Negative on negative rates

This FAQ on negative rates is useful. Joseph Stiglitz has an article in ‘Project Syndicate’ on negative rates and their limitations. The article falls short. The real problem with negative rates is their unintended consequences on confidence, on borrowing to invest, on inflation expectations and on asset prices. Firms do not bring their hurdle rate down when rates go down. But, they go up when interest rates rise. That is why negative rates do not boost investment but something else.

I will add more after I had read Larry Fink’s annual letter to shareholders.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s