The picture above is from Santander Consumer Bank AG in Germany. According to their web site, they want you to take out a loan at "-1.0% financing for 24 months".
In case that isn't clear, negative 1.0% interest rates means they pay you to borrow money.
(Before you try calling them, you have to be German to qualify.)

I know what you are thinking. It must be a mistake. No one would ever pay for the right to loan money, right? That's just bizarre.
Yet, there is this (via Google Translate).

Getting paid to borrow money for your house. It seems too good to be true, but for some clients of BNP Paribas and ING is not a dream but reality. The interest rate on their home loan is dropped below zero and so they get money from the bank.
Who in 2012 concluded a mortgage loan variable rate at BNP Paribas Fortis or ING has very lucky. Due to a decline in interest rates, the interest rate on their home loan has also fallen below zero. In other words, the banks pay their customers rather than collect interest. This writes the newspaper De Tijd.

Better ask Alice for directions, because we have gone through the looking glass.

To be fair, Denmark was first with negative interest mortgages, and then came Spain.

Here's how it works. Mortgage interest in Europe is often pegged to interbank lending rates known as Libor or Euribor. Short-term rates on a Swiss franc version of Libor are now approaching minus 1.0%.
Spain's Bankinter, which sold mortgages pegged to Swiss Libor, told CNN it couldn't pay interest on a loan (go figure!) so instead reduced the principal for some of its customers.

"It's not healthy, it's not sustainable, it's mad."
- José María Roldán, head of the Spanish Banking Association

Bankers paying borrowers to take their money is turning 1,000 years of capitalist fundamentals on it's head.

Let's be clear on something: negative interest rates are not supposed to happen. Period. The entire discussion of NIRP has been the domain of theoretical economics for generations.
The reason is obvious. Why loan money to someone at a negative interest rate when holding cash instead makes more sense?
Even during the deep deflation of the Great Depression, interest rates never went below zero.

It doesn't take a financial wizard to see that this makes absolutely no sense at all, and is destined for tears.
Actually, let me rephrase that.
Being a financial wizard appears to be a hindrance to recognizing just how stupid this is.

Sub-zero interest rates in Europe and Japan are “net positives” for the global economy, International Monetary Fund chief Christine Lagarde said Tuesday

Yes, you can be so over-educated that it makes you a moron. (see Economists/2008/Subprime)
Of course Lagarde also recently said, "When the world goes downhill, we thrive," so take it for what it's worth.

Fortunately, not all the bankers are so disabled.

The chairman of France's second-biggest retail bank is more worried about Europe's banking sector now, in some ways, than when he took the reins at BPCE bank during the depths of the global financial crisis in 2009.
Francois Perol said on the sidelines of an economic conference in Italy on Saturday that negative interest rates in the euro zone were a major problem, squeezing interest margins in a way that was unsustainable over the longer term.
"I am much more worried than I was in 2009 in certain respects."

So paying people to borrow money is unsustainable? You don't say.
Morgan Stanley called NIRP a “dangerous experiment’ that will erode bank profits 5%-10%.

The European Central Bank (ECB) lowered its deposit rate below zero, after all, and also buys bonds en masse to push market interest rates down.

Negative interest rates are an enormous part of the market now.

More than $26 trillion of government bonds now trade at yields of below 1%, with around $7 trillion currently yielding less than 0%. Government bonds in Germany with a maturity of seven years are trading at negative yields, while Swiss and Japanese government bonds out to 10 years trade at negative yields.

More than 46 percent of all non-U.S. sovereign bonds now yield less than zero.
Even Italy is selling bonds with negative interest rates. A serial defaulter like Italy. That's like paying Charlie Sheen to watch your stash of coke.
Even corporations are issuing negative rate bonds.

So besides squeezing bankers profits, what are the negative side effects?
For a good example of how badly things can go wrong I give you Japan, where the BoJ just recently adopted NIRP.
There's a free Snickers bar for the first person who can guess the moment in this chart where negative interest rates started.

Two months after the BOJ said it would start charging interest on some lenders’ reserves, the outstanding balance in the interbank call market tumbled to a record low 2.97 trillion yen ($27 billion) on March 31, according to Tanshi Kyokai data going back to 1988. While the brokers association and the Japan Securities Depository Center said two weeks ago they had upgraded systems to settle transactions at sub-zero yields, traders say more than technical issues are preventing a revival.
“Among central banks, the BOJ is the one that destroys functioning markets the most,” said Izuru Kato, the president of Totan Research Co. in Tokyo. “Companies will slash staff and scale back operations where activity is grinding to a halt, exposing markets to spikes in rates when the time comes for normalization.”

NIRP isn't just breaking Japan's interbank lending.
Japan's bond market is breaking as well.

Signs of stress are multiplying in Japan’s government bond market, which is crumbling under pressure from the central bank’s unprecedented asset-purchase program and negative interest rates.
Bank of Japan Governor Haruhiko Kuroda has repeatedly said his policies are having the desired effect on markets, including suppressing JGB yields. His success is driving frenzied demand for longer-dated notes as investors avoid the negative yields offered on maturities up to 10 years. And as buyers hang on to debt offering interest returns, the BOJ is finding it harder to press on with bond purchases of as much as 12 trillion yen ($106 billion) a month, sparking sudden price swings leading to yield curve inversions that have nothing to do with economic fundamentals.

Even before the BoJ broke the bond market with NIRP, they completely destroyed money markets fund in Japan.

