Negative Rates and Other Financial Technologies in Modern Economic Reality on the World-System Scale

Abstract

In the present article the author considers negative deposit rates and other financial technologies both with respect of their evaluation by the modern economic science and as a logical development of the previous trends and also as a natural stage in a long developmental path of financial technologies. Every economic crisis gives rise to new financial technologies (NFT). The 2008 crisis also generated new financial technologies which include quantitative easing and low and negative deposit rates. The novelty of our approach consists in treating negative rates as a result of previous development of financial technologies and in analyzing them not only on the national but on the World-System scale. We also emphasize that quantitative easing and close to zero rates passed a kind of a test in Japan in the 1990s and 2000s. Negative deposit rates are an-other step towards a larger production of money in the situation of a) depres-sion and deflationary pressure; b) growing national debt and emission via central banks unprecedented over the recent decades; c) abundance of easy money; and d) increasing merge of the state and private financial interests. The article forecasts a wider spread of negative rates after a new recession (which is to start already in 2020). In search for profitable spheres of application the assets will actively flow to developing markets with higher rates. As a result, the negative rates may promote financial convergence which is a convergence between developed and developing countries in terms of financial strength (as it happens with GDP). If one considers Japan as a testing ground for new financial technologies then one may expect the transition of FRS and ECB to the policy of direct purchase of shares because the Japanese Central Bank has been buying shares for the last years.