Negative interest rates have an unexpected result. There is a problem that hits financial analysts around the world. This problem exactly shows you why the negative interest rates are so bad. The Bloomberg terminal can’t handle bonds with negative interest rates. As Bloomberg terminals are the go-to for almost everyone, this provides with a real problem. So it is fair to say that no one expected negative interest rates to happen. Otherwise, the Bloomberg programmers would have taken it into consideration.
At the moment there is over 13 Trillion in corporate and government bonds with a negative rate. At the same time are negative interest rates coming to the United States. Yes, I know that central bankers say it is not the case. But since when are they performing there job?
Negative interest rates are really destructive for everyone with money. Next to this is capital not priced accordingly. When we look at negative interest rates we should not be surprised. It is just the next step in extraordinary efforts from central bankers to stimulate the economy.
One of the problems we need to address is the fact that there is more debt now than we had prior to the credit crisis from 1007/2008. So when things go wrong it will be much worse than it was back at those days.
But why should you invest your money in negative bonds? Does this make sense to you? So you put $ 1,000 in and you get $ 900 back. You have made a negative return of 10%. It only makes sense if you get even far less back if you store it somewhere else.
The benefit of positive interest rates is that it makes sense for you to put money aside. You get rewarded for the risk and the fact that you can’t access your money for a moment.
When we take a common-sense look on what interest is then we need to point out that it is the willingness of someone with money to delay consumption and facilitate some other economic objective. With negative interest rates, this is no longer the case. It is a subsidy for those who are in debt at the expense of those with savings.
As we know the wealth and stability of a nation are based upon national savings.
Negative interest rates are just the price we pay to central banks. It is the price we pay for the fact that society is broken down by central bankers. It is going to end society as we know it.