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Old 09-13-2019, 06:21 PM
 
10,074 posts, read 10,368,323 times
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Quote:
Originally Posted by Avondalist View Post
European banks have not passed on negative rates to consumers yet. The first bank to do so will see a huge outflow of deposits so no bank wants to make the first move.
It's not easy to spook millions of people. I am saying if it does happen then how many banknotes are in circulation. At first glance there seems to be more than enough in most countries. But Japan has so much money invested in banknotes that getting that money back into circulation is proving to be a major impediment to their economy.
  • Japan has 9.873 billion 10,000JPY yen notes in circulation at end of 2017 for a population of 126.7 million. That is 78 notes per inhabitant (including children).
  • USA has 13.3 billion $100 notes in circulation at end of 2018 for a population of 330 million
  • Euro Area has 10.78 billion €50 notes and 2.92 billion €100 notes in circulation at end of July 2019 for a population of 380 million. The €200 banknote is just starting to increase in popularity, and while there is some debate about how quickly the €500 banknote will vanish, it is not going to increase.

    Production orders since 2016 of the new Europa series are 9.57 billion €50 notes, 3.15 billion €100 notes , and 1 billion €200 notes. There are still 479 million €500 notes in circulation, which is down 22% since the ECB announced that this denomination would not be included in the Europa series.

While the USA would seem to have plenty of $100 banknotes, if 9 billion are circulating overseas, and maybe 2 billion are not the color notes, there are not really that many to handle a massive rush on the banks. You can say we can always print more, but there are legal and logistics challenges to printing several billion extra $100 banknotes.

Sweden with only 83 million 500 kr banknotes worth ~€50 for a population of 10 million cannot have any kind of rush on the banks. Since most banks do not handle cash at teller windows, the ATMs would be empty in an hour. Sweden has not had a banking crisis since 1993, so they are not expecting it to happen again. They may have a safe full of 1000kr banknotes in case of an emergency.

Last edited by PacoMartin; 09-13-2019 at 06:45 PM..
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Old 09-13-2019, 06:54 PM
 
2,015 posts, read 672,805 times
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Quote:
Originally Posted by PacoMartin View Post
It's not easy to spook millions of people. I am saying if it does happen then how many banknotes are in circulation. At first glance there seems to be more than enough in most countries. But Japan has so much money invested in banknotes that getting that money back into circulation is proving to be a major impediment to their economy.
  • Japan has 9.873 billion 10,000JPY yen notes in circulation at end of 2017 for a population of 126.7 million. That is 78 notes per inhabitant (including children).
  • USA has 13.3 billion $100 notes in circulation at end of 2018 for a population of 330 million
  • Euro Area has 10.78 billion 50 notes and 2.92 billion 100 notes in circulation at end of July 2019 for a population of 380 million. The 200 banknote is just starting to increase in popularity, and while there is some debate about how quickly the 500 banknote will vanish, it is not going to increase.

    Production orders since 2016 of the new Europa series are 9.57 billion 50 notes, 3.15 billion 100 notes , and 1 billion 200 notes. There are still 479 million 500 notes in circulation, which is down 22% since the ECB announced that this denomination would not be included in the Europa series.

While the USA would seem to have plenty of $100 banknotes, if 9 billion are circulating overseas, and maybe 2 billion are not the color notes, there are not really that many to handle a massive rush on the banks. You can say we can always print more, but there are legal and logistics challenges to printing several billion extra $100 banknotes.

Sweden with only 83 million 500 kr banknotes worth ~50 for a population of 10 million cannot have any kind of rush on the banks. Since most banks do not handle cash at teller windows, the ATMs would be empty in an hour. Sweden has not had a banking crisis since 1993, so they are not expecting it to happen again. They may have a safe full of 1000kr banknotes in case of an emergency.
I meant that the first bank to charge negative rates would see a huge outflow of deposits to other banks not charging negative rates, not that cash would be withdrawn. Although I'm sure a lot of cash would be withdrawn from that bank and others.
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Old 09-13-2019, 09:30 PM
 
10,074 posts, read 10,368,323 times
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Quote:
Originally Posted by Avondalist View Post
I meant that the first bank to charge negative rates would see a huge outflow of deposits to other banks not charging negative rates, not that cash would be withdrawn. Although I'm sure a lot of cash would be withdrawn from that bank and others.
The repo rate has been the Riksbank's (Sweden's Central Bank) policy rate since 1994. The repo rate is the rate of interest at which banks can borrow or deposit funds at the Riksbank for a period of seven days.

The last day since Sweden's Repo rate was last positive on 28. Oct. 2014
-0.25% 13. Sep. 2019 since 09. Jan. 2019
-0.50% 08. Jan. 2019 since 17. Feb. 2016
-0.35% 16. Feb. 2016 since 08. Jul. 2015
-0.25% 07. Jul. 2015 since 25. Mar. 2015
-0.10% 24. Mar. 2015 since 18. Feb. 2015
0.00% 17. Feb. 2015 since 29. Oct. 2014
0.25% 28. Oct. 2014 since 09. Jul. 2014
0.75% 08. Jul. 2014 since 18. Dec. 2013
1.00% 17. Dec. 2013 since 19. Dec. 2012

The banknotes in circulation in Sweden has been reduced by 27.8% since Dec 31, 2014

From 75,417 million SEK to 54,480 million SEK or roughly from 754 to 545 per person.

Swedish banks do not charge their customers negative interest rates either, but Swedes do not have the option of changing bank accounts to domestic banknotes in large numbers even if they wanted to. It is not illegal for them to acquire Euro banknotes.
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Old 09-14-2019, 07:06 AM
 
Location: Central CT, sometimes NH.
3,540 posts, read 5,212,384 times
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Quote:
Originally Posted by SkyDog77 View Post
The savings glut is what is forcing rates down to begin with. Basic supply/demand.

