The Non-Weirdness of Negative Interest Rates

> If you want to hold gold and watches and sentimental things at a bank, you pay to rent a safe deposit box. If you want to hold oil or grain to use it or sell it next year, you can pay for storage in a tank or some other facility. And if there’s a surge in the supply of oil or a bumper crop of grain, and storage capacity is scarce, then you can expect to pay even more for warehousing capacity. If you want to hold your wealth in land, then you pay in insurance and security and property taxes.

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> In other words, to store money at a bank requires the existence of some other borrower who will pay the bank. As such, just as you’ll pay more to store grain when grain is abundant and warehouse space is scarce, you have to pay more to hold money when savings are abundant but demand for borrowing is scarce.

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> If negative interest rates still seem odd to you, then it might be helpful to just turn the question around. Ask yourself why you think that at a time of limited growth opportunities in Europe, savers are entitled to get paid for their wealth in Switzerland or Germany. Why is that something worthy of remuneration?

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> In the meantime, there’s lots of money out there and a limited capacity to store it all. So increasingly, savers are going to have to pay for money storage services. And although it’s not much consolation, we can at least remember that whether it’s fees for oil tanks, safe deposit boxes, security guards, insurance, or wealth managers, there's nothing unnatural about being forced to pay to preserve your wealth.