Market Commentary

Negative Interest Rates Still Exist

For years European nations have been experimenting, on an emergency basis to jump start their economy, with negative interest rates, and the question needs to be asked has it worked? Today those countries that moved their bank policy to reflect negative rates are still stuck with them. They seem to not be able to return to normalcy.

This means their commercial banks must pay the central bank to hold their excess cash reserves. It’s the central banks wish to push money into the system rather than keeping on the commercial banks’ books. The theory is for people to save less and spend more.

It is not and has not worked so why keep doing it? The central banks can’t seem to fess up to the failure and return to normal interest rate practices, maybe because their economies are so weak. The socialist system they have throughout most of Europe can’t seem to produce a dynamic economy in good times and recover much from bad times. Something needs to change but not without a lot of pain.

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