Odd Lots What Negative Interest Rates Mean for the World
Aug 12, 2019
Viktor Shvets, Macquarie's Head of Asia Strategy, dives into the implications of negative interest rates, which have reached an alarming $17 trillion in debt. He argues that this trend undermines the principle of the 'time value' of money, ultimately hindering economic growth. Shvets also presents a case for rethinking capitalism and political structures as the consequences of negative rates become clearer. Additionally, he discusses the challenges and potential of Modern Monetary Theory in addressing these fiscal dilemmas.
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Leveraging and Financialization
- The current low-interest-rate environment is a result of increased leveraging and financialization of assets.
- This system prioritizes asset price growth over real income growth and creates instability.
Deflationary Pressures
- Central banks fear deflation due to high global debt levels, but their actions exacerbate it.
- Low interest rates allow zombie companies to survive and accelerate technological advancements, both deflationary forces.
Tech's Deflationary Impact
- Tech investment, fueled by low capital costs, has a deflationary impact on economies.
- Technology disrupts traditional businesses and labor markets, contributing to disinflation.