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(Another Bonus!) Off The Cuff: Why Negative Rates Won’t Work

user profile picture Adam Taggart Aug 28, 2019
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In this week’s Off The Cuff podcast, Chris and John Rubino discuss:

  • Why Negative Rates Won’t Work
  • Why We Won’t Bounce Out Of The Next Recession
  • The Rich & Poor Alike Will Suffer In The Next Downturn
  • The Only Official ‘Plan’ B Is Panic At This Point

Recorded two weeks ago, we’ve only just now had the space to run this podcast. In it, John Rubino does a masterful job breaking down why negative rates are unnatural for a reason — they simply don’t do anything positive for the economy:

It won’t work if interest rates go to -2%. People will not borrow like crazy at that rate. And therefore, we won’t get the repairing expansion driven by new debt that we would have gotten at different levels of interest rates being cut two or three percentage points.

But the interesting and scary thing about this is that even if it did work, it might even be more disastrous than if it didn’t.

Because by “working” that means people would be incented to borrow huge amounts of new money. And taking on another doubling of the global level of debt, like we did in the last ten or so years, for instance, which is what it would take to pull us out of the next recession, means that the nominal amount of debt in the world would be absolutely gargantuan. And that debt, even at 0% or -1-2% would start to go bad just because there’s so much other debt out there.

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I have not even listened to the audio yet, but I have been wanting to post this link.
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