Foreign Policy Magazine

Through the Looking Glass

Once unthinkable, negative interest rates are now dangerously en vogue.

In 1998, when I was a reporter in Tokyo, an event happened that economists once thought impossible. Japan was at the height of its banking crisis, and as panic swelled, short-term market interest rates—what traders pay to borrow one another’s money overnight—dipped below zero for the first time ever.

It was such a shock that computers at local banks went haywire; programmers hadn’t prepared for negative interest rates. I told my colleagues that a world where people got paid for borrowing money, rather than paying for the privilege, was crazy. It would never last.

I was wrong.

This June,

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