“ “Risk-free return” is the standard tag attached to the government’s solemn obligations. An investor I know, repulsed by prevailing government yields, has a timelier description – “return-free risk”.” – Jim Grant
How absurd are negative interest rates?
Two weeks ago in Denmark, news spread about the first person to get a business loan and get paid by the bank to do so. Eva Christiansen, and entrepreneur, earns about 1$ a month from a business loan she took out to grow her business. Let that sink in for a few minutes. She took out a loan, and instead of paying interest to the bank, gets paid interest each month just for taking the bank’s money. What a great deal. Where do I sign up for one of these loans? If you are interested in what type of business she is running, that makes the story even better.
If you are asking the question of why would the bank pay this woman money each month to take their money, you wouldn’t be alone. I’m fairly certain that it has nothing to do with the type of business she runs, but it is mind-boggling to understand why a bank would pay someone to borrow money. Unless of course you understood what was happening in Europe with interest rates.