The negative interest rate nightmare may become a reality

By Rick Moran

The Bank of Japan recently shocked the financial world by adopting negative interest rates – a radical move that's supposed to stimulate their perpetually sluggish economy. The theory is that negative rates will stimulate lending, encouraging banks to make riskier loans and for depositors to increase the velocity of money by circulating it faster. But in practice, well, nobody knows. Negative interest rates is an untried practice, and the risk of backlash against banks is one of the major unknowns. The European Central Bank is now fiddling with negative rates as another credit meltdown looms. Might the Federal Reserve be next? Chairman Yellen says no, but at the same time, she is telling banks to prepare for them...... 

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