[Alberta's Child]

I think we are looking at deflation from completely different perspectives. I'm looking at it in terms of an underlying economic trend, not as it relates to an individual loan transaction.

The bank will never lend money at a negative interest rate, but it could absolutely find itself in a position where the "market rate" for a loan is negative (i.e., the bank hypothetically has to pay someone to borrow money). In this case, the bank simply doesn't underwrite any loans. You can theoretically borrow money at a negative interest rate, but nobody is there to lend you the money.

Note that there's no special distinction between low and negative interest rates in this situation. You already see the effects of this when interest rates are low, even if they are still positive.

[Garth Tater]

but it could absolutely find itself in a position where the "market rate" for a loan is negative (i.e., the bank hypothetically has to pay someone to borrow money). In this case, the bank simply doesn't underwrite any loans.

You've misunderstood. The banks will charge positive interest rates for loans that THEY make and will be happy to underwrite loans for creditworthy borrowers. The negative interest rates will be on money that YOU loan them. Every nickel you put in a bank nowadays is a loan to that bank. That is what the term "bank bail-in" refers to. The laws authorizing bank bail-ins have already been signed here in this country. The abolition of cash is on its way.