IMF Calls For Negative Interest Rates

GOVERNMENT SLAVES – The concept of negative interest rates — in which lenders have to pay to lend money or to invest — has gotten a big boost from the International Monetary Fund. The IMF stated this week that world central banks should move to negative interest rates because the extra monetary stimulus would ease lending conditions. Or so they claim.

José Viñals, the chief financial counselor and director of monetary and capital markets for the IMF, argued for negative interest rates in a research paper, stating, “Although the experience with negative interest rates is limited, we tentatively conclude that overall, they help deliver additional monetary stimulus and easier financial conditions, which support demand and price stability.” Stripped from its statist jargon, what Viñals is saying is that world financial elites want to inflate currencies to cause even more borrowing and lending, partly to keep prices from falling.

During the Great Depression, both Presidents Herbert Hoover and Franklin Roosevelt bought into the thesis that high prices and high wages lead to prosperity. Both championed fiscal and monetary policies that led to a deepening and a prolonging of the Great Depression.

Keeping interest rates artificially low is one way to generate inflation. Another method is what the U.S. Federal Reserve and the Bank of England have adopted since the 2007-09 global financial crisis: so-called quantitative easing — i.e., buying assets to boost the supply of money as an economic stimulus. Since quantitative easing has clearly not worked, and the economy remains stagnant, some supposed experts have now begun to champion the radical proposal of negative interest rates.

Last June, the European Central Bank adopted negative interest rates for the purpose of preventing banks from depositing money with it and instead having them lend to eurozone businesses.

About one-fourth of the world economy by output is presently experiencing official rates that are less than zero.

Some critics of negative interest rates have offered the Keynesian model — increased government spending — as an alternative solution to anemic world economic activity.

The reality is that the American economy has experienced negative real interest rates now for about five years. Real interest rates are interest rates minus the “inflation” rate (here defined not as the increase in the supply of money and credit, but rather by its effect of higher prices). In other words, those putting money into interest-bearing savings accounts — such as CDs, money market accounts, and checking accounts — are experiencing a decline in what their savings will actually buy.

Now, as a way to deal with continued economic stagnation, some financial elites such as those who run the world’s central banks and the IMF are even desirous of seeing negative nominal rates, in which a person would actually have to pay the financial institution to put money into the bank!

It is remarkable that any educated person could make such proposals in a serious manner. Not only will such policies fail to stimulate the economy, but negative interest rates are just a method of income redistribution from savers to borrowers. These policies are particularly brutal to retired persons, who are already receiving such low interest rates that, in real terms, they are actually losing money by putting it into the bank. But such manipulation of the interest rates by the U.S. Federal Reserve System and other leading central banks of the world, keeping interest rates artificially low, is popular with those who borrow money, such as home buyers.

It is basically a government policy to punish savers, and negative nominal interest rates would only exacerbate this punishment. CONTINUE READING