Negative Rates Are Rewriting the Rules of Modern Finance

Re:Negative Rates Are Rewriting the Rules of Modern Finance by samsonradu on Monday September 30, 2019 @04:13PM (#21119269)

Aren't negative interest rates deflationary by design? When an entity already in debt borrows money at negative interest rates the debt will keep shrinking, thus destroying monetary supply.

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Re:Negative Rates Are Rewriting the Rules of Modern Finance by Litmus2336 on Monday September 30, 2019 @05:07PM (#21119670)

The negative interest rates discourages holding money and encourages spending (and investment), which drives inflation. I do not believe negative interest rates destroy money, but I am not an expert. I cannot find any literature to prove or dispute that.

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Re:Negative Rates Are Rewriting the Rules of Modern Finance by samsonradu on Tuesday October 01, 2019 @05:27AM (#21123546)

You're right, it does encourage spending and investment. However a part of the money does eventually go into negative interest rate assets (due to regulations etc.) and I believe that shrinks the money supply.

Not an expert either.

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Re:Negative Rates Are Rewriting the Rules of Modern Finance by imtringued on Monday September 30, 2019 @05:35PM (#21119884)

You get $1000. You pay back $950. The monetary supply increased by $50.

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Re:Negative Rates Are Rewriting the Rules of Modern Finance by samsonradu on Tuesday October 01, 2019 @05:23AM (#21123525)

Uhm... no.

I borrow $1000 and promise to pay back $1050. Lender now has a $1050 IOU which he will likely put into circulation (borrow against it, trade it etc.). Monetary supply just increased by $50.

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