Negative interest rates, which central banks in several countries have implemented as a way to spur economic growth, is a radical move. In the last of a three-part series, ‘Negative Thinking,’ commentator Satyajit Das examines this policy and its risks.
Low rates are supposed to encourage debt-financed consumption and investment, feeding a virtuous cycle of expansion. They also increase wealth, encouraging spending. Low rates and abundant liquidity should drive inflation.
Instead, these policies since 2008 have brought the global economy a precarious stability at best, and have not created economic growth or inflation. Continue reading