Essay makes the case that 0% interest rates – which translate to negative real interest rates after inflation – are a massive transfer of wealth from investors to governments & other borrowers around the world .. “We’ll show that the scale of the transfer is nearly $1 trillion per year in the U.S. alone and will argue that the zero-interest-rate policy lowers expected returns on stocks and real estate as well. Low interest rates hurt more than just investors. Everyone suffers because low rates distort consumption and investment decisions, potentially causing economic growth to be slower than it otherwise would be .. Negative real interest rates are a nefarious tax, punishing savers and depriving the economy of one of its primary sources of income .. Financial repression in this century is thus represented by the space between the zero axis and the red real-rate line. That is the ‘tax’ paid by savers due to the zero interest-rate policy. Actually, that is a low estimate of the tax because real interest rates are usually positive, representing a reward to the investor for deferring consumption .. What a mess. It will take teams of PhDs years to unravel all the distorted incentives, capital misallocations and foregone savings opportunities that emerge from the financial repression of the early 21st century.”

Laurence B. Siegel is the Gary P. Brinson director of research at the CFA Institute Research Foundation, and an independent consultant. Thomas S. Coleman is executive director of the Center for Economic Policy at the Harris School of Public Policy, University of Chicago.