More on negative-nominal-interest-rate...

The negative interest rate adopted by some of the World’s developed countries’ central-banks has started a new discussion among analysts and economists as what would be the interest-rate trajectory for the economies reeling under recession, several rounds, when they have cut down nominal-interest-rate below zero in an attempt to boost consumption and investment spending to increase demand and growth keeping inflation and unemployment low. It is true that several important central-banks of the developed-world has cut down nominal-interest-rate below zero and are receiving money from deposits opposite of the usual practice of paying interest rate for their deposits which is primarily intended to boost consumption instead of savings during recession. But, these banks have missed to reconcile consumption and investment, both. They are trying to increase consumption by dis-incentivizing savings, but, have made no effort to increase investment by also reducing the borrowing cost in the negative which means banks should literally pay for new loans, means interest-rate payment for availing loans when they are getting money from deposits. The banks are now earning from deposits, but they must also try to increase loan demand by incentivizing through interest-payment, and that’s what negative interest rate should do in order to increase employment, demand and growth. Only then negative interest would make a complete sense to increase economic-activity because the Capitalist must also be incentivized to increase employment through more investment when the households are encouraged for more consumption. However, if the banks manage to increase consumption without investment that would create inflation and unemployment, in the place of deflation and unemployment, which is again an awkward position from the view-point of stability. Nonetheless, the objective of the monetary-policy and interest-rate management is to shoot for the natural interest rate at which the economy is on full-employment and there is neither inflation nor deflation.