are the opinions of Tim Hayes and not necessarily those of Cambridge Investment Research. They are for informational purposes only, and should not be construed or acted upon as individualized investment advice.