On December 10, it finally happened. Instead of requiring the government to pay interest in exchange for lending money, a group of investors offered to pay the government in order to lend them money.

Quite naturally, the offer was accepted.

The government needed $1.5 billion, which it pledged to repay on March 26.

He launched calls for tenders. What was the lowest return an investor would lend him money?

It was not short of offers. He rebuffed $8.2 billion in offers, and some of them were willing to accept very low returns.

The lowest was -0.01%. The minus sign indicates that instead of the government paying the lender a return for lending to them, the lender would pay the government a return for the privilege of lending to them – a perfectly legal reverse if you will.

The lowest bid for the $1.5 billion loan was at a negative interest rate.(Australian Office of Financial Management (AOFM))

The government got a good chunk of the $1.5 billion for less than nothing.

Some of the bidders demanded more, but nothing too far into positive territory.

This happened because selling bonds benefits both parties: the government can borrow the money it needs and the investor gets a safe place to park their money.

In these circumstances, where the benefits go both ways, there is no reason to assume that the final payment will go only one way.

And sometimes the chosen direction is arbitrary. Economist Joshua Gans gave an update on Twitter talking about the coronavirus vaccine.

He said: “Half of economists think people should be paid to be vaccinated, the other half think they should be paid to be vaccinated sooner.

“Can we at least determine if the price is positive or negative?

Two people blur while walking past a sign on a black tiled wall.  It says RESERVE BANK OF AUSTRALIA
Selling bonds benefits both parties: the government can borrow the money it needs and the investor gets a safe place to park their cash.(PA: Joel Carrett)

Which bank pays which bank?

Two banks are involved when you take out a debit card to pay for a purchase: your bank (which issues the card) and the seller’s bank (which accepts the card).

Who should pay whom? Usually the seller’s bank pays a fee to the buyer’s bank, but not always. Depending on the type of card and bank, sometimes the fee runs in the other directionfrom the buyer’s bank to the seller’s bank.

The truth is that both parties benefit from the transaction, and to whom the banks ultimately pass the costs (the buyer or the seller) is another matter altogether.

Home recording kills the music?

A man sorts a box of old cassettes
The advent of cassette tapes worried record companies, but the fears were misplaced.(ABC News: Hannah Laxton-Koonce)

The advent of cassette recorders spooked record labels, and throughout the 1970s, 1980s and 1990s they persuaded the governments of Australia, Canada, the United States and much of the Europe to impose Specimens (taxes) on the sale of blank recording media such as cassettes and compact discs in order to compensate companies that would suffer.

There was only one problem. Businesses have not suffered. The advent of the cassette made it possible to listen to recorded music in places other than the living room record player (notably in cars and later, with the Walkman while walking or jogging).

Time spent listening to recorded music skyrocketed, US recorded music sales more than doubledand record labels took in more money than ever before.

Radio stations should pay to play, or…

On the contrary, record labels should have paid cassette suppliers rather than the other way around.

The same type of two-way exchange occurs when radio stations play music.

Radio stations pay artists, composers and record companies for the music they play (but not a lot) and sometimes record companies pay radio stations (pay) in order to ensure the reading of their discs.

In 1970, Australia’s six biggest record companies demanded more money from radio stations, which they refused to pay. The resultant “recording bansaw commercial radio drop British and Australian artists represented by the majors and instead play local American and independent artists whose companies were not asking for more money.

Without airplay, sales faded. The long and winding road cracked the first five places it was posted, but not in Australia.

Six months later, each side realized needed the other.

Google should pay for the newspapers, or….

The compact first edition of the Sydney Morning Herald.
Newspapers can benefit from Google and Facebook granting access to their content.(ABC News: Giulio Saggin)

Now the government is insisting that platforms such as Google and Facebook pay news outlets for the content they link to, which looks like a world first.

Or at least it seems to be. The original bill published in April required the arbitral college to take into account the direct and indirect benefits of news content for the digital platform.

After representations from Google and Facebook, the revised version final legislation released in December also requires the panel to consider the benefit “to the registered news industry” of having the digital platform pointing to its content.

This advantage is huge. Without Google and Facebook, news sites would be devoid of traffic (which is why they allow Google and Facebook to point to their content).

The treasurer calls it a “two-way exchange of value“. At least for me, it is no longer clear in which direction the money should flow.

Prices can be both negative and positive.

Peter Martin is a visiting scholar at the Crawford School of Public Policy at the Australian National University. This article first appeared on The conversation.

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