The Effect of Negative Interest Rates on the Economy

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Economic policymakers are like children in that they are held only partially accountable for their mistakes and misdeeds. And just as children learn to selectively deny responsibility to get away with naughty behaviour, so policymakers learn that they, too, can conveniently disown the ‘unintended consequences’ of their actions. It is thus refreshing to see that a recent paper by the NY Fed explores some possible unintended consequences of negative interest rates—an extreme, unconventional monetary policy action under discussion by central bankers. Yes, central bankers apparently will stop at nothing to artificially stimulate what they call ‘growth’, which in recent years has resulted in money and debt growth rather...