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Negative Interest Rates and the Eradication of Money's Time Value

The notion of negative interest rates — that being an interest rate below zero — is hard to align with any traditional financial model. We can speak about the concept, but experiencing its actual existence feels like entering a twilight zone of interest rates, thinks Shannon Berkley.

Money handlers actually have no right (no one has the right) to extend “negative interest rates” to anyone. While pundits more easily follow the descent of interest rates to near-negative territory and beyond, it is territory that no citizen can afford to be in. Such a trajectory of rates might well be a legitimate part of the typical financial model, but it is as surely the death knell for private wealth, too.

It may not seem so dramatic, and the notion that it is “just this moment in time, just a moment” is also far too easily assumed by most citizens. Businesses might understand it better and, for that matter, play a more sophisticated game with the current situation, but a simple example demonstrates the problem with that kind of thinking.

By means of example, let’s imagine that a business has a wad of money at the start of a year. With negative interest rates, that wad slowly reduces in value, and the time value of money (utility) also comes into play. It is assumed that the business is productive and growing in volume or reach, and by definition, which business isn’t? Yet the same business six months into the year, having had the value of that wad of cash shaved away, has done less, produced less, and earned less than it could have with positive interest rates in play. 

It might have missed the opportunity to add a staff member or two, or to terraform a planet in space — a project worth zillions of dollars. Investors understand that opportunity costs are real and sometimes even dramatic, hence the average investor’s preference for the money today in order to put it to work to earn some more. 

The loss inherent in opportunity costs is often speculative, but on a rinse-and-repeat cycle of negative interest rates, that business will eventually cease to exist, at least without working a lot faster and harder with less capital available. The “time value” of money dictates that non-eroding cash-in-hand today is worth more than the same amount even just a little down the line. And the opposite holds true as well — value-eroding cash today is worth less down the line than it was yesterday. Getting devalued money later on also costs unfathomable human activity, commercial dynamism, and overall wealth and wellbeing for all involved.

So what if a business suffers? For one, that business is one of thousands facing the same fate, employing millions of people who live with millions of families in millions of homes. As a result, almost imperceptibly, everything and everyone slowly goes downhill. It is a huge loss, but one ephemeral and thus never earning more than gripes and belt-tightening. What it really is, is the slow erosion of individual wealth, the death of individual surety, along the equally outrageous lines that central banking elites control the value of what one can earn in a human life — and thus define the quality of a person’s very journey in life.


Extending negative interest rates is taking away people’s money. It’s theft. There are a million different justifications on the lips of economists, politicians and top money handlers, but the personal implications are simple enough to understand. In an International Monetary Fund (IMF) paper on negative interest rates, the fund stated: “This paper demonstrates that a subset of these tools [rates] can have a big effect in enabling deep negative rates with administratively small actions on the part of the central bank.”

What the IMF is saying out loud is that banks can strip a person of the value of the currency they call wealth, with only minor tweaks to the system. The personal implications are that money is being stolen; nibbled at by negative interest rates, all electronically managed in the digital ether. While despots of old had to cut gold coins with copper to slowly bluff the citizenry, the digitisation of cash makes it so much easier today. 

As for that cash, employing negative interest rates would likely mean the slow and complete elimination of cash, forcing everyone to migrate to a wholly digital platform, making the future brighter than ever for those who want to sack the world’s citizens. When cash is plentiful, enforcing negative rates becomes impossible. Guaranteed, the push towards digitised fiat currency will continue. 

The IMF’s paper: Enabling Deep Negative Rates to Fight Recessions: A Guide by Ruchir Agarwal and Miles S. Kimball (April 2019) also states that ‘’the zero lower bound is not a law of nature; it is a policy choice.’’ It is surely only that the average citizen doesn’t understand the implications of others making choices about their financial status that allows this kind of chicanery to pass without revolt. As an economic tool, negative interest rates are possibly the biggest attack on private wealth in the history of humankind.

Making the shift from a paper standard to an electronic, digital monetary standard will allow governments to tax ad infinitum. A despot’s dream — endless control over everyone’s money. Linking all wealth and title to a digital system would also mean the complete eradication of freedom, privacy, personal autonomy and simply the right to a libertarian existence. When viewed in this light, negative interest rates applied to a digitised money standard, reveal themselves to be what they really are: masters and breakers of the populace.


The fintech fraternity of investment bankers all the way up to central and global banks is a jargonised, technical and challenging realm for many, possibly most of the world’s citizens. It is thus easy to marginalise the complainers and defiers who would rally against the notion of negative interest rates. There has always been an elitism that precluded “common” participation from the realm. It is less easy to dismiss the loonies, however, when someone like Oswald Grubel speaks out against the notion of negative rates, dubbing the concept ridiculous.

A former Credit Suisse CEO, Grubel has openly stated that “negative interest rates are crazy!” While Grubel’s remarks referred to his concern for the financial industry at large, every citizen of earth should be equally and justifiably alarmed. UBS Group AG’s CEO Sergio Ermotti, has also stated: “The ECB’s imposition of negative interest rates has created an absurd situation in which banks don’t want to hold deposits.” He and many other noteworthy commentators have also pointed to the implications for savings rates, social programs and society as a whole.

The European Central Bank (ECB) itself has said: “While removing the effective lower bound by abolishing cash can be envisaged, such a step should be the outcome of changing technologies and social perceptions, not of policy prescriptions” — a little rich coming from an institution pivotal to making this lunacy come about, and sounding more like mock concern than any real hesitance. We told you — we’re the good guys — we’re just following social perceptions — we didn’t make that policy.


There is mounting evidence that the application of negative interest rates is not working to boost any economy so far. It has been noted that no financial crisis — and, wow, have there been some in recent history! — has ever precipitated the implementation of negative interest rates. There are many levels to the debate — it is good for banks or bad for them; it will stimulate the economy or destroy it — but the one debate unlikely ever to happen would feature the world’s working adults gather to consider the implications head-on, from their respective points of view.

It is worth noting that the IMF’s recently released paper is more about how to present a “negative interest rate program” to the public. The pending scenario going forward is that banks are going to charge depositing clients for holding their funds. Or gambling with their money, basically, to see where they can earn dividends from it while clients pay. When one deposits money with a brokerage, one expects an improved return. How is it even possible that we will all soon accept a complete reversal of roles, where we pay banks to make money off our money?

Supranational bureaucracies are engineering a more beaten, more accepting, docile, and poorer citizen. The cost to everyone’s quality of life, human endeavour at large and the public trust will be carefully managed to avoid disruptive upset. Negative interest rates are an insult to private wealth, yet ever so slowly, such manipulation will become the norm, it appears, in the 21st century.   EG  

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