The Impossibility of Negative Rates

by John Tamny
The American Institute for Economic Research

The economics discussion would be greatly enhanced if it were better understood that underlying all spending, selling, saving, lending, borrowing, and investing is an exchange of products, services or labor. Real things are always and everywhere being moved around when “money” changes hands.

It cannot be stressed enough that “money” is just an agreement about value that only has use insofar as there’s already wealth. Money does not instigate despite what economists, pundits and politicians tell you, rather it’s a consequence. We produce goods, we save them, we direct them to higher uses in the near-term since our needs are long-term (investment), and money is merely the medium that facilitates the movement of real things.

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