Introduction of Minus Interest Rate
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 Home > Introduction of Minus Interest Rate
Difference between interest rate and economic growth rate

 As described earlier in sample transaction, it may be understood that interest rate and economic growth rate agree. If these are different, what is happened?

 Suppose interest rate on a loan is changed to 20 % and transaction price is changed to ¥110 (Interest rate of deposit is 10%) in earlier second transaction. Economic growth rate is 10% in this case. Then B has to repay ¥120 in debt with sales of ¥110. But the amount of difference of ¥10 can’t be paid. This ¥10 is credit obligation of bank C. The credit obligation can’t be collected, so it is called bad debt.

 
 As described above, if interest rate on loans of banks is over economic growth rate, bad debt is sure to occur in proportion to the difference of rates.

 As economic growth rate is number count of the whole country, accurate meaning is [Bad debt occurs on an average of the whole country.]
 As there is no money to repay, it can’t be repaid.
 Company of sound financial strength may be tolerant as a matter of course, but company of needy financial situation may have bad debt - be in bankruptcy.
 Therefore, it is necessary to keep consistency between interest rate and economic growth rate in order to prevent occurrence of bad debt.

 As discussed above, mechanism of occurrence of bad debt may be grasped. Nominal economic growth rate has been turned to minus, but loan rates in banks have been plus since the year 1998. As there is no money to repay the difference, it becomes obvious as bad debt.
 Therefore, no matter how hard banks clear away bad debts, bad debts increase under the condition of minus economic growth rate. It is theoretically inevitable conclusion.

 In addition, the reason for companies to have poor intention to borrow money although the Bank of Japan realizes zero interest policy can easily be understood. To borrow money has high possibility to lose under the condition of minus economic growth rate and plus loan rate. Possibility to lose is higher than possibility to gain on an average.

 Therefore, it is necessary to introduce interest rate [minus interest rate] that fits economic situation for companies to enhance the willingness to invent, and to stimulate the economy.

 There may be opinion that interest rate should be plus and original principal should be guaranteed from the viewpoint of depositor protection, but it is impossible naturally. Currency exists with economy. If economy diminishes, currency decreases inevitably. If currency doesn’t decrease, depositors have currency that doesn’t exist essestially. If this type of currency increases, credit across whole economy is lost. Therefore, it is necessary to introduce minus interest rate when economy diminishes.

 In addition, as interest rate over economic growth rate is excessive repayment burden, companies may be in bankruptcy. Then economic value over interest burden is lost. As a whole nation, demerit of company’s bankruptcy is far more than merit of depositor’s interest received. In short, interest rate over economic growth rate destroys the economy.
 Therefore interest rate should usually be controlled to burden both debtees and debtors equally. The interest rate is economic growth rate. Is it OK with you?

    
  

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   Introduction of Minus Interest Rate (PDF)
Contents
   Preface
   The meaning of currency
   What is Interest rate?
   Decision method of interest rate
   Difference between interest rate and economic growth rate
   The influence of government activity to interest rate
   Calculation of basic interest rate
   Currency is fractal structure
   Deflation occurrence rule
   Occurrence status of bad debts by difference between interest rate
      on loans and economic growth rate
   Mechanism of Japanese recession
   Necessity for minus interest rate
   Effect of introduction of minus interest rate
   Improvement of banking system
   Change of interest rate decision rule
   Increase of assets caused by minus interest rate
   Reconstruction of economic theory
   Solution of deflation problem
   What is real richness

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