Both officials spoke Tuesday at the World Economic Forum in Davos and offered different views on how effective below-zero government bond yields are on stimulating growth.
There's about $11 trillion worth of sovereign debt in the world that carries negative rates, most of it in Europe and Japan. On the surface, it does look like bondholders pay for the privilege of lending money to governments.Those purchasing those products pay a premium, or more than 100 cents on the dollar. If the interest earned during the time they hold the instruments is less than the premium they paid, those bonds are said to carry negative yields.
Kudlow has long been an advocate of pro-growth policies like tax cuts and lower regulation. Global central banks like the Fed have kept interest rates historically low since the financial crisis and have exploded the size of their balance sheets through aggressive asset purchases. "There's nothing wrong with a balance sheet rising," he said. "But where are the tax cuts? Where are the incentives for people to work the extra hour take the extra incentive and take the extra risk?"
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