The European Central Bank cut interest rates below zero for the first time in 2014 following the region's debt crisis.
Global central banks are making investors pay to stash their money. An investment chief overseeing $4.5 billion explains why that would be a disaster for the US.
Here's everything you need to know about negative interest rates, from how they work to why they matter:Interest rates are established by central banks and flow down to commercial banks and other financial institutions. Central banks set a benchmark range for borrowing costs, and commercial banks then take direction from that range to set rates for savings accounts, mortgages, and loans.
The idea behind negative interest rates on savings accounts is to encourage people to spend. If savers have to pay for their money to be stored, ideally they'll be more likely to spend it instead. Bonds have a negative yield when the total amount of interest an investor receives over the life of the bond is less than the premium they paid for it. Investors who purchase bonds with a negative yield and hold them to maturity end up losing money on their investment.
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