Re: Negative rates
High Firebird.
Banks and Insurance firms would just accept it.
The EU (ECB) printed over €2 trillion. Fundamentally they spent that on bailing out Germany post 2009 financial crisis - where their massive big bets didn't pay off (so the rest of the EU in effect bailed them out, whilst the likes of Greece with tiny debts by comparison were refused such assistance by Germany!). Had those big bold bets (bad debt) paid off that would have been a different matter (pretty certain they'd have kept the benefits for themselves).
Printing money devalues all other notes in circulation so in turn everyone pays.
The primary factor is not relative nominal rates but real rates, after inflation. In a -2% deflationary world a -1% return from a investment/deposit is a real +1% benefit. Buying 30 year treasury bonds at a 0% (or lower) real rate seems crazy to some, but for those expecting a shift into even more negative yields, for instance a move from 0% to -1% - well that yields a significantly higher price being paid for the same bonds (+35% price increase). For those expecting a move in the opposite direction, short dated Bills/cash are the preferred choice, as even though they might lose -1%/year from holding, that might avoid a -35% capital loss whilst remaining relatively secure; Or cash stuffed under the mattress costs nothing, but is at greater risk of being stolen/destroyed. Cash is a just a zero duration (immediately redeemable) 0% nominal face coupon yield bond (bill).
Stocks are just more extreme forms of bonds, very long duration (on average), variable coupon (yield) and as such the price is more volatile.
Regards. Clive.
AI
