Negative interest rates on all money held?

[st434u]

The madness of neo keynesians, on a new level:

 

http://finance.yahoo.com/news/paper-currency-gold-004346371.html

 

This article suggests that paper money should be phased out altogether, and have fiat money remain entirely digital. In this way a great burden on the Central Bank would be lifted, as they would now have the ability to pay out (charge) a negative interest rate on all money being held by the commercial banks or the public, which the existence of cash prevents as it allows people to simply hoard it under their mattresses with impunity.

 

Without the existence of cash, the Central Bank would have more of an ability to combat the dreaded "deflation", as well as boosting aggregate demand, by forcing everybody to spend their money as fast as possible, not just by creating inflation but by actually charging them directly and nominally for the economically destructive practice of saving money.

[ribuck]

Sure they would like to enforce negative interest, but it won't ever happen. Even without technologies such as Bitcoin, people would simply resort to using precious metals or scarce commodities instead of fiat.

 

The banks, on the other hand, are obliged to play the government's games and there are already some countries where they are required to put their excess funds on deposit with the central bank for negative interest.

[shirgall]

This was first tried in Greece, and recently the European Central Bank. We'll see how it flies.