The deflationists must be in shock right now. The Sveriges Riksbank, the oldest central bank in the world, has rejected the very idea of sound money policy.
Today, Riksbank cut Sweden's deposit rate to -0.25%, effectively charging savers interest on deposited money.
The decision on the repo rate will apply with effect from Wednesday, 8 July. The deposit rate is at the same time cut to -0.25 per cent and the lending rate to 0.75 per cent.
Of course this will get instantly pushed through the entire banking system.
"It's a double whammy, or even a triple whammy," said Roger Josefsson at Danske Markets.
"The deposit rates are actually negative now. In some sense they are creating a money machine for banks. You can lend all you want, but don't put that back into the central bank."
This has all sorts of implications. For instance, just when consumers are trying to deleverage in order to weather the economic storm, they are being prevented from doing so. The economy of Sweden, like all 1st world nations, are overflowing with debt. Still, the authorities are determined to keep it from readjusting.
If this "works" in Sweden you can bet that you'll see it elsewhere.