Except when you're giving out a loan you're not asking the debtor to "store the wealth", you're asking them to pay you back the principal plus interest when the loan matures.
The debtor is free to do as they wish with your money in the meantime. The debtor is also "free" to default and not give you back anything. The interest rate is supposed to reflect that risk.
In the case of a government bond, you either have the risk of sovereign default, or the risk of currency devaluation to pay back otherwise unservicable debt.
The idea that already heavily indebted governments will be "storing your wealth" is completely naive. They'll be playing this game until suddenly they can't hide the massive inflation anymore, then they'll have to hike interest rates to double digits to get it back under control. This literally just happened in Turkey last year, but it also happened in the US in the seventies.
I agree. The difference is that at large levels of wealth, levels beyond what most of us can realistically imagine happening, then storage becomes an issue.
No regular person is going to buy a bond with a negative interest rate. Just hold cash. But once you start to have large amounts of cash, different considerations enter the picture. How do you store it? Security guards. Guards to watch the security guards. Too much cash is hard to spend, so you want it in electronic form.
The market is now saying that for certain types of cash in electronic form, the risk adjusted fee for creating the electronic record and holding it for you is greater than the interest they will pay you for the money.
In that way, the net interest rate including all factors such as the risk of default, ends up negative.
> The debtor is also "free" to default and not give you back anything. The interest rate is supposed to reflect that risk.
That is not the only thing interest rate is supposed to reflect. Interest rate is supposed to also reflect the price of transferring your consumption over time (if you borrow , you want to consume earlier, if you lend, you want to consume later). And there is no real [1] reason why this price would have to clear only at positive values. So you have also possibly negative components on affecting the interest rate, thus it is completely feasible that the total interest rate is negative.
[1] outside the flawed assumptions of economics textbooks, that is.
The debtor is free to do as they wish with your money in the meantime. The debtor is also "free" to default and not give you back anything. The interest rate is supposed to reflect that risk.
In the case of a government bond, you either have the risk of sovereign default, or the risk of currency devaluation to pay back otherwise unservicable debt.
The idea that already heavily indebted governments will be "storing your wealth" is completely naive. They'll be playing this game until suddenly they can't hide the massive inflation anymore, then they'll have to hike interest rates to double digits to get it back under control. This literally just happened in Turkey last year, but it also happened in the US in the seventies.