Name: Negative interest rates are coming and they are downright terrifying
Uploaded: 2020-03-13T10:53:08.000Z
Duration: 3 min 9 s
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the number of countries with negative interest rates is growing up to 30% of the globally traded bond universe, according to J.

What will the long term impact on the global financial system look like because of this?

Yahoo Finance Is editor in chief Andy Serwer is joining us now.

Annie, this is, ah, getting pretty disturbing, to say the very least, Yeah, it's a really disturbing trend.

And, as you said, 30% of the global universe.

That means all the government bonds in Japan, most of the government bonds in Europe, government bonds, all the government bonds in Germany, Many corporate bonds in Japan and Europe is well, and even some corporate bonds from the United States from Pepsi, Apple and McDonald's that air euro denominated it's growing.

It's about $16 trillion of debt now carries negative interest rates, which is kind of a mind boggling concept to begin with, You had a great are very in depth on the Yahoo finance I looking at this, but you spoke to Mohammed El Arian and he said negative yields could break things.

Well, it's It's because it's so unknown, Brian.

I mean, if you think about it, basically, you know, is a lender you're getting back less than you've lent.

It is a bar, or you're just, you know, being able to benefit tremendously from this.

It hasn't really hit consumers yet, but I But I think that it will.

At some point I think the consumer impact could be well, you know, in Europe actually again going back there where it's so prevalent.

In Denmark, for instance, you are being paid negative rates as a depositor, especially wealthy people.

It's not normal at all, So what they're doing is encouraging you not to have money in the bank.

That means keeping in cash or investing in stocks is an alternative, and then, conversely, also in Europe and Denmark in particular, people are able to get negative more mortgage rates.

So as a consumer you want to borrow from the bank because you're paying back less, you see how this goes completely upside down.

And the real thing is, to my mind, it has all the hallmarks of potential for real trouble in the financial markets because it's unprecedented.

They think it's never gonna happen here in the United States, and I think there's a real process possibility.

Like Mohammed, El Arian said, It could really break things.

If it happened, what's the big chances that it could happen here in the U.

It seems to be, that's where we're going.

Yeah, I think there's a real chance and you know, the same people who were saying, You know, Donald Trump would never be President Boris Johnson.

Everybody be prime minister The people who are now saying we'll never have negative rates here and again.

You know, so far, the financial systems holding up just fine with these negative rates.

But But what does it really mean when you're paid back less?

I mean, obviously you wouldn't want to do it, so that means you start chasing yield.

It's a distortion, and I think it's something policy makers haven't really wrap their brains around.

Does that make sense to go rotate back into stocks?

If you if we do hit negative rates in the U.

 The equity prices, send them to the moon and create some bubbles again, The distortion potential here is, to my mind, you know, again unknown and potentially really dangerous. 