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Comments on: On penalty cash rates http://www.tvhe.co.nz/2009/07/13/on-penalty-cash-rates/ The Visible Hand in Economics Thu, 16 Jul 2009 16:09:43 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: Cargo Trailers http://www.tvhe.co.nz/2009/07/13/on-penalty-cash-rates/#comment-20399 Thu, 16 Jul 2009 16:09:43 +0000 http://www.tvhe.co.nz/?p=4024#comment-20399 No they can’t. Think about this, if there was a bank offering a loan with a negative nominal rate of interest then the amount I pay back in the future would be less than the loan amount.

]]> By: Matt Nolan http://www.tvhe.co.nz/2009/07/13/on-penalty-cash-rates/#comment-20353 Tue, 14 Jul 2009 21:21:39 +0000 http://www.tvhe.co.nz/?p=4024#comment-20353 @Mario Sanchez

Hi Mario,

Negative nominal interest rates are an insane concept – I don’t know if it would really work at all 😛

Ultimately, the goal of the penalty interest rate isn’t to make nominal interest rates negative – it is too change the opportunity cost associated with the banks decision to lend/buy bonds. By making “hording” less attractive a penalty rate of interest (and positive interest on borrowing from a central bank) can increase the money supply by either getting banks to make riskier loans or too buy up bonds.

]]> By: James in New York http://www.tvhe.co.nz/2009/07/13/on-penalty-cash-rates/#comment-20352 Tue, 14 Jul 2009 20:53:24 +0000 http://www.tvhe.co.nz/?p=4024#comment-20352 Why is New Zealand in a depression state? Are we not coming out of a recession.

]]> By: Mario Sanchez http://www.tvhe.co.nz/2009/07/13/on-penalty-cash-rates/#comment-20348 Tue, 14 Jul 2009 13:04:38 +0000 http://www.tvhe.co.nz/?p=4024#comment-20348 I am still trying to determine how negative nominal rates are not deflationary (at least from the perspective of narrow money supply, if not from the perspective of the multiplier & velocity). Every actual example of negative nominal interest policy described seems to require money destruction (expiration of currency based on serial number or lack of timely stamps, paying cash back to the central bank) or fiscal contraction (paying taxes for various failures to act as desired).

]]> By: Interest Rates » TVHE » On penalty cash rates http://www.tvhe.co.nz/2009/07/13/on-penalty-cash-rates/#comment-20333 Mon, 13 Jul 2009 06:27:52 +0000 http://www.tvhe.co.nz/?p=4024#comment-20333 […] Read the rest of this great post here […]

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