Sunday, March 8, 2015

The Swiss Cheese Higher Interest Rate Theory

March 8, 2015
SNB considering higher negative interest rates: Schweiz am Sonntag

Citing sources close to the SNB, Schweiz am Sonntag said "a rate of minus 1.5 percent is being considered".

As far as Switzerland is concerned, there are definitely holes in the higher interest rate theory.

It would seem that once rates go negative, higher rates means they go even more negative. Who knew? No wonder economists are so worried about the zero lower bound. It's an event horizon for interest rate black holes. Reality shifts as the boundary is crossed.

Perhaps savers should start thinking about the -100% "higher" bound. That's a level that should never be breached, at least in theory. In practice though, perhaps a properly determined government could actually tax your losses, lol. Sigh.

"Says here that you lost 100% of your money. Can you afford the taxes on that or would you like to take out a loan at one of our prestigious private commercial banks? Just doin' our part to stimulate the strong and robust global credit economy! Thanks for participating!"


Mr Slippery said...

This is an interesting new world of NIRP!

Soon, we will have the negative rate mortgage and car loan. Ideally, you would keep all your money in cash and take out huge loans to collect interest from the lenders. Storing a lot of cash is bulky.

We need the US bring back the high denomination notes. The $1,000 Grover Cleveland was attractive, and the $10,000 Salmon Chase, and $100,000 Woodrow Wilson gold certificate!.

Anonymous said...

Do I have to give them a toaster to make a deposit?

Anonymous said...

Not enough currency in circulation for most to avoid
negative interest rates on saving. I just can't see. net
compensation rising with negative interest rates.

Stagflationary Mark said...

Mr Slippery,

I'm looking forward to the million dollar Mission Accomplished bill. I mean really, we've won at that point. Right?

Stagflationary Mark said...


The Chinese will supply the toaster. You just need to fog a mirror. It's the new and improved economic banking model of prosperity!

Stagflationary Mark said...


I think there's plenty of currency. It just isn't in the hands of the canned soup buyers.

dearieme said...

Don't knock canned soup. We've found a wonderful one: Cream of Asparagus.

Where was I? Ah yes, I'm thinking of plunging my wife into a two year gilt that pays about 0.5% p.a. just in case our interest rates go negative too. Dear God, what's next?

Stagflationary Mark said...


Hey, I love Cream of Mushroom and Cream of Chicken canned soups. Probably slowly killing me over the long-term but what a way to go! :)

There's also the regulars like Tomato and chicken noodle of course.

Oh, and the cream soups mixed with chicken and rice also works for me.

Yeah, I'm a cheap date. No caviar in my diet. ;)

dearieme said...

Hah. We had foie gras for the first time ever at the weekend. Rather good.

Stagflationary Mark said...


That is one thing I will never willingly eat. Those animals definitely do not lead a good life.

Who am I to talk though? I eat the cheapest eggs and those chickens hardly live a good life either. Sigh.

We all have our limits. Must kill something to live. Even lettuce might be silently screaming.