Today, we want to say two things about negative interest rates. The first is really simple. Anyone who believes in a theory of interest that says "the savers demand interest to compensate for inflation" needs to ask if this explains negative interest in Switzerland, Europe, and other countries. If not, then we need a new theory (Keith just presented his theory at the Austrian Economics conference at King Juan Carlos University in Madrid - it is radically different).
Perverse Inventives
Second, negative interest perversely incentivizes some very perverse behaviors.
For example, suppose you could borrow