Interest rates are kind of a fiction. When we save we’re buying something now to sell later, that is what is actually happening and it is intermediated by finance. Islamic Finance has a much clearer mechanism to illustrate this. People do not expect the European economy to be much large in the medium term than it is now, this means that durable assets, equity and other savings vehicles won’t be worth much more either this makes finding a positive return difficult.
This has nothing to do with Keynesian ideas of natural rates of interest or socially optimal policy. Transmitting purchasing power through time is just really difficult so periods of negative interest rates shouldn’t be seen as an aberrant tax but as a consequence of technological stagnation in finance or terrible macropolicy making.
I think you can make a very strong case for bot. Finance has grown faster than the rest of the economy since the 1940s but it hasn’t proven four times as effective at intermediating.
I’m on record calling the ECB insane and I’ll do it again. Bad policy making is an incredibly important reason for why interest rates might go south of zero. It’s difficult to be confident we’ll be richer in the future than the past when unemployment in Europe is doing this:
At the moment far too many people want to buy stuff now relative to the future. Ten percent of firms close each year. You need to spend one percent of your home’s value on upkeep each year. This is another way of saying that buying stuff now and then selling it for more in the future is a pretty amazing thing, low interest rates, even negative interest rates are nothing to be amazed by. They’re the only way to reconcile the present and the future.