Topic: Negative Interest Rates - page 2. (Read 2387 times)

I think Bitcoin is now becoming more popular and that is also good for the future. The world is now more becoming digital.
And I also hope that Bitcoin will have a great future and that many stores also accept Bitcoin.

While agreeing with everything you wrote about the diminishing utility of trying to force banks to make loans, I don't necessarily agree that this is a trial run for introducing negative interest rates to the public. The banks are already being charged negative interest, so if they thought they could pass it along without alienating customers, they would be doing so already. But consumers aren't going to tolerate banks charging them to hold their money, they're going to pull it out and stuff it in a mattress, further removing liquidity from the banks and the markets. The CBs know this is an obvious and likely scenario, so they're not going to push negative rates so far that they actually become a larger risk to the system than not. At least, that's how I see it.

Its a form of getting cheap money from the public lol.

And honestly we have no way around it, since most of the people already go for safe investments like bonds then an actual stock. People look for security so yeah.. lol.

 Negative interest rates encourage risky lending practices, which was the primary cause of the 2008 financial crisis. Banks won't care as much if they lose money on bad loans because they will lose even more if they don't loan the money at all.

Which is why banks are speaking out against NIRP; they get charged and consumer demand is still on life support. Banks were borrowing at 0% and getting paid to store their excess reserves with the government. But the crux is that there is very little appetite to borrow to the level needed for a consumption driven economy. There is no recovery. That tide has gone out.

So the CB NIRP is the trial balloon for introducing NIRP to the public; once we get 'used' to the idea and the world doesn't end, it's coming. And NIRP won't necessarily mean people begin to spend, an example being the report in Japan that sales of safes have skyrocketed, pre-empting the move.

The negative rates are only charged by the central bank to the banks, not to consumers (because the banks don't pass the negative rates on so as not to alienate customers). So the theory is by penalizing banks for holding money by charging them interest to do so, they are incentive to loan it out instead, thereby creating economic activity and spurring the economy.

This is literally the reason they have negative interest rates.

One implication of real NIRP (as opposed to today's "fake" NIRP) may be that gold, silver and Bitcoin will go up.

The way the elites have always made sure the system worked is that inflation must be higher than the return on "safe" fiat-based assets (short term govt. bonds, insured bank deposits, etc.), and that lower rate must be higher than the return on non-state-issued assets (gold, silver.)  Otherwise, investors would move en mass into the "wrong" assets (short-term Treasuries instead of stocks or real estate, gold instead of dollar-based assets, etc.) and the elites lose their power to profit by financial inflation.

(So you notice that gold's return is held at zero, via the gold standard, through most of the 400-year history of modern money.  It only goes up over short spans of time when the elites lose control temporarily.  During the "fiat" period it behaves more-or-less the same way.)

The problem today, for the elites, is that inflation is too low, and it's hard to make the other two rate go below zero (since people can always hoard cash, today, if their banks really give them negative interest.)  So the three rates are squeezed together around the 0 to 2% range.  People are accepting the small loss to inflation by keeping their savings in the safest assets, to avoid risking their money.

(And why shouldn't they?  Unlike the Great Depression, almost none of the debt overhang has been wiped off the books.  Investors are right to bet that the authorities will be afraid to print or borrow too much money to stimulate the economy, which would really burst the financial asset bubble.)

So, the idea is to push interest on "safe" fiat-based assets lower, below zero, so when people see their bank balances slowly evaporate (and presumably cash has been abolished, so they can't put it under the mattress,) they'll decide to spend and invest, and stimulate the economy.

(This is not the whole story, of course.  NIRP is not essentially different from centuries of the same kind of policies -- it's just that the elites hit a zero interest road block, below which they can't push interest rates, while there is cash.  These centuries of policies are what's really responsible for the current economic pain in the first place -- via propping up the values of financial assets with state power during stable times, and letting the pain fall on everyone when confidence collapses in some over-valued asset.  Only the elites really benefit from this system.)

But there's one thing not many commentators discuss -- the rate of return on non-state-based assets, ie gold, silver and Bitcoin.  Since this rate must be significantly below the "safe" rate for fiat-based assets, when the latter rate goes negative, the returns on gold, silver and Bitcoin must go even more negative for confidence in fiat money to be kept.  This may mean the elites must allow or engineer the prices of the non-state assets to go very high (again, over a short time span,) just so they will have enough power to suppress their rates of return over the period of NIRP to very negative values.  (The suppression of gold prices during the "fiat" era is well documented by two serious books -- in effect, the elites won't and can't leave the gold standard, whatever they say in public.)

Who will be ok in saving money with a negative profit that is mean i will give you my money and every month take some to your self it is noy logique

OROBTC,

Yes, many problems, but all just symptoms of the debt problem - there is too much debt, for governments and for the banking system. NIRP for excess bank reserves is just the trial balloon for mainstream implementation after they failed to stimulate demand via ZIