<p>Over the past several years, we have seen many countries that have risk free debt yield negative returns. Even <a href="https://www.barrons.com/articles/yields-go-negative-on-corporate-bonds-not-just-government-debt-51562942845" rel="nofollow noreferrer">some corporate bonds</a> are yielding negative returns now. However, most corporate debt and riskier debt still yields positive returns. And I expect it will be a long while (if ever) before the entire risk curve is yielding negative returns.</p>

<p>While this may be a concern for other reasons, it doesn't change the fact that "falling lending opportunity lowers profit". The less positive yielding debt that exists, the less opportunities to profitably lend. And while I am dubious of the sustainability, <a href="https://www.marketwatch.com/story/that-near17-trillion-pile-of-negative-yielding-global-debt-its-a-cash-cow-for-some-bond-investors-2019-08-22" rel="nofollow noreferrer">negative yielding debt can apparently be profitable too</a>. Keynesian ideas will be relevant for a long while.</p>

<p>In fact, one of the most relevant concepts in a world of negative yielding debt is the notion of a <a href="https://en.wikipedia.org/wiki/Liquidity_trap" rel="nofollow noreferrer">liquidity trap</a>, which was originally popularized by John Maynard Keynes. To combat this, in the next recession, we may see more unconventional monetary policy ideas like <a href="https://en.wikipedia.org/wiki/Helicopter_money" rel="nofollow noreferrer">helicopter money</a> be implemented.</p>

CC BY-SA 4.0
2019-09-30T06:02:01.770Z
2019-09-30T06:02:01.770Z
Kent Shikama
<p>When interest rates are negative the entire point of keynesian economics is reversed and doesn't work.</p>

<p>Interest has been negative for a long time with subprime etc. It's just now obvious.</p>

<p>We need a new economics to deal with this situation. </p>

CC BY-SA 4.0
2019-09-30T05:29:19.380Z
(-1) Risk free interest rates may have been negative for a while in some countries but riskier debt has positive interest rates. Keynesian ideas will be relevant for a long while.
Kent Shikama
CC BY-SA 4.0
2019-09-29T17:40:00.047Z
2019-09-29T17:40:00.047Z
user24398
<p>Keynesian economics assumes falling lending opportunity lowers profit.</p>

<p>Under negative rates less lending actually means More Profit. So how does this change things?</p>

CC BY-SA 4.0
2019-09-29T16:42:32.910Z
This _may_ help: https://economics.stackexchange.com/q/17241/175
ahorn
<macroeconomics>
What happens to demand economics when rates are negative?
user24391
# What happens to demand economics when rates are negative?

(Asked by: username_0 on 2019-09-28)

Keynesian economics assumes falling lending opportunity lowers profit.

Under negative rates less lending actually means More Profit. So how does this change things?

**Tags:** macroeconomics
> **Comments:**
> **username_1**: This _may_ help: https://economics.stackexchange.com/q/17241/175  

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## 2 answers

### Answer by username_2 on 2019-09-30. Score: 0

Over the past several years, we have seen many countries that have risk free debt yield negative returns. Even [some corporate bonds](https://www.barrons.com/articles/yields-go-negative-on-corporate-bonds-not-just-government-debt-51562942845) are yielding negative returns now. However, most corporate debt and riskier debt still yields positive returns. And I expect it will be a long while (if ever) before the entire risk curve is yielding negative returns.

While this may be a concern for other reasons, it doesn't change the fact that "falling lending opportunity lowers profit". The less positive yielding debt that exists, the less opportunities to profitably lend. And while I am dubious of the sustainability, [negative yielding debt can apparently be profitable too](https://www.marketwatch.com/story/that-near17-trillion-pile-of-negative-yielding-global-debt-its-a-cash-cow-for-some-bond-investors-2019-08-22). Keynesian ideas will be relevant for a long while.

In fact, one of the most relevant concepts in a world of negative yielding debt is the notion of a [liquidity trap](https://en.wikipedia.org/wiki/Liquidity_trap), which was originally popularized by John Maynard Keynes. To combat this, in the next recession, we may see more unconventional monetary policy ideas like [helicopter money](https://en.wikipedia.org/wiki/Helicopter_money) be implemented.


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### Answer by username_3 on 2019-09-29. Score: -1

When interest rates are negative the entire point of keynesian economics is reversed and doesn't work.

Interest has been negative for a long time with subprime etc. It's just now obvious.

We need a new economics to deal with this situation.

> **Comments:**
> **username_2**: (-1) Risk free interest rates may have been negative for a while in some countries but riskier debt has positive interest rates. Keynesian ideas will be relevant for a long while.  

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