*The New York Times tackle the idea of negative interest rates. (NY Times)
Must be a slow news day. In just about every entry level economics course, someone asks if negative interest rates are possible to spur immediate lending. The hypothetical of vaporizing 10% of the money randomly every year should, according to them, approximate negative interest rates.
There are some things that work at the theoretical level and not in the physical word. With such a crazy monetary policy, people would just dump the dollar for other currencies or gold. The dollar would be devalued and the prices that Americans pay for everything would go up. Remember that we compete at the international level for raw materials and goods.
The New York Times should more carefully screen their submissions.
Wouldn't vaporizing about 10% of US currency also have the consequence of upsetting our trade partners or those nations who hold substantial amounts of US currency as reserves? I can't imagine China (or any other country for that matter) responding warmly to random fluctuations in its US reserves i.e. a loss of 10% at any given point in time.
Exactly. That's why they'd dump US currency for Euro, GBP, or Gold.