Buffett: Negative Rates Are More Puzzling Than Scary

The prospect of negative interest rates confounds Warren Buffett but doesn’t frighten him, according to a recent Bloomberg article. “U.S. policy makers have been seeking to grapple with the economic fallout of the coronavirus pandemic, “ the article notes, citing the Fed’s cutting of its benchmark rate to zero earlier this month. In his annual shareholder letter (released in February), Buffett contended that equities would outperform long-term, fixed-rate instruments in the long run if current… Read More

Negative Interest Rates Present a Threat

In response to former Fed Chairman Alan Greenspan’s reported comments that negative interest rates wouldn’t be “that big of a deal,” a recent Bloomberg article rebuts, “it’s wrong. Negative interest rates represent a threat to the financial system.” The article explains, “the fractional reserve banking system is leveraged to interest rates. This works when rates are positive.” It adds, “in a negative rate environment, the bank must pay to hold loans and securities. In other… Read More