<p>By neutral, the author probably refers to something that can hardly be influenced by external forces. Money can be affected by market forces and by central banks, and the consequences are variations on inflation and exchange rates. However, if you have gold or land, these will hardly lose their <strong>relative value</strong>, at least that was the idea in the 50s-60s. </p>

<p>Coming back to the negative interest rates, for a rational investor that would need to decide between investing his money in return for a negative interest rate, or use the money to buy gold or land, which yield a neutral or positive interest rate, he/she would take the latter.</p>

CC BY-SA 3.0
2017-08-06T08:09:18.843Z
2017-08-06T08:09:18.843Z
JoaoBotelho
<p>I currently deal with interest rate theories, reading amongst others Paul Samuelson (1958) and Peter Diamond (1965). </p>

<p>In Samuelson the possibility of a naturally occuring negative interest rate is introduced due to consumption smoothing and without some central bank mechanism. Often times I heard (or read) that the interest rate is impossible to decrease below zero as soon as some commodity is introduced that preserves its value over time, like land or some kind of neutral money. What I don't understand is, why? What is the idea behind that and what kind of concept is this neutral money as opposed to "traditional" money? </p>

<monetary-policy><interest-rate>
Negative interest rate and land
Taufi
# Negative interest rate and land

(Asked by: username_0 on 2017-08-05)

I currently deal with interest rate theories, reading amongst others Paul Samuelson (1958) and Peter Diamond (1965).

In Samuelson the possibility of a naturally occuring negative interest rate is introduced due to consumption smoothing and without some central bank mechanism. Often times I heard (or read) that the interest rate is impossible to decrease below zero as soon as some commodity is introduced that preserves its value over time, like land or some kind of neutral money. What I don't understand is, why? What is the idea behind that and what kind of concept is this neutral money as opposed to "traditional" money?

**Tags:** monetary-policy, interest-rate

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## 1 answers

### Answer by username_1 on 2017-08-06. Score: 1

By neutral, the author probably refers to something that can hardly be influenced by external forces. Money can be affected by market forces and by central banks, and the consequences are variations on inflation and exchange rates. However, if you have gold or land, these will hardly lose their **relative value**, at least that was the idea in the 50s-60s.

Coming back to the negative interest rates, for a rational investor that would need to decide between investing his money in return for a negative interest rate, or use the money to buy gold or land, which yield a neutral or positive interest rate, he/she would take the latter.


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