Editing Interest rate (section)

====Theory====
{{Main|Demurrage currency}}
Given the alternative of holding cash, and thus earning 0%, rather than lending it out, profit-seeking lenders will not lend below 0%, as that will guarantee a loss, and a bank offering a negative deposit rate will find few takers, as savers will instead hold cash.<ref>{{cite news |url= http://blogs.ft.com/maverecon/2009/05/negative-interest-rates-when-are-they-coming-to-a-central-bank-near-you/
|title=Negative interest rates: when are they coming to a central bank near you?
|date=7 May 2009
|first=Willem
|last=Buiter
|author-link=Willem Buiter
|work=[[Financial Times]] blog
}}</ref>

Negative interest rates have been proposed in the past, notably in the late 19th century by [[Silvio Gesell]].<ref name="mankiw">{{Cite news |url= https://www.nytimes.com/2009/04/19/business/economy/19view.html |title=It May Be Time for the Fed to Go Negative |work=The New York Times |first=N. Gregory |last=Mankiw |author-link=N. Gregory Mankiw |date=18 April 2009}}</ref> A negative interest rate can be described (as by Gesell) as a "tax on holding money"; he proposed it as the ''[[Demurrage currency|Freigeld]]'' (free money) component of his {{Lang|de|[[Freiwirtschaft]]}} (free economy) system. To prevent people from holding cash (and thus earning 0%), Gesell suggested issuing money for a limited duration, after which it must be exchanged for new bills; attempts to hold money thus result in it expiring and becoming worthless. Along similar lines, [[John Maynard Keynes]] approvingly cited the idea of a carrying tax on money,<ref name="mankiw" /> (1936, ''[[The General Theory of Employment, Interest and Money]]'') but dismissed it due to administrative difficulties.<ref name="wired">{{Cite magazine |title = Cash and the 'Carry Tax' |first = Declan |last = McCullagh |magazine = WIRED |access-date = 2011-12-21 |url = https://www.wired.com/politics/law/news/1999/10/32121 |archive-url=https://web.archive.org/web/20080617034453/https://www.wired.com/politics/law/news/1999/10/32121 |archive-date=17 June 2008 |date=27 October 1999}}</ref> More recently, a carry tax on currency was proposed by a [[Federal Reserve]] employee (Marvin Goodfriend) in 1999, to be implemented via magnetic strips on bills, deducting the carry tax upon deposit, the tax being based on how long the bill had been held.<ref name="wired" />

It has been proposed that a negative interest rate can in principle be levied on existing paper currency via a [[serial number]] lottery, such as randomly choosing a number 0 through 9 and declaring that notes whose serial number end in that digit are worthless, yielding an average 10% loss of paper cash holdings to hoarders; a drawn two-digit number could match the last two digits on the note for a 1% loss. This was proposed by an anonymous student of [[Greg Mankiw]],<ref name="mankiw" /> though more as a thought experiment than a genuine proposal.<ref>

See follow-up blog posts for discussion: "[http://gregmankiw.blogspot.com/2009/04/observations-on-negative-interest-rates.html Observations on Negative Interest Rates]", 19 April 2009;
"[http://gregmankiw.blogspot.com/2009/04/more-on-negative-interest-rates.html More on Negative Interest Rates]", 22 April 2009; "[http://gregmankiw.blogspot.com/2009/05/more-on-negative-interest-rates.html More on Negative Interest Rates]", 7 May 2009, all in [http://gregmankiw.blogspot.com/ Greg Mankiw's Blog: Random Observations for Students of Economics]</ref>