Zero And Negative Interest Rates

Larry Summers has a post in the Washington Post about the incredibly low interest rate environment we are witnessing right now.When you consider the effects (slim as they are) of inflation, there are cases where the rates borrowers are paying are zero and even negative.

That means the lender is happy to get back less than they lent because they think that’s a better deal than they can get elsewhere. Think about what that says about the mindset of lenders (or holders of capital assets writ large) right now.

My partner Albert has written a book called World After Capital in which he argues that what has been scarce until now (capital) will no longer be scarce and that we will move on to other forms of scarcity. 

When capital is abundant and when you are getting paid to access it temporarily that leads to a very different set of decisions.

What we don’t know is whether this is a temporary situation (as Larry Summers hopes and policy makers are attempting to ensure) or a more permanent situation as Albert envisions. That is an important question.