A funny thing happened on the way to global central banks usurping the market and centrally commanding the price of interest. Economic events began to occur that the history of economic thought never considered. Negative interest rates is one. An idea that is so bizarre, upside down, and non-intuitive that a google search to reference the history of negative interest rates takes one back all the way to the year 2015. Somehow the great economic thinkers from Plato and Aristotle, through Smith, Ricardo, Say, Marx, Keynes, and Von Mises never considered negative interest rates as a possibility, much less a topic worthy of discussion. Recorded interest rates, going back a thousand years, have never persistently reached a negative level. By the end of April 2016, about $8 trillion of government bonds worldwide offered yields below zero.
Today, economists, policy makers, and the financial press treat negative interest rates as if they have always been a normal component of the economic world. The alternative to accepting the bizarro world of negative rates is to question what central banks are actually doing. Are their policies in any way beneficial and is change needed? Asking these questions requires understanding the framework of classical economics that promotes the proven history of sound money. For today’s conventional economic wisdom, a disastrous detour down the monetary rabbit hole seems the easier path.