The bank could just keep the 1000 dollars, not lend it out, and at the end of the year the bank would have 1000 dollars not 950. And that 1000 dollars, due to deflation, is worth more in terms of purchasing power, than it was a year previous. Banks would have no incentive to lend at negative interest rates. If the only way people would be able to afford to borrow is if nominal interest rates are negative, lending will not happen because the bank could just hold the cash.Further, if the banks were charging negative interest rates, or even extremely low positive interest rates on loans, in order to make any profit, they would have to pay negative interest rates to their depositors. If that happened then people would not deposit money in the bank. Why would someone put money in the bank if the bank kept reducing their balance without that person withdrawing any money? If they just held the cash they would be better off. If all the banks were giving negative interest on deposits, then no one would deposit any money and in fact everyone would start withdrawing their money. This, in essence, would be a run on the banks.
This happened a few years ago. This was after school. I was getting a headstart on a project that’s due a few weeks away when one of my friends called me. She told me that she needed to tell me something urgently and asked me if I can meet her at the park in our neighborhood. Obviously, I went, out of concern. When I went, we were just randomly walking around in the park when she suddenly started fidgeting. I asked her what’s wrong and she told me that she’s afraid to tell me and that she’s scared that I’ll judge her. I said that she didn’t have to be and that if she did nothing wrong, she had nothing to be afraid of. That seemed to cool her down because the next thing I knew, she was trying to kiss me. She made a move on me that totally caught me off-guard, but before before her lips could touch mine, I instinctively reached out and slapped her.