If only the right knew how, or the left was able to

Negative interest rates appear to be incompatible with our current banking system, because it is the banking institutions which have the most difficulty making profits in an environment of negative rates. It is the very fabric of our economy that has again been shaken as our world sinks further and further into this new paradigm of negative rates that are straddling realms once thought to be beyond reach. And for good reason, because negative rates are in fact a tax levied on banks who must pay them when they place their reserves in their central bank. Banks cannot pass all this taxation onto their clients, for obvious reasons, and they must therefore resign themselves to registering a loss rigorously sanctioned by financial markets these last few weeks.

For as much, the establishment of negative interest rates (invoked and defended multiple times across many of my articles) is the only weapon at our central banks’ disposal to fight the economic paralysis that has been brought on by deflation. With negative rates being the only response to the crisis in terms of monetary policy, the cause and effect relationship between austerity and negative rates seems obvious. Our politicians are fully counting on the central banks who are at their wit’s end to replenish our economies because they themselves do not have the guts – or perhaps even the power? – to implement public policies that would encourage economic activity. The right and the left are now united in the same woeful combat against deficits, and the various and differing governments that come and go are shirking their responsibilities by refusing to handle the hot potato of growth at a time when central banks are now coming to the end of their dynamics of monetary creation.

Our dazzling political leaders – who excel in hollow, feckless statements of intent – should, however, realise that the public doesn’t care about these debates on negative interest rates, which concern only a tiny minority of specialists, when they are waiting for genuine recovery measures on spending and aggregate demand. The cost of this blundersome plan of austerity – paid for so far by the citizen – will henceforth also be taken on by the banking system in the form of these imposed negative rates. Workers, savers, shareholders, financial intermediaries: it is the whole chain and all economic agents who are therefore now paying the price of this insane budgetary measure which is cutting into banks’ profits, having already paralysed consumption.

And yet, the denunciation of austerity is still regarded in very low esteem by the media and people of power, with the rare economists (such as yours truly) who are stigmatising this self-destructive policy being labelled by others as dangerous leftists… In reality, it is a matter for the confines of philosophy, because why the hell are people, bankers, consumers and politicians insisting on fighting against an expansionist policy which is supposed to have 100% beneficial effects on their own activity and secondarily on their economy? Why are we leaving the monopoly on denunciation of austerity measures to the far left, when these measures have turned out to be lethal for everyone?