This is of course both a political and a financial question.

But I am really struggling to understand/predict the ramifications of these never before (widely) tried techniques.

More specifically, I am thinking about the fiscal pros and cons, the winners and losers, and the political implications.

It seems to me the winners are entities with a lot of debt (nations, governments, multinationals) and people who have very good credit (ironically they are the same as entities with a lot of debt, plus rich people and the professional elites). if you have good cashflow and have borrowing capacity, negative interest is not such a big deal.

But for the vast majority (the working class, the poor, the pensioners), negative interests seem to be a net negative. The negative rates inflate asset prices without improving their ability to borrow.

And if these observations are true, we should expect a lively political debate about it. Yet the power elites seem to be unanimous in their support for negative rates?

So the question is is this not talked about because this is too complicated/too distant for the average person/politician?

  • Do you have some special dimensions (inflation, inequality, unemployment, pollution,...) in mind or just live in general?
    – Trilarion
    Sep 4, 2019 at 20:51
  • 1
    @Trilarion: from a political perspective. I am wondering who are the winners and losers. It seems to me that the lower classes (including pensioners) would be the likely losers. Pensions and social security are built with the assumption of a meaningfully positive interest rates environment in mind. Negative rates doesn't help people with poor credits and can't borrow. It would also hurt first time home buyers (as low rates would likely push housing prices higher). With all that in mind, why is negative rates rarely discussed in politics? And why do people accept that it is a good thing? Sep 4, 2019 at 20:57
  • In Switzerland we have negative interest rates since 2008 or so.
    – Bregalad
    Sep 5, 2019 at 6:06
  • "Yet the power elites seem to be unanimous in their support for negative rates?" It's (currently) the lesser of two evils. The alternative would be the European economy (and probably also the world economy) collapsing because southern European banks with bad credits in their portfolio and whole countries like Italy would default on their debt. Everyone is careful in not talking about this because that allows the markets to continue ignoring this problem.
    – Roland
    Sep 5, 2019 at 6:47
  • @Roland: Under negative interest, the more money you owe, the more money you get in interest. So of course this helps debtor nations. But in theory this can lead to a weird feedback loop, as one's credit worthiness is based on how much one has. But if the more one borrows, the more one makes. Everyone can in theory get access to infinite credit and infinite negative interest income. Sounds like a dream. But also a bit illogical... who would be providing this credit and why? Sep 5, 2019 at 14:22

3 Answers 3


Depends on how long they last, and how far ahead the citizen thinks.

  • Many first world countries have fully or partly privatized pension systems, where each citizen should save some income during working years to spend during retirement. How much to save depends on what you think you'll need, how old you expect to get, and on the interest rates. Lower or negative interest means you have to save a higher percentage of the income.
    That could be hard to do for some people, and it will also reduce domestic consumption right now.
  • As interest in government bonds and the like drops, potential investors look for other area to invest their money. One area is the housing sector.
    • This could cause a housing bubble, harming home owners with little reserves.
    • It could permanently increase housing costs, with negative effects on both tenants and buyers.
  • The first bullet applies to personal savings of any type. I don't see the second scenario at all. People hoard cash in a deflationary setting, delaying purchases. This would dampen all markets. It would hurt homeowners only in the sense that their chief investment is devaluing generally.
    – user9790
    Sep 5, 2019 at 15:12
  • @KDog, in parts of Europe housing prices go up well above inflation or interest. The second bullet is mentioned by plenty of analysts.
    – o.m.
    Sep 5, 2019 at 19:41

Negative interest rates occur under really two situations, significant currency appreciation or a deflationary, economic slump. I won't talk about those conditions directly, but focus on negative interest.

The biggest likelihood is that you would pay fees or interest on deposit and cash accounts CDs, US Savings Bonds, money market and DDA accounts. If the situation got very dire, you could potentially qualify for a loan where the lender would pay you interest to take the loan. Note that the first thing to happen in all these instances is that regulators and banks would charge fees on deposits and deposit like products first.

  • So if you break a CD with a negative interest rate before the maturity date, does that mean the early withdrawal penalty percentage adds money to the broken CD?
    – agc
    Sep 5, 2019 at 14:24
  • @agc They probably wouldn't have "breakage fees" on CDs with negative rates, and might even get a breakage bonus. You would likely "forgo" having to pay the interest until maturity, unless you paid that up front. In that case you would get a credit. Remember the goal is to increase consumption and deter spending.
    – user9790
    Sep 5, 2019 at 14:55
  • @agc deter savings. Sorry for the confusion
    – user9790
    Sep 5, 2019 at 22:15

In countries where people aren't very used to invest their savings in the stock market, zero or negative interest rates have proven a bit of (financial) culture shock. Deutsche Welle has a documentary (in English) that includes significant segments in which a German pensioner has to deal with this. I'm not sure which country you're from or you have in mind when you say this isn't getting discussed, but I think this aspect does get substantial attention in the media in Germany.

The same documentary includes segments on indirect effects, such as easy/cheap credit (which goes hand in hand with low interest rates) facilitating housing market speculation, with effects on the less well off, and more generally a posited more rapid increase in wealth inequality again due to easy credit. The documentary also says that easy credit has resulted in more companies being bought and sold, with some effects on workers.

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