Keynesian Epicycles: Justifications of Below-Zero Bound Interest Rate Policy

``Evan Soltas writes that if people aren't converting deposits to currency, one explanation is that it's just expensive to carry or to store any significant amount of it. Therefore, the true lower bound is some negative number: zero minus the cost of currency storage. How much is that convenience worth? It seems like a hard question, but we have a decent proxy for that: credit card fees, counting both those to merchants and to cardholders. That's because the credit-card company is making exactly the same calculus as we are trying to make -- how much can we charge before we make people indifferent between currency and credit cards? The data here suggest a conservative estimate is 2 percent annually.'' -- It's rather simple; with interest rates permanently suppressed to prop up governments and the big banks, there is no incentive to invest, therefore there is no business growth, therefore no borrowing either, and thus all anyone wants to do is hoard cash. That means people look for what is perceived as the "safest option" (i.e.: flight to safety). Charging a few points of negative interest on money (at least large scale deposits) is not enough to change this dynamic.