It is sometimes easy to treat economic policy in the abstract and overlook its human cost. Or make claims involving the Greater Good. Such claims always merit close scrutiny. This Bloomberg piece by Narayana Kocherlakota, former president of the Federal Reserve Bank of Minneapolis touched that nerve.

Negative rates provide as many questions as answers. But some things are clear. "Almost" retirees looking at annuity rates are major losers. As are serial savers, poor fools. Thrift is not cool, Aesop.

We know these things but they do not (or no longer) shock majority swathes of our ranks. Those that it does understand Bernie, Nigel, Marine, Pablo, Heinz-Christian and Donald.

"So a debased currency will help?"
So we are to pay banks to guard our savings. And be paid to borrow - which, by the way, is already the case for some borrowers in Sweden and Denmark.

House prices love it. Small Scandinavian children, bewildered, are asking "You mean the bank pays us to spend their money, Daddy?" Yes, my child. Well, not "their" money. But that's another story ("Cinderella can't figure out how to debase the krone").

Banks, whatever one thinks of them, are not universally looking like they want to play along and "understand and fully support" Mr. Kocherlakota's message. Here's a report that Commerzbank is considering simply hoarding the cash - rather than lending it - to get away from ECB negative rates.

Does it imply cultural changes to spending behaviour? Clearly.  But mostly it exasperates and lends fodder to either edge of the political spectrum. Policy is pursued, essentially, through currency manipulation.

Unfortunately, the current ZIRP / NIRP novelty of this path presents insurmountable obstacles to widespread capital stock formation and investment. Encouraging that, once upon a time, was how serious policy sought to improve productivity and create growth.

Novelty means uncertainty. Calculating the net present value of capital investment projects becomes more of a gamble than it is worth in such a context. Projected depreciation, debt servicing, revenues and costs are all affected (unequally and potentially profoundly) depending on the inflation (or deflation) assumptions assumed.

Why gamble when central banks are experimenting? Defer or displace activity somewhere steadier. Concurrently, don't forget to take the money on offer, employ financial engineers and "invest" in your own shares instead:



But try not to forget who pays.

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