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24-Oct (BusinessInsider) — If you’re a bank, the idea sounds crazy. Why pay someone to hold your cash?
In 1983, when Frederic Mishkin started writing “The Economics of Money, Banking and Financial Markets,” his seminal textbook on macroeconomics, he never thought he’d devote much space to the idea of negative interest rates.
“A million years no,” Mishkin told Business Insider.
Negative rates were seen as a bizarre thought exercise by academic economists, not something any of us would see in the real world.
It was “absolutely unthinkable when I started writing this book,” Mishkin, a former Federal Reserve governor and professor at Columbia Business School, said.
In fact, it took just about 30 years. And as Mishkin finishes the 12th edition of his textbook, he’s devoting a whole lot of space to negative interest rates.
“There’s something very shocking about this,” Mishkin said. “I have to talk about how negative rates are something that can be very prevalent.”
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