In recent years, central banks worldwide have adopted negative interest rates. Desperate for economic growth, the central planners believed they could encourage consumers to stop saving and start spending, so the gross domestic product (GDP) can surge and politicians can appear to be lifesavers.
The talk of subzero rates has died down in recent months, but it may be revved up again, thanks to one international agency.
On Tuesday, Maxime Bernier, the Canadian Member of Parliament and head of the People’s Party of Canada (PPC), tweeted out an International Monetary Fund (IMF) paper that endorses subzero interest rates.
The crazy Keynesians at the IMF are discussing how to impose negative interest rates and force you to spend your money to “boost” the economy when the next recession hits.
This is the coming war on cash, on prudent savings and on sound money. https://t.co/2TIbyxTT6r
— Maxime Bernier (@MaximeBernier) April 23, 2019
The researchers argued that doing so will boost the economy, especially when the next recession hits.
In addition to spurring growth, the IMF authors ostensibly endorse digital currency to continue manipulating the marketplace.
“The proposal is for a central bank to divide the monetary base into two separate local currencies—cash and electronic money (e-money). E-money would be issued only electronically and would pay the policy rate of interest, and cash would have an exchange rate—the conversion rate—against e-money. This conversion rate is key to the proposal. When setting a negative interest rate on e-money, the central bank would let the conversion rate of cash in terms of e-money depreciate at the same rate as the negative interest rate on e-money. The value of cash would thereby fall in terms of e-money.
To illustrate, suppose your bank announced a negative 3 percent interest rate on your bank deposit of 100 dollars today. Suppose also that the central bank announced that cash-dollars would now become a separate currency that would depreciate against e-dollars by 3 percent per year. The conversion rate of cash-dollars into e-dollars would hence change from 1 to 0.97 over the year. After a year, there would be 97 e-dollars left in your bank account. If you instead took out 100 cash-dollars today and kept it safe at home for a year, exchanging it into e-money after that year would also yield 97 e-dollars.
At the same time, shops would start advertising prices in e-money and cash separately, just as shops in some small open economies already advertise prices both in domestic and in bordering foreign currencies. Cash would thereby be losing value both in terms of goods and in terms of e-money, and there would be no benefit to holding cash relative to bank deposits.
This dual local currency system would allow the central bank to implement as negative an interest rate as necessary for countering a recession, without triggering any large-scale substitutions into cash.”
So far, the euro area, Switzerland, Denmark, and Sweden – jurisdictions that have experimented with subzero rates – have hardly seen significant growth. It seems that not only does it not boost growth, negative rates to do not prevent consumers from saving.
The Danes, for instance, have actually increased their savings since the central bank slashed rates below zero (SEE: Central banks’ negative interest rate policies are already backfiring).
Bernier, who is known as Ron Paul of the North, is right: this is a war on cash, on sound money, and savings.
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