Weekly Insights from Sol Berkoff
Principal at Charleston Capital, Inc.
Once, I got into an argument with a really smart person about negative interest rates.
He claimed that negative interest rates were not possible.
I found that argument really odd, given that we were both staring at Bloomberg’s European Rates screen which at that time was filled with negative interest rates.
Wednesday of last week, the total amount of negative-yielding debt hit an all-time high of $12.5 trillion.
Why? European bank capital rules favor sovereign debt. As a result, European banks end up owning more European sovereign debt than they would without this incentive.
Why am I writing about this? Well – the idea that someone would buy a bond with a negative interest rate rather than invest in a local business really bothers me.
We are willing to trust small businesses to watch our children and prepare our food. But we are scared to death to finance them.
We need data and scale to make this change.
Investing in debt with negative interest rates is absurd.
Stay positive. Finance a small business.