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Comment by devchix | Hacker News Reader

For people asking why is there even such a thing as negative interest rate (lend $100, get back $99), NPR Planet Money has a good explainer. TL;DR: There's a lot of cash in search of investment. While waiting for opportunity, you could stash it under the mattress. But that's not safe, you'd probably have to buy a safe, hire some guards. Also it's not very liquid. So you pay a bank to hold it for you, put it in their safe, use their transfer system, etc. Tah-dah: negative interest rate.

https://www.npr.org/2019/09/20/762748958/episode-940-interes...

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In another sense, doesn’t the existence of long-term negative interest rates suggest that some people/institutions have more money than they can productively use? If so, this would seem to be a pretty clear argument for wealth re-distribution in the name of poverty alleviation and reducing economic inefficiency.

In a sense, that is precisely what low/negative rates do. If cash-holders' future purchasing power is diminished, it effectively redistributes future purchasing power to those earning money and making things now and in the future.

In theory. In reality low income people do not have access to loans and therefore no access to low interest rates.

> If so, this would seem to be a pretty clear argument for wealth re-distribution

Negative interest rates are wealth redistribution. Keeping money in account would cost more money, so instead, you are forced to lend it out to people who need it (presumably poorer) for less money in the future. Thus the rich who have lots of cash lose money and the poor, who need cash, can use their cash, start businesses, and have to do less work to make their business profitable, after paying back the loan

> you are forced to lend it out to people who need it (presumably poorer) for less money in the future

This will never happen.

Um what? Negatvie interest rates already exist in some european countries and exactly this is happening.

It will never be lent out to poor people.

It will be lent out to people who can pay. If poor people can't then they won't, but I mean, it will be lent out to people less rich than the ones lending. That may mean middle class too. Still transfers from upper to middle are indeed wealth redistribution.

> Negative interest rates are wealth redistribution.

So are positive interest rates, just in the opposite direction.

Sure, but the commenter was asking if negative interest rates indicated that we need wealth redistribution from rich to poor. Also, in the recent past, we have had a negative 'real' interest rate. You'd be hard-pressed to find funds paying more than inflation on your cash.

> In another sense, doesn’t the existence of long-term negative interest rates suggest that some people/institutions have more money than they can productively use?

Yes. This is why venture capital is a thing, why it's so easy to get funding for a variety of businesses, and why hedge funds that have very modest returns are popular.

> If so, this would seem to be a pretty clear argument for wealth re-distribution in the name of poverty alleviation and reducing economic inefficiency.

Inflation is wealth redistribution. By reducing the real value of money, it benefits those who are engaged in economic activity and makes sitting on money a losing proposition.

Actual wealth redistribution is a bad idea because it reduces incentives to invest or engage in economic activity and encourages capital flight.

What you wrote might be true for warehousing physical gold but not for (mostly digital) fiat money because the cost of digitally storing $1 and $10,000 is the same.

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