Ed --

No worries! It's my job. The whole point of the Enterprising Investor is to help folks understand issues like this better :). I love thoughtful questions like yours, as it not only points out issues in my own explanation (sorry!) but gives me a chance to see what sort of issues I can hit in future posts.

I think I will need to treat this in a forthcoming post, as I want to take some time and do it authoritatively. For the meantime, I'd say that I doubt central banks would allow a zero interest rate on bank deposits in a world of persistent negative interest rates in other asset classes. I'm not sure the mechanic through which they would apply a haircut to a bank deposit, but I imagine they would need some way to address the capital hoarding (and subsequent lack of investment) that would result from allowing bank deposits to yield a nominal 0%. I would bet that they would take action aimed at forcing the yield towards real 0%.

I apologize if that's still unclear! Stick around though -- hopefully I can do a better job in the next few days to come after conferring with colleagues.

All best --

Will