Lower rates lead to more investment and less savings, but the question I have is how linear that is. Rates are already super low. How much are firms sitting on projects waiting for even lower rates.

I’m sitting through a series of lectures with a senior Fed official over the course of the next few months. Very interested to get his perspective.
Trade uncertainty and lack of truly revolutionary investment opportunities is the reason many businesses are not investing. Many established businesses provide the less sexy everyday goods and services needed for us to live our lives. A lot of new businesses are selling goods and services where they are trying to establish a need but in many cases they are not truly revolutionary. True growth needs to capture the needs of a growing population both in absolute terms and in income. That is where large populations like China and India factor in. American companies of all sizes know that they need a presence in those markets to generate growth. It's not just about a supply chain for cheap products here.

Alternative energy, its infrastructure and transportation systems are opportunities here and abroad for American companies to prosper. Current changes in policy are working against these new technologies and does not support the necessary improvements to infrastructure and transportation systems. Other countries, like Germany and China are supportive of these technologies and their governments are investing heavily with both capital and educational resources and training. We do not and leave it largely to the private sector. This lack of a plan specifically in education is evident in our inability to generate enough skilled talent for our own companies and a severe shortage of technical talent for the nuts and bolts work.
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Old 09-14-2019, 11:49 AM
 
Location: Washington Park, Denver
7,201 posts, read 6,779,293 times
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Quote:
Originally Posted by Lincolnian View Post
Trade uncertainty and lack of truly revolutionary investment opportunities is the reason many businesses are not investing. Many established businesses provide the less sexy everyday goods and services needed for us to live our lives. A lot of new businesses are selling goods and services where they are trying to establish a need but in many cases they are not truly revolutionary. True growth needs to capture the needs of a growing population both in absolute terms and in income. That is where large populations like China and India factor in. American companies of all sizes know that they need a presence in those markets to generate growth. It's not just about a supply chain for cheap products here.

Alternative energy, its infrastructure and transportation systems are opportunities here and abroad for American companies to prosper. Current changes in policy are working against these new technologies and does not support the necessary improvements to infrastructure and transportation systems. Other countries, like Germany and China are supportive of these technologies and their governments are investing heavily with both capital and educational resources and training. We do not and leave it largely to the private sector. This lack of a plan specifically in education is evident in our inability to generate enough skilled talent for our own companies and a severe shortage of technical talent for the nuts and bolts work.
Agree. Specific to China, their Net Exports (Export of goods - Import of services) have dropped over $200B from 2007 to 2018. Trump seems stuck on the 2007 numbers.
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Old 09-14-2019, 02:01 PM
 
Location: WA
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As I understand his call for lower rates is to reduce the cost if the country's debt. Selling long term bonds at zero rates would make a huge difference in the budget.
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Old 09-14-2019, 02:06 PM
 
73,564 posts, read 73,400,278 times
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Quote:
Originally Posted by cdelena View Post
As I understand his call for lower rates is to reduce the cost if the country's debt. Selling long term bonds at zero rates would make a huge difference in the budget.
Especially if they do it near zero with 50 year bonds which they are thinking of doing
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Old 09-14-2019, 03:54 PM
 
Location: Brawndo-Thirst-Mutilator-Nation
16,809 posts, read 16,943,278 times
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Mainly shuttling money into or keeping money in the stock-market.............where else you gunna go with rates near rock-bottom for most other investments???
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Old 09-15-2019, 03:17 AM
 
10,074 posts, read 10,368,323 times
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Quote:
Originally Posted by cdelena View Post
As I understand his call for lower rates is to reduce the cost if the country's debt. Selling long term bonds at zero rates would make a huge difference in the budget.
Which actually would make some sense if you used the period with low interest rates to reduce the debt. That way when rates go back up your principal would be somewhat smaller.


26 December 1978 the prime rate was 11.75% and the USA had very little cash in circulation (per individual)
31 December 1978 Country
$2,008 Switzerland
$1,229 Belgium
$772 Sweden
$724 Japan
$680 Germany
$679 Netherlands
$605 France
$428 United States
$394 Italy
$326 United Kingdom
$320 Canada

14 December 2017 the prime rate was 4.50% and the USA has a lot more cash in circulation (per individual)
31 December 2017 Country
$10,280 Switzerland
$7,948 Hong Kong
$7,818 Japan
$6,106 Singapore
$4,960 United States
$4,227 Euro area
$2,606 Australia
$2,021 Canada
$1,966 Korea
$1,663 Saudi Arabia
$1,429 United Kingdom (2016)
$1,123 Russia
$944 Argentina
$852 China
$698 Sweden
$631 Mexico
$437 Turkey
$365 Brazil
$227 South Africa
$218 India

While the USA has more cash in circulation than the Euro Area, most of it's cash is circulating overseas.

If Trump starts a rush to convert bank accounts into cash, people may have to look for something other than US $100 banknotes. Swiss 1000CHF banknotes worth US$1010 might be very popular.
Euro Area 200 banknotes worth $227 might be easier to find.
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Old 09-15-2019, 11:38 AM
 
Location: Log "cabin" west of Bangor
5,706 posts, read 6,870,983 times
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Quote:
Originally Posted by PacoMartin View Post
While the USA has more cash in circulation than the Euro Area, most of it's cash is circulating overseas.

If Trump starts a rush to convert bank accounts into cash, people may have to look for something other than US $100 banknotes. Swiss 1000CHF banknotes worth US$1010 might be very popular.
Euro Area 200 banknotes worth $227 might be easier to find.
Yeah? And just where am I going to be able to spend Swiss notes or Euros? Who is going to take them and how would I know if the 'exchange' is correct?

Nope, not buying it.
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