Why negative interest rates are mad, bad – and dangerous

What should we think about negative interest rates? What kind of Alice in Wonderland world are we living in when companies and households are paid to borrow and charged if they save?

Seemingly crazy, negative interest rates are spreading nonetheless. Implemented by central banks in Europe, Japan and elsewhere, they now apply in countries accounting for a quarter of the global economy. Should we be worried? Could we see negative rates in Britain?

Earlier this month, the Bank of England cut interest rates for the first time in seven years, from 0.5 per cent to a new record low of 0.25 per cent. Quantitative easing was also restarted, with the Bank set to purchase £60 billion of bonds with newly created money over the next six months, on top of £375 billion of QE since March 2009. Billed as a response to the UK’s ‘Brexit shock’, the Bank’s bold move has renewed speculation that the UK could soon go even further.