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Tem42 comments on Open thread, Dec. 21 - Dec. 27, 2015 - Less Wrong Discussion
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The Fed recently announced a small interest rate hike, but rates remain astonishingly low in the US and in most other countries. In several countries the interest rate is negative - you have to pay the bank to hold your money - a bizarre situation which many economists previously dismissed as a theoretical impossibility.
How should individuals respond to this weird macroeconomic situation? My naive analysis is that demand for investment opportunities far outstrips supply, so we should be trying to find new ways to invest money. Perhaps we should all be doing part-time real estate investing? Are there other simple investment strategies that individuals are in a better position to pursue than big investment firms?
I don't think that anyone ever thought that paying the bank to hold your money was a theoretical impossibility -- paid checking accounts are not a new thing. What is supposed to be 'impossible' is for bank loans have a negative interest rate -- if the bank pays you to borrow money. Of course, even that was/is only 'impossible' with certain exceptions (specifically, deflation is bad for lenders; but they try to predict deflation, and try not to loan at a negative real rate).