As central banks all over the world gradually dive into the world of subzero interest rates, former Federal Reserve Chair Alan Greenspan warns that it will eventually “warp” savings and investment.
Speaking in an interview with Bloomberg News, the former head of the United States central bank said that he wouldn’t call the policy of negative interest rates dangerous, but “it is clearly not productive.”
“The big argument about excessively low interest rates for a very long period of time is that it warps the investment pattern on real investments,” Greenspan said.
The European Central Bank (ECB) and the central banks of Japan, Sweden, Denmark and Switzerland have all embraced the concept of keeping some of its important interest rates into negative territory in order to spur economic growth.
Janet Yellen said the Fed has kept subzero rates on the table in the event of an economic disaster.
Greenspan added that he’s not too optimistic about U.S. and global economic growth because business investment has slowed down.
“We’re in trouble basically because productivity is dead in the water,” he said. “Real capital investment is way below average. Why? Because business people are very uncertain about the future.”
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