Central Banks’ Negative Interest Rates are Stimulative?

Maybe not.  Not if this small businesswoman in Germany proves typical.  Heike Hofmann sells fruits and vegetables in a small city in northwestern Germany.

When Ms Hofmann heard the ECB was knocking rates below zero in June 2014, she considered it “madness” and promptly cut her spending, set aside more money and bought gold. “I now need to save more than before to have enough to retire,” says Ms. Hofmann, 54 years old.

Of course.  When she’s retired, she’ll be in no position to participate very much in risky investments; most of her income beyond the German retirement payment system will need to come from fixed income investments.  That fixed income will come in the form of dividend-paying instruments and…interest-paying debt instruments.

And there’s this low-wage worker in Sweden:

Lasse Bohman, a 63-year old newsstand worker from Stockholm, said the concept of negative interest rates is “weird” and makes him want to save more for retirement rather than spend. “I am just going to keep on putting money in the bank,” he says, or “put it under the mattress at home.”

Never mind that to get to retirement, current workers need to save more at the lower rates of return that result from Central Bank-driven negative interest rates (or even artificially low, but positive, rates).


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