What are Negative Interest Rates and what is their Impact?

What are Negative Interest Rates and what is their Impact?

According to economic theory, we should not have persistent negative interest rates. The reason: investors – lenders - want a real return for taking the risk of not getting their money back (defaults) and for deferring spending from today to the future. Join Trevor as he briefs us about the history of Interest rates and what impact it can have on the economy.
Overview

Interest rates are the return on lending money or, alternatively, it is the price of money. All savers are lenders - assuming that money is placed in a deposit taking institution, such as a bank, or similar that pays a return for holding those savings. In this video, Trevor discusses negative interest rates.

Key learning objectives:

  • Why should we not have persistent negative interest rates?

  • How has pandemics affected long-term interest rates?

  • How may population demographics explain some of the recent trends of interest rates?

  • Why may negative rates be useful?

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Summary
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Expert
Trevor Williams

Trevor Williams

Trevor is a visiting professor at the University of Derby and an economic consultant. He is the author of several books and articles and is former Chief Economist of Lloyds Banking Group.

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