Negative Interest Rates Propel Bitcoin to the Forefront
Negative Interest Rates are causing bankers to fear, among other things, currency warsand the widespread use of virtual currencies. Indeed, it is amazing how things are acting together to propel Bitcoin’s inexorable march to become one of the main currencies of the world, if not the world reserve currency for fiat currencies. New technologies, the Internet of Things, and global economic trends seem to be collaborating towards this end. Or perhaps, the world is going crazy. Take for example the recent moves by some of the world’s major central banks to impose negative interest rates.
Negative Interest Rates Boost Bitcoin
Until a few decades ago, negative interest rates were only a curiosity for some economists. Now negative interest rates are becoming widespread, sending ripples of fear throughout the banking industry.
Specifically, Hervé Hannoun’s, Deputy General Manager, Bank for International Settlements, explained:
“Negative interest rates could over time encourage the use of alternative virtual currencies, undermining the foundations of the financial system as we know it today.”
It seems that central banks resort to negative interest rates to resuscitate economies when all the other options have been exhausted. As Bloomberg put it, “Negative interest rates are a sign of desperation, a signal that traditional policy options have proved ineffective and new limits need to be explored.”
According to Richard Werner, a professor of economics and the creator of quantitative easing:
“The policy of negative interest rates is thus consistent with the agenda to drive small banks out of business and consolidate banking sectors in industrialized countries, increasing concentration and control in the banking sector.”
The adoption of negative interest rates is gathering steam. In January, Japan’s Central Bank announced that it was for the first time setting negative interest rates, at minus 0.1 percent.
The European Central Bank, along with several major central banks in Europe, including the Danish National Bank (DNB), the Swedish Riksbank, and the Swiss National Bank (SNB) have also adopted interest rates below zero, for the purposes of encouraging more lending, boosting exports, stabilizing inflation expectations, and reducing the risk of deflation, according to the World Bank’s Global Economic Prospect.
Now, the U.S. Federal Reserve is the big question. Specifically, will the Fed follow the path of its European and Japanese counterparts? This week Janet Yellen, Fed Chair, touched upon this issue in front of Congress, stating that the Fed is studying the countries that have adopted negative interest rates while conceding that this is indeed an option to consider.
“We wouldn’t take those off the table, but we have work to do to judge whether they would be workable here,” Yellen told CNBC.