Ex-BOE’s King Warns of Cash Under the Mattress Scenario

The video discusses the limitations of negative interest rates, particularly in Europe, where they pose challenges for commercial banks and society. It highlights the potential negative impact on retail customers, who may withdraw cash if banks pass on negative rates. The video questions the reliance on monetary policy to address economic weaknesses, suggesting that other policy tools and resource reallocation are needed for effective solutions.

Why are central bankers limited at the zero bound in Europe?

• Because positive interest rates are harmful to the economy.

• Because zero interest rates lead to high inflation.

• Because negative interest rates are beneficial for commercial banks.

• Because negative interest rates are not feasible for commercial banks and society.

What might happen if banks pass negative rates to retail customers?

• Customers might invest more in the stock market.

• Customers might leave their money in the bank.

• Customers might withdraw their cash and store it at home.

• Customers might increase their spending.

What is questioned about monetary policy in this section?

• Its effectiveness in controlling exchange rates.

• Its impact on reducing unemployment.

• Its role in addressing every economic weakness.

• Its ability to increase inflation.

What does the speaker suggest about the effectiveness of expansionary monetary policy over the past decade?

• It has improved employment rates.

• It has caused a decrease in inflation.

• It has been ineffective in significantly boosting growth.

• It has led to rapid economic growth.

What alternative approach is suggested to address economic issues?

• Increasing taxes.

• Reallocating resources within the economy.

• Reducing government spending.

• Implementing stricter monetary policies.