Know The Difference Minute

Japan just ended a nearly two-decade term of negative rates. Are negative rates the carrot or the stick? 

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End of an era

Welcome to the Know the Difference Minute for Tuesday, March 19th.
Remember negative rates? In the US we got close to zero, but not negative. Japan and many parts of Europe had negative rates for a long time.
Imagine having to pay the bank for the privilege of depositing your money? It’s not so far-fetched as some people do with bank fees. It gets really strange when the bank pays you to borrow money.
In 2019 a Danish bank did that.
Lower rates are supposed to discourage savings, encourage borrowing, and stimulate growth and inflation. Negative rates are using a stick instead of a carrot to get people to spend.
The Bank of Japan was the last holdout. They had negative rates for 17 years. With inflation rising, they said it’s time to put the days of negative rates behind them.
I’m Dave Spano from Annex Wealth Management. That is your Know the Difference Minute.