Sees negative rates as a defense against all "teh deficit!" criticisms he's been getting from his right libertarian flank... at negative rates its "free money!" so "teh deficit!" doesn't matter, etc...
And he's eventually been getting everything he wants from the Fed...
As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the “GIFT”. Big numbers!— Donald J. Trump (@realDonaldTrump) May 12, 2020
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Since the debt of a monetary sovereign like the US is inherently risk-free, the MOST it should return is zero percent minus overhead costs. Otherwise, we have welfare proportional to account balance.
That said, individual citizens should be exempt from negative interest up to a reasonable account limit since SOME risk-free savings are legitimate for liquidity and initial capital formation needs.
I think even the ww2 war bonds paid 4%...
Would be nice to have that kind of income now...
An equal Citizen's Dividend could be funded with negative interest on large fiat users (e.g. private depository institutions).
There's an ethical source of income to replace welfare proportional to account balance.
Yo they would just pass the expense on to the customers...
Which is why all citizens (at least) should have debit accounts at the Central Bank - so they can be shielded from negative interest to a reasonable account limit.
How are negative rates supposed to be stimulative? What's the theory even? The europeans seem to think banks borrow from the central bank and then lend that money out.
Is this just to try to drive up asset prices due to yield seeking?
I think they think that if the rates are lower then people will reflexively go in to sign up to borrow more.... increasing economic activity...
I think Trump wants it because 1 it will help him politically with his deficit problem with right libertarians, and 2 he thinks it will makecUSD more competitive in trade ...
How would it help with the deficit problem libertarians?
But mechanically, how's it even supposed to work? Banks would be paying the Fed on their reserve balances, it's a cost to banks. Banks would have to borrow form the Fed to get paid, and what would they then do with the reserves?
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