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Typically, commercial banks will pay account-holders a small interest rate for storing their money with the bank. With negative interest rates, account holders get charged a nominal rate instead, so they lose money by keeping it in the bank.
The idea behind negative interest rates on savings accounts is to encourage people to spend. If savers have to pay for their money to be stored, ideally they'll be more likely to spend it instead.
Banks need a supply of capital to lend. Negative nominal rates make that hard. It’s a very last ditch policy to stop deflation.
For the most part when people are talking about negative rates they are talking in terms of Real rates, not nominal rates. I doubt Trump understands the difference honestly.
Banks need a supply of capital to lend. Negative nominal rates make that hard. It’s a very last ditch policy to stop deflation.
For the most part when people are talking about negative rates they are talking in terms of Real rates, not nominal rates. I doubt Trump understands the difference honestly.
Yeah, just have to wait and see. Calling for negative rates while saying how booming our economy is, makes no sense. I'm actually used to that now.
As with all the rest, just have to wait and see.
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Banks need a supply of capital to lend. Negative nominal rates make that hard. It’s a very last ditch policy to stop deflation.
For the most part when people are talking about negative rates they are talking in terms of Real rates, not nominal rates. I doubt Trump understands the difference honestly.
Your smaller local banks might still need your deposits to lend. But loans create deposits.
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.
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.
I don't think that banks' excess reserves actually reflect a savings glut. Because within the banking system everything zeros out. With QE's banks exchanged debt paper for an equal amount of Fed money created out of thin air.
I don't think that banks' excess reserves actually reflect a savings glut. Because within the banking system everything zeros out. With QE's banks exchanged debt paper for an equal amount of Fed money created out of thin air.
Not just savings in banks. Savings meaning capital not spent on consumption goods or invested in capital projects.
Trump tweets that he favors zero or negative interest rates in order to prevent a recession. While these rates are popular in Japan and Europe, they have never been tried in the USA.
Negative interest rates, in particular, frighten many Americans because they fear that the commercial banks will increase fees on savings account to pass on the costs.
The 10,000 JPY banknote worth $92.75 in USD is extremely popular in Japan because they can keep their wealth in home safes. Circulation of these banknotes is between 9 and 10 billion notes for a population of roughly 126 million.
While the FED reports that there are 13.435 billion $100 banknotes are in circulation as of the end of 2018 for a population of about 330 million, upwards to 75% of the Benjamins are believed to be in circulation in foreign countries.
Will Trump's tweet cause a bank run on $100 bills? Will calls for the government to re-issue the $500 banknote increase?
If there were a 'fee' on a savings account...basically charging me for the priviledge of using *my* money...I wouldn't have a savings account...oh, wait, I don't have one anyway, what isn't in my checking account is either stashed where I can get it any time I want it or in my pocket...yeah, the pocket where I have to slide my pistol back to reach into it...
Quote:
Originally Posted by lieqiang
I'm skeptical that your average blue collar worker will see a tweet by Trump about interest rates and decide they need to go hoard $100 bills.
I already do. Since the day my debit card was turned off due to a [$7.00] fraudulent charge and I had already filled my gas tank but had no cash on me (embarrassing, to say the least) I now carry a wad of hundreds at all times, with more where I can get it if I need it. I also carry some 1oz silver bullion pieces as a 'last resort' emergency stash.
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