Financial Advisor Tim Hayes discusses the folly of negative interest rates in his April investment article in SOCO and New England Monthly magazines.
Hayes highlights 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.”
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 tragedy [the financial crisis], the second time as farce [negative interest rates].”
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.”
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.