From an editorial Friday in the Chicago Tribune:
Have we got a strange deal for you, Federal Reserve chief Janet Yellen said – hypothetically – to America’s banks: Instead of paying interest on deposits you store with us, maybe we consider charging you a fee.
And so an unnatural, break-glass-in-case-of-emergency concept got a surprise hearing Thursday on Capitol Hill: negative interest rates.
With the U.S. economy stuck in weak growth mode but buffeted on many sides by real turmoil, Yellen was asked about the idea of the Fed going negative on its benchmark interest rate. The theory: Because near-zero interest rates haven’t enticed enough businesses to borrow and expand, the Fed would prod banks into lending by penalizing them for sitting on their money.
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Yellen’s cautious answer suggests the chances of doing so are remote: U.S. prospects for growth would really have to sink. But the idea is definitely not out of the realm of the possible.
This is radical, unwelcome stuff that adds instability to a fragile world.
There is another approach, and it has nothing to do with the Fed’s control of interest rates. If the crux of the problem is firing up the American economy, let’s see Washington get past its interminable gridlock and find ways to help American business grow. Doing something positive is always better than doing something negative.