Negative Interest Rates

September 1, 2015

Several countries, especially in Europe, are suppressing interest rates to the point that creditors must pay for the honor of lending the debtors money – Interest Rates are negative.

Here in the US, we have had negative REAL interest rates for most of the last generation. Negative Real Rates just means that the nominal rate is below your favorite measure of price increases in the Economy.

Negative Real Rates are extremely hard to measure, since the wonks running the various federal agencies tasked with putting out statistics such as the CPI, are political appointees. As such, they torture the data until it confesses to a low rate of Inflation. Another way to describe these agencies activities is to say, “They LIE!”

Negative Real Rates are a national disgrace – that a supposedly free people would allow this kind of criminal activity, and even applaud it. But for the “Man-In-the-Street,” it means next to nothing. Most Americans either are unschooled on the subject, or they are just too busy with life’s other challenges. If you mention the concept to them, their faces glaze over.

But now, something has changed. At first, I thought it was merely another software glitch at Yahoo! In their 2nd day of reporting a negative Nominal Rate, I believe their chart. The US now officially has negative Nominal Rates.

So What?!

So Plenty!

There are two kinds of Economies: Free Market Economies and Government Command and Control/Socialist Economies. China today – and many past totalitarian countries – are nearly completely in charge of all that goes on in their Economy. At least as close as they can get with people naturally doing their own things whenever possible. (Maybe North Korea would be a better example.)

Similarly, a completely Free Market also probably has never existed. There will always be somebody in authority who thinks he knows better than you do in how to spend your money. Nineteenth century America probably comes as close to the ideal as possible.

Everything else is some kind of compromise between the two poles. (Keep in mind that being a little Socialistic is like being a little Pregnant.)

A Free Market Economy, by its very nature, works through the billions of choices made by individuals to deliver the best combination of goods & services at the best price with the various levels of quality desired. The bent toward Free Markets is what made America rich.

Socialism takes the existing Economy, and through the political choices of a few people in charge, make the Economy poorer. The US march toward socialism has gone on since before FDR, through the reigns of both parties.

Some, like Reagan, spoke as if he at least understood Free Markets (until he was shot), but the US march toward socialism – what Hayek called the Road to Serfdom – is what our country’s seen.

The Negative Interest Rate is as good a sign (better than most) of the tightness of socialism’s grip in our country. Interest rates are a price which people as consumers, people as workers, and people as businessmen use to guide our Economy regarding Production vs Consumption, on Saving vs Spending, on increasing our capacity to produce more & better vs eating our seed corn.

Make no mistake: Socialism is EVIL! In my book, all who support Socialism, whether they be schooled true believers or useful idiots, also are Evil. They want to strip you of your property. They want to take away your choices. They would complete the process of stripping away your Freedoms.

I am not playing partisan politics here. I am just as willing to tar the wicked amongst the Republicans as amongst the Democrats. The Jeb Bushes and Chris Christies are just as much to be opposed as the Obamas and the Clintons.

I would call on each of you to consider your votes next year very carefully. Since (I believe) poverty and lack of Economic freedom make all other issues irrelevant, please concentrate ONLY on Economically important issues. And, understand that some issues, like the anti-energy Global Warming nonsense, also are attacks on Economic freedom.

Yes, you’re very busy trying to survive and prosper. But your votes in 2016 may be more important than in any other year.


Robert (Bob)  Shapiro is self-taught in Austrian Economics and has consulted briefly for the governments of Mexico, Greece, Portugal and Spain. He has traded Gold & Silver and their stocks since 1970. Bob Shapiro’s blog is

During 1500s the Spaniards had taken 16,000,000 kilograms of silver from Peru.