ABSTRACT
With interest rates touching new lows, some of the basic laws of money are breaking down. For example, the “law of compounding” has been one of the most important driving forces behind the evolution and growth of modern finance. And when interest rates become negative, the “law of compounding” works in reverse and negative interest rates pose a serious risk of capital misallocation. All over the world, labor-saving technologies and cheaper capital are putting economies at the risk of jobless growth. Manufacturing processes are more automated today than ever and this trend is unlikely to reverse. When a corporation is evaluating investment options in automated technologies, such an absurdly low cost of capital makes a huge difference. When everything else remains the same, only the low cost of capital is a strong enough reason to transfer more and more work to machines.