All 11 companies running money-market funds stopped accepting new investments, citing the BOJ stimulus. They plan to return money to investors, the Nikkei newspaper reported, and money from the funds is moving to deposits, according to analysts at Deutsche Bank.
While the BOJ’s monetary easing policies are meant to stimulate lending and encourage borrowing, lending growth slowed slightly in February while deposits rose -- the exact opposite of what the bank was aiming for.

Nowhere has NIRP been a bigger failure than in Japan. If it continues for long Japan's economy will collapse. And yet no one in a position of authority has pointed out that the Emperor has no clothes.

"Let's be clear: Negative interest rates are terrible."
- BlackRock CEO Larry Fink

Other side effects of NIRP are as equally unsurprising.
Moody's Investors Service concluded that three countries with NIRP, Sweden, Switzerland, and Denmark (the originators of negative rate mortgages) "the unintended consequences of the ultra-loose monetary policy are becoming increasingly apparent -- in the form of rapidly rising house prices and persistently strong growth in mortgage credit."
Imagine that. When you pay people to take out mortgages you create housing bubbles.

NIRP also means punishing savers for saving money.
The response in Germany was predictable.

The European Central Bank's negative interest rates are sparking demand for safe deposit boxes, where bank customers can store cash to avoid the prospect of paying the bank interest on their accounts, German bankers said.

In Japan there was a run on home safes for the same reason - to store cash.
It isn't just retail customers.

German reinsurer Munich Re is boosting its gold and cash reserves in the face of the punishing negative interest rates from the European Central Bank, it said on Wednesday.

This dash for cash has prompted some economists and bankers to propose banning cash, thus eliminating the ability of people to protect themselves from NIRP.

There is one other side effect to NIRP that should have been obvious, but for some reason central bankers are still refusing to acknowledge.

"Not nearly enough attention has been paid to the toll these low rates — and now negative rates — are taking on the ability of investors to save and plan for the future."
"This reality has profound implications for economic growth: consumers saving for retirement need to reduce spending... A monetary policy intended to spark growth, then, in fact, risks reducing consumer spending."

Finally, there is the fact that negative interest rates encourages investment in excess capacity, which in turn drives down prices for goods and services. This creates a deflationary feedback loop in a time of very low inflation.

Most economies with negative rates are caught in a credit trap. Credit demand is weak and credit supply is constrained. Policy measures such as negative rate and additional QE are increasingly ineffective.

In essence, central bankers are treating a global demand problem (i.e. the consumers are broke and in debt) as a supply problem (i.e. the consumers need more loans).
Stephen Roach calls this misdiagnosis "the greatest failure of modern central banking."

Why does this matter to me?

The question above requires a multi-part answer.
First of all, take a look at this chart.

Notice that every time a recession hit, the Fed dropped interest rates to combat the slow-down.
Also notice that interest rates are near zero, so knowing that NIRP doesn't work, in the event of the next recession, further cuts will have no real positive effect (this chart is similar to the rest of the developed world).
35 years of falling interest rates are over. An era has ended. Monetary policy can no longer cover up for fiscal failure.

I seriously doubt the global political and financial establishment has come to terms with this fact.
But they will, when the next crisis hits.

Central banks have another tool - an enforcement tool - called quantitative easing (QE), the buying of financial assets in order to influence interest rates.
It's only supposed to be used in case of emergency.

Central banks have been at DefCon1 for eight years now.

The balance sheet assets of the world's six major central banks hit a new all-time record, increasing to $16.9 trillion from $4.9 trillion 10 years ago, a 239 percent increase.
The balance sheet asset of the Fed, which has been leading the monetary policies of America, the world's largest economy, reached $4.495 trillion, equal to 25.41 percent of the country's combined GDP. This proportion was 6.17 percent in 2006.

So what? What's to stop them from continuing this forever?
Once again, Japan is the note of caution.

The total assets of the Bank of Japan (BOJ) reached 70 percent of the country's GDP in 2015 with $2.834 trillion, compared to 24.27 percent in 2006.

Japan's central bank has bought up so many of its bonds that liquidity in their bond market has dried up. It's a major reason why NIRP in Japan is a bigger disaster than anywhere else.
Thus QE, like falling interest rates, has both diminishing returns and an upper limit.

Also, this unprecedented and massive purchase of bonds by central banks has distorted (and was meant to distort) asset prices. Any attempt at "normalization" will have dramatic and negative effects on prices (and profits).
Once again, I don't believe politicians and economists understand what has happened here.

As more and more people recognize the failure of NIRP you might think that they would step back and re-evaluate their actions.
But you would be wrong. Instead they are preparing for the biggest and most dangerous experiment of them all.

Faced with political intransigence, central bankers are openly talking about the previously unthinkable: "helicopter money".
A catch-all term, helicopter drops describe the process by which central banks can create money to transfer to the public or private sector to stimulate economic activity and spending.
Long considered one of the last policymaking taboos, debate around the merits of helicopter money has gained traction in recent weeks.
ECB chief Mario Draghi has refused to rule out the prospect, saying only that the bank had not yet “discussed” such matters due to their legal and accounting complexity. This week, his chief economist Peter Praet went further in hinting that helicopter drops were part of the ECB's toolbox.

Germany's finance minister has threatened to sue the ECB if they do use "helicopter money".

Since the negative effects are so obviously a failure, I guess success has been redefined to meaning "not causing a complete collapse". Sort of like how the GWOT has gone.