RE: Steemit - The Unlikely Online Savings Account

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Steemit - The Unlikely Online Savings Account

in money •  8 years ago  (edited)

On the motive for negative interest rates. Your perspective is supported in many publications, I however am inclined to believe it is a simple issue of liquidity. When a loan is formed double entry book keeping creates a credit and a debit; the interest owed is not created. Canada for example has no asset ratio requirement to the credits and/or debits. Just poof a credit and debit pops into existence. That the interest is not created leaves a systemic stress that is reduced by growth in the debt economy - increases in the velocity of money, reduction in interest rates and/or growth rate of debt.

For visualization, imagine the liquidity (money availability) squeeze if debts are extinguished by repayment or default faster than loan creation and interest earned is not spent into the money pool. On a macro scale without getting into which entity benefits, negative interest rates alleviate the liquidity issue. In loose support of this liquidity argument are a couple of links that shows negative yielding debt is past $13 Trillion which about 15% of global GDP, http://goo.gl/I359Sv
https://goo.gl/FH2Vi5

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