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The Politics of Negative Interest Rates

Simone Weil once said, “If you want to know what a man is really like, take notice of how he acts when he loses money.” Likewise, if we want to know what our societies are really like, we must take notice of how they react to negative interest rates.

ATHENS – Objects of desire come at a cost. Only bad things, like toxic waste, have a negative price, the equivalent of a fee payable to anyone willing to make them disappear. Does this mean that negative interest rates embody a new perspective on money – that it has gone “bad”?

In market economies, money is the measure of the value of goods and services. And the interest rate is the price of that metric – of money itself. When the price is zero, it makes no difference whether money is kept under a mattress or lent, because there is no cost to holding or borrowing cash.

But how can the price of money – which, after all, makes the world go round, or, as Karl Marx put it, “transforms all my incapacities into their contrary” – be zero? And how can it possibly ever become negative, as it now is in much of the global economy, with the world’s moneyed people “bribing” governments to borrow from them more than $5.5 trillion?

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