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10

If there is inflation, what is your alternative? If you do not lend, your money loses even more of its value. A numerical example: If inflation is 5% and you can lend at 2% nominal interest rate, you can make the loan and lose 3% of your money's purchasing power OR you can not make the loan and lose 5% of your money's purchasing power. Poor choices, but ...


7

The same reason that oversupply leads to falling prices in any other market. There is a huge amount of money out there, and a lack of good returns with adequate levels of safety, so money is cheap. The reason this leads to negative rates is that money, like other goods, has a carrying cost. Keeping physical cash requires heavily secured real estate and is a ...


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