A new world, an unchartered territory – A negative yield environment

There are US$16T of negative yield bonds at this moment as we speak and we have never come across this before in our lifetime.  The world will be in big trouble when the largest economy (USA) is also in a negative yield environment.

The conventional mindset is positive yield whereby the borrower pays the lender an interest rate to secure a loan and not the other around.  Our current financial system and economic structure are not built for a negative yield environment.

If we want to accept and adopt a negative yield environment, we will need to change our mindsets but people are resistant to changes.  How many people can accept the reality that they are paying the bank an interest rate for their deposits instead of the bank paying them an interest rate?  How many creditors can accept it when they need to pay borrowers an interest rate?   Where will the banks get the money to lend out when people start to stash money at home?  Many elders in Japan started to buy safes to keep money at home when the banks started to charge deposit fees (interests).

https://www.scmp.com/news/asia/east-asia/article/2115888/cash-loving-japanese-savers-play-it-safe-hiding-money-their

In order to minimize the disruptions to the conventionalists, we will need to restructure our financial system and economic structure which will entail many uncertainties and risks because we have never done this before in our lifetime.  This will be a regime change and it is an arduous task.

Conversely, if we reject the negative yield environment and maintain our conventional thinking, we will need to enforce positive yield on the current situation and cause a great recession or depression to happen.

We are stuck between a rock and a hard place now.  Even the economists are at their wit ends now because they’ve never studied the negative yield environment before in their lifetime.