Should the Fed go for Negative Interest Rates?

Suggestions of negative interest rates are clever in the same sense that Swift suggesting eating Irish children is clever. Its GLARINGLY wrong, but you might learn something figuring out why. And there isn't just one reason why. There are plenty, so everybody can play.

Here's my reason: A negative interest rate is the fed giving away money. Now the fed rates are not available to everybody, so a negative interest rate is primarily the fed giving away money to banks.

Once you REALIZE it is a subisidy, then you realize the government is just giving money away to some people. You can then get over the stigma of the government giving money away to people since you are doing it anyway, and you can give up on the relatively ineffective plan of giving the money away inefficiently to rich people (banks and bankers), and proceed with a much more efficient giveaway.

The fed could just mail people money. Maybe $1000 each every man woman and child. The poorer amongst us would almost certainly quickly spend it. The richer amongst us wouldn't, but what the hey, when you are giving away money you can't expect perfect efficiency. The advantage here: people spending $1000 bucks they got free and clear is a lot less stupid than going into debt to spend $1000, when they already have too much debt, generally.

I would call this a pretty brain dead article, esp. for a Harvard Economist. Pay people to borrow money? Maybe if the negative interest rate is low enough, I can retire on the mortgage on my house. The article has other equally stupid ideas like declaring currency ending in a selected digit worthless, e.g. bills ending in 9 are worthless.

Negative interest actually exists in periods of high inflation. We all know how much fun that is.

Makes me want to turn in my Harvard economics degree for a refund.

No.

http://globaleconomicanalysis.blogspot.com/2009/04/time-for-...