Wow.  There have been many “I never thought I would read about that” moments this year, but to read an article on the BBC about the concept that banks could offer negative interest makes me wonder if the apocalypse really is upon us.  Also called demurrage, negative interest is a carrying charge, and one that people might pay if they think their money is really at risk.

From the BBC:

Justin Urquhart Stewart, director of Seven Investment Management, says rates have been negative before.

“It does sound very strange, but it has happened in the past.

“If you go back more than 20 years to Switzerland, people were so worried about the value of currencies that they were running to anything they saw as a safe currency and the Swiss franc was it.

“So overseas investors had to pay for the privilege of holding Swiss francs – a negative interest rate.”

But that’s just the beginning.  Another effect of demurrage is that it encourages spending, because your money will be worth less tomorrow than it is today.  Of course, you ought to be spending money on something that will be of greater value tomorrow than it is today.

What’s the nuance?

In the BBC piece, the “rational” economists and bankers say that it won’t happen, despite the examples to the contrary, but the very fact that the article was not laughed out of the newsroom points to an incredible shift in what’s possible.

As we wrote just last month, innovative money, currency and exchange systems are getting more and more attention these days.   Innovative money systems are not so distant anymore.