The United States is close to joining many European nations in what is a rather
unsavoury designation: having negative interest rates on standard two-year government
bonds. The political strategies that are in place to provide buoyancy to the interest
rates are either fading or set to expire completely, which could easily lead the nation’s
government bonds to be a negative investment to citizens. Because citizens desire
to put their money securely in banks and invest in the relatively safe comfort of
government bonds, this will effectively punish people for trying to save their money
. The
base-case investment will lose money, so people will stop seeing bonds as a viable
option for investing. This will reduce the funds the government has at its disposal, so it has significant effects on both the government and the general populace. This negative rate of return is the result and continuation of an economic snowball effect, and one that is quickly picking up speed as it rolls downhill. Unless measures are put in place to stop interest rates dropping below zero, all factors of the American economy will be severely impacted.
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