Gyroscopic Investing

After seven years of Quantitative Easing (QE) and Zero Interest Rate Policy (ZIRP) have failed to deliver “escape velocity” economic growth, central banks are now turning to Negative Interest Rate Policy (NIRP) as the next extension of monetary stimulus. While QE and ZIRP were extreme measures of a rather common monetary policy playbook, the basic concept of negative interest rates is somewhat difficult to comprehend. Why would anyone pay to lend someone else money? Furthermore, what are central banks trying to accomplish and why would negative interest rates be any more effective than prior rounds of QE and years of ZIRP? The economic and capital markets implications are many, and myriad unintended consequences loom with this untested monetary experiment. In this newsletter, we will explore the reasons negative interest rates are being considered and implemented, what negative interest rates mean in theory and in practice, and the potential risks they present to the overall economy and investment portfolios.

Source: http://meketagroup.com/documents/GMN%20 ... 0Rates.pdf