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Old 09-23-2019, 02:22 PM
 
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Depends. A rate of -0.04% would basically change nothing. A rate of -1% would cause some people to have extra money withheld from their paycheck in order to get 0% interest from the IRS instead of -1% from their bank. A rate of -5% starts to flirt with mass economic panic and will cause people to hoard physical cash. A rate of -20% will probably cause financial institutions to illegally hoard physical cash even when regulations require it to be kept in some other form. At even more negative rates, perhaps -50%, gold and physical cash would become the subject of enormous debate with some calling to ban their ownership entirely. A possible “ war on personal money” similar to the war on drugs might be the result, with police raiding and seizing from those who keep cash or precious metals. A more negative rate could only be sustained by a totalitarian government that essentially bans the ownership of hard assets. Just my own speculation though...

Last edited by ncole1; 09-23-2019 at 02:32 PM..
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Old Today, 09:27 PM
 
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Quote:
Originally Posted by ncole1 View Post
Depends. A rate of -0.04% would basically change nothing. A rate of -1% would cause some people to have extra money withheld from their paycheck in order to get 0% interest from the IRS instead of -1% from their bank. A rate of -5% starts to flirt with mass economic panic and will cause people to hoard physical cash. ...
Interest rates don't get that low.

United States 2.00%
Canada 1.75%
Singapore 1.74%
Norway 1.50%
Australia 1.00%
New Zealand 1.00%
United Kingdom 0.75%
Euro 0.00%
Japan -0.10%
Sweden -0.25%
Denmark -0.75%
Switzerland -0.75%

Oct 29,2008 1.0% Lehman fails; Bank bailout approved; AIG bailout
Dec 16,2008 0.25% Effectively zero; Lowest fed fund rates possible
Between 2008 and Dec 17 2015, the Fed kept the "Fed Funds Rate" at zero. The recession ended in June 2009.
2015: GDP = 2.9%, Unemployment = 6%, Inflation = 0.7%

At the end of 2007 there were 5.7 billion $100 banknotes in circulation
At the end of 2015 there were 10.8 billion $100 banknotes in circulation

But I disagree with you that people will wait for -5% before they will hoard physical cash. I think that there was some hoarding when the rate went to effectively zero. Any kind of negative interest rates would be worse.

The Fed has only ordered 1.078 billion new $100 banknotes for fiscal year 2020. That's a fairly small number so they must be worried about hoarding.

new $100 banknotes produced in billions. Problems with the new color banknotes from 2011-2014
2018 1.75
2017 1.52
2016 1.52
2015 1.08
....
2014 0.64
2013 4.43
2012 3.03
2011 0.72
----
2010 1.91
2009 1.79
2008 1.21
2007 1.09
2006 0.95
2005 0.67
2004 0.52
2003 0.85
2002 0.60
2001 0.20
2000 0.00
1999 1.54
1998 0.76
1997 0.65
1996 1.25
---------------- new big headed $100 banknote
1995 0.60
1994 0.60
1993 0.32
1992 0.22
1991 0.96
1990 0.24
1989 0.20
1988 0.16
1987 0.22
1986 0.18
1985 0.16
1984 0.14
1983 0.09
1982 0.11
1981 0.12
1980 0.10

Last edited by PacoMartin; Today at 10:02 PM..
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