KOKOMO – As a fan of the television series “Stranger Things,” I’ve enjoyed seeing the program’s vision of the “Upside Down” alternate dimension existing parallel to the human world. It’s scary and dangerous and can be found pretty near to where you are standing. Of course, growing up, I closely followed the comic book adventures of Superman and its occasional tale of Bizarro World, a world where everything is pretty much backward from how it should be.

If President Trump gets his way, the United States will soon join the “Upside Down” and Bizarro World with the introduction of negative interest rates.  Before we go charging off into the negative interest great unknown, we should all get a thorough education about what negative interest rates might mean.

Let’s start with the situation of Bargersville, Indiana, retiree Elmer Toadsnuggle. Elmer has a small pension and Social Security. He scraped and saved $100,000 prior to retirement and he’s now shopping for a bank where he can buy one of those high interest certificates of deposit.  

Being a sharp codger, Elmer goes to the same bank where 30 years previously he received a toaster and electric blanket for opening an account. Elmer is a little more than disturbed when he learns from a stern Susie Nomanners, the teller, that not only will he not get a toaster nor an electric blanket, but he will have to pay the bank for storing his money for him. That’s right, Elmer will pay .6% for the privilege of allowing the bank to hold his retirement funds. Elmer tells Susie what she can do with her negative interest rates and storms off looking for anyone else who might give him something for using his money.

Then there’s Mike Millennial. Mike owes $20,000 on a credit card and $60,000 in student loans. He’d like to buy a new car and eventually own a home but interest charges are eating up much of his income. Mike wanders into the same bank that Elmer Toadsnuggle just stormed out of and sees a big sign at the entrance that says, “Be All You Want To Be, We’ll Pay You To Borrow Money.”  Intrigued, Mike discovers that he can get a loan that will pay off his credit card and student loan debt and get loans that will allow him to buy a new car and a starter home. And the best part is that the bank will actually pay Mike for borrowing the money. As Mike pays down his principal on the loans, the bank will pay him a rate for borrowing the money.

Bizarro you say? Impossible you say? Ain’t gonna happen not no way, not no how! It might surprise you to learn that it is happening in other locales around the world.

In Japan, negative interest is charged on deposits. Ditto for Denmark and Switzerland. Germany is now selling 30-year bonds with a whopping 0% interest. That’s right, you give your hard-earned Euros to Angela Merkel and she’ll keep them safe for 30 years and not give you a single penny of interest on your funds. The European Central Bank has plans in place for a negative interest world across the board. If they need negative interest to keep their struggling economies afloat, you can count on them to use the scheme. Since most governments and central banks like to use the tail to wag the dog, what are they trying to accomplish?

As you might expect, negative interest greatly benefits those who owe money and those who would like to buy more stuff but don’t want to pay interest. The winners in a negative interest rate world are generally the less thrifty and the lucky ones who just happen to need a new car, washing machine or a refinance on their 30-year mortgage. But the biggest winners in the negative interest world are governments. All government borrowing in the form of bonds can be refinanced at negative rates and, you guessed it, government can start borrowing to spend even more money. The sins of the father get buried in a sea of red ink.

If I was a Never Trumper, a Democratic candidate for president or a late night talk show host, I might be interested in the inherent conflict that the president might have with the Trump Corporation owing beaucoup billions at the same time that he is beating on poor Federal Reserve Chairman Jerome Powell to drop rates into negative territory. I’ll leave that issue to the press to explore.

The losers in the negative interest game are the savers and retirees who depend on interest for their retirements. They will simply be out of luck, much as they have for the past 10 years if they are bank certificate investors. The greatest threat to these retirees is not the negative interest but the real risk that they will venture into more risky investments in the hunt for ever more elusive yield. This was how junk bonds originally came into being and how those bonds came crashing down in the late 80s. It could happen again, but this time it would be much worse.

There would be additional winners. People who owned things financed by debt would find the value of their assets exploding. Every purchase would be more affordable and prices would rise. Negative rates would do nothing to reduce the wealth disparity in the United States and, in fact, would greatly exacerbate the situation as the rich would get richer and the poor would get relatively poorer. When I talk about the rich, I’m talking about the top 1% who own much of the hard assets in our country.

Just like every economic situation we’ve ever faced as a nation, there will be winners and losers. The problem is that when the game begins, we won’t know who will win or lose until the music stops playing. Musical chairs may be a fine parlor game but should only be engaged in by willing participants.  A negative interest Federal Reserve policy would pull a significant group of participants into a game they can’t understand and don’t want to play. The United States needs to take measured steps down this dangerous path. The downside could be huuuge! 

Dunn is the former Howard County Republican chairman.