Next, the FED will pay you to borrow their money.

The US FED has dropped interest rates to the floor: zero to a quarter of a percent.  That probably won’t have a big impact, except short term (a day or so)  on stock market sentiment.  But if banks aren’t actually lending to businesses, then its not going to stimulate economic activity.

So, maybe negative rates would help.  “We’ll pay you to borrow our money.  But you’ve got to promise to lend it out.” It might be cheaper, more efficient and more effective than a fiscal stimulus.  Though a fiscal stimulus is needed too.

As we’ve noted for months, the interest rate is not what’s going to make or break the economy.   The behaviour of players in the debt and equity markets is.  And right now, they’re hardly even playing at all which is why the economy is stagnating.


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