Topic: Banks are offering Negative interest rates! will this help BTC - page 3. (Read 669 times)

Ever since 2008 there's been ever more creative plate spinning but little background engineering to address the underlying issues. All their ammo's been spent attempting to hold at bay what's been on the horizon. When it actually turns up there won't be much lead left in their pencil.

Please someone correct me if I'm wrong here. There's only two reasons I can see why people would buy this.

Firstly, if you are buying in different currency to your own. If someone feels (for example) EUR is going to massively outperform USD over the next 30 years, then the small loss in bond value is more than made up by the increase in exchange rate. You can use these bonds to essentially trade currencies.

Secondly, if they expect the markets in general to do terribly over the next 30 years. If you think there is going to be a massive economic recession over the coming years, then holding a bond which is guaranteed to only decrease by a small amount might be better than taking the risk against a potentially much larger decrease in other markets.

The second is worrying, because it suggests that both the government which is offering these bonds and the large banks and corporations which are buying them are bracing for the worst. The recession which we are all expecting could be worse than imagined.

The idea behind negative interest rates is to encourage the banks to give out loans, with the intent of reactivating economy. When a bank is subject to negative interest rates, it has to basically pay to have their money placed in their Central Bank (normally applied to the amount above the mandatory reserve rate).

Take a look at how it seems to be affecting german Deutche Bank (amist the other issues it’s having): https://edition.cnn.com/2019/07/29/business/deutsche-bank-ecb-negative-rates/index.html

The negative interest rate effect is more on the bank’s side really, and customers (including governments) should benefit theoretically by finding more willingness to loan (at currently low rates). I can’t see BTC in the equation really, except for the fact that some institutional money and private may find its way due to current low interest rated (which have been long standing in Europe now).

Seems that you have misunderstood the OP.
If you hold your money in these banks, you will get zero interest rate. For example, If you hold 100 dollars in your bank account, you will get back 99 dollars at end of the year. It doesn't mean if you borrow them 100 dollars, you should give them 99 dollars after a year.
Giving negative interest rates is due to avoid inflation. These rates are changed over the time based on the economy condition of the country. They don't give people free money. Negative rate are only applied when you give the back money. It is not applied when you borrow money.
Assume that they give you money with zero rate. What will happen? All the people will borrow money.

It is interesting! I think that's an bank strategy to attract and convince people to continue to patronize banking system. But you know if that the bank offer, i will grab it. I will make a loan and invest in cryptocurrency so that i can gain more and more profit. Maybe banks didn't realized that if people borrow from them with negative interest rate will be an opportunity to have more investment in crypto specially in bitcoin.

Actually the answer is Yes. If you are doing full reserve. This is precisely how a full reserve bank earns its money, in exchange of keeping yours safe and giving it to no one.

If the bank doing it is a fractional reserve bank (as most likely is) then it makes no sense, and might in fact cause a bank run.

How does this help Bitcoin? Its a bit unrelated. When you send bitcoin to an exchange or online wallet, you are losing money on transfer fees and often the site's fee. Which is not unlike "negative" interest (which is another way of taking fees).

But in an actual deflationary economy this should be the norm, not the exception. People should by default be asked fees to deposit their money in a bank that will absolutely never use it for anything else. This type of bank can never have a bank run, everyone could withdraw all their money at anytime, unlike fractional reserve bank.

Perhaps this is an effect of certain deflationary coin spreading worldwide... But start learning how a deflationary economy works, you need to read Mises and the Austrian economists, read about full reserve banking among other things. What you think crazy is actually right, once you learn the missing parts.

In a deflationary economy people tend to save money (ie. hold) and use only what is needed. But this money/investment is solid and unchained to debts or absurd terms. It is like your savings grow in purchasing power, so its equivalent to the misleading "interest rates". Except, no middlemen are required, they become optional. You pay for someone to keep your money safe because you can't figure it out how to do it yourself.

Sounds familiar? It is. Americans have it hard to understand because they have been used so much to debt and debt based economy, while Austrians propose a savings based economy with a deflationary coin (they wanted to use gold directly, as this was proposed early 20th century, in fact, before that big crash of 29). Oh and bubbles never form in this type of economy, so there are no crashes either. Everything moves steady, and slowly, instead of fast and furious only to crash hard.

Read the Austrian economists and you'll get it.

Below zero interest rate will cause companies to borrow from banks with lower costs. Some countries have decreased the interest rate to below zero to prevent inflation. It might be helpful for economy but it's not fair to people. it should be also noted than some countries pay more than 20% interest rate to holders. But they have inflation much more than 20%. So their people money's value decrease more than people of Japan and Germany.
Some central banks in some countries have to print money to pay the holders.
Any way, I think bitcoin limited supply is exactly what is needed for economy and it provides fair condition. People are the real owner of their money and banks cannot give them zero interest or give them high interest but print money.  

This sort of thing would be good for any investment/asset that is uncorrelated to it. Sometimes things are correlated in strange ways, but I imagine that any major international economy that stumbles is going to improve the Bitcoin charts.

More and more it is becoming a haven from the flaws of tyranny.

Would you rather have a deflationary currency or an inflationary currency with negative interest rates? As soon as we can get some stability behind Bitcoin, which will come alongside adoption there won't be a better option available.

LOL well I would love to. If I get 1% profit for loaning money then what stops me. I would loan as much as I can and buy Bitcoin with it. It seems Banks are losing their clients and they are coming up with this schemes to attract customers.

Eventually fiat will turn out to be just pieces of paper as they are in Zimbabwe and Somalia if I am not wrong.

I pulled/quoted some of the article under the link

https://www.yahoo.com/finance/news/negative-interest-rates-japan-germany-france-150324580.html

"What if I said I wanted to borrow $100 from you and pay you back $99 five years later? Would you do it?

Hell no!

And yet this is exactly what’s happening right now in the banking systems of Japan, Germany, France, and other European countries.

Negative interest rates — where the lender gets paid back less than they’ve loaned — now add up to 30%, (and counting), of the global tradable bond universe, according to JPMorgan (JPM). You may have seen for instance that Germany just sold the first negative yielding 30-year bond issue.

In case you’re wondering, yes, this is crazy.

“It’s really unusual and really distorting the global financial system,” says Torsten Slok, chief economist at Deutsche Bank Securities (DB). “I spend all my time talking about it.”

This is not going to end well

Negative rates are counterintuitive, unprecedented — and to my mind — mind-bendingly insane and downright scary. They are like a parallel universe where everything you’ve ever learned about finance and human behavior is turned upside down. ..."



Note I was amazed to read this new twist on reality.


Can you imagine buying a negative yielding 30-year bond issue?

I can't but germany did wtf?