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Once they open this Pandora's Box there is no going back.
They do not know what will happen if negative rates are pushed on customers.
The "they" being the economists and bankers that live and breath this stuff.
Coincidentally currency circulation has gone up in those countries that now have NIRP..Japan, Denmark and Switzerland. Not that the money is being spent but that the money is no longer being held in the bank.
Once that capital flight starts you cannot stop the flow.
Yes and at the same time electronic payments slowly become the norm, larger denomination bills are quietly discontinued, fees incrementally increase, etc., and then you suddenly realize the frog has been boiled. Just watch Europe, that is how it is done.
Having savings for your rainy day, or for some kind of future investment is something to be discouraged and punished. Because you might be a drug dealer or terrorist? Please.
Maybe I'm not too bright, but exactly what does a negative interest rate mean? I understand it's a stimulus method to discourage money hoarding, but what does that mean to both borrowers and savers? For a borrower, does that mean a bank pays me to borrow? As a saver would that imply penalties for saving?
currently the neg rates apply to BANKS, putting money in central banks etc.
It is an inter-bank issue intended to encourage the banks to put monies to work
We simply can't have RETAIL neg interest rates , without having mass withdrawals and perhaps causing an actual run on banks.
SO what do neg rates mean to consumers. It means that nothing else has worked. nothing else has forced money to go to work rather than rest safely in a vault.
currently the neg rates apply to BANKS, putting money in central banks etc.
It is an inter-bank issue intended to encourage the banks to put monies to work
We simply can't have RETAIL neg interest rates , without having mass withdrawals and perhaps causing an actual run on banks.
SO what do neg rates mean to consumers. It means that nothing else has worked. nothing else has forced money to go to work rather than rest safely in a vault.
Because there is no stability. This bogus recovery is going on 7 years old now (recession officially over June 2009). Data calculations have been modified always resulting in "better numbers".
The GDP calculation got fudge enough to bump it up 3% vs reality.
And if you read foreign news other countries are doing the same.
Lots of creative accounting to bolster positive GDP numbers.
And the people aren't fooled anymore. So they are paying down debt and saving their money.
So, if I understand, it will cost me money to put my money in the bank, better to keep it at home (just sayin'), so I have $100 to save
Then, I borrow money from the bank, let's say $100, but I only need to pay back $99 next month
Why not borrow $100 every month, pay back the $99 every month, pocket the $1, I'd be making 12% annual return, right?
Rates are not going to go down to -12%. -0.1% or so is a more likely starting point.
Negative interest rate loans are not going to be available to bank customers, just as ZIRP did not cause zero interest rate loans to be available to bank customers. ZIRP cause interest rates for borrowers to go very low, such as 3% mortgages and 2% car loans, but no one is getting 0% mortgages or car loans (except maybe for introductory rates, but those have always been around).
As for the questions on "bank run" - Yes that is precisely the point. The Gov't wants us to get our money out of the banks and put it in stocks, bonds, real estate, buy a new washing machine or car or flat screen TV, or just do something with it other than leave it sitting in a bank.
Depends on where you are looking at things from!!!
From the top down I'd agree with you. From the bottom up?
Wages are 45% of GDP so double wages and you only have to increase the cost of everything by 45% to cover the expense of the higher wages. 2x the wages for an increase of 1.45x the cost to cover it. How greedy will the top be? Put a 90% tax on the top and they can be as greedy as they want as long as it gets rolled over into a basic income. From the bottom up driving inflation with wages looks good to me.
Rates are not going to go down to -12%. -0.1% or so is a more likely starting point.
Negative interest rate loans are not going to be available to bank customers, just as ZIRP did not cause zero interest rate loans to be available to bank customers. ZIRP cause interest rates for borrowers to go very low, such as 3% mortgages and 2% car loans, but no one is getting 0% mortgages or car loans (except maybe for introductory rates, but those have always been around).
As for the questions on "bank run" - Yes that is precisely the point. The Gov't wants us to get our money out of the banks and put it in stocks, bonds, real estate, buy a new washing machine or car or flat screen TV, or just do something with it other than leave it sitting in a bank.
They are not hoarding it for convenience, they are worried about their potential layoffs, another massive recession, and what they will live on if/when the s... really hits the fan. The year 2008 was not that long ago. The problems haven't really been solved. Now we have a volatile election year on top of everything else. So, Simon says go buy a boat with your life savings? Now? Invest like you did in 2007? Some of us bought houses right before the crash. If my mother had invested as her trusted bank advised her in 2006 she would have lost everything and been in the poor house in her old age.
Rates are not going to go down to -12%. -0.1% or so is a more likely starting point.
Negative interest rate loans are not going to be available to bank customers, just as ZIRP did not cause zero interest rate loans to be available to bank customers. ZIRP cause interest rates for borrowers to go very low, such as 3% mortgages and 2% car loans, but no one is getting 0% mortgages or car loans (except maybe for introductory rates, but those have always been around).
As for the questions on "bank run" - Yes that is precisely the point. The Gov't wants us to get our money out of the banks and put it in stocks, bonds, real estate, buy a new washing machine or car or flat screen TV, or just do something with it other than leave it sitting in a bank.
Wow. I completely agree with you. Saving used to be encouraged and rewarded years ago with high interest bearing savings accounts. Today, parking your money in a 0% savings account nets you a 3% loss annually due to inflation. Additionally, bank fees greatly outweigh interest.
In order for savers to compensate, they are forced to move their money into risky investment accounts hoping they achieve a high enough % return to keep pace. Even a 5% annual return in stocks may not be enough to offset losses since you get hit with capital gains taxes.
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Because you might be a drug dealer or terrorist? Please.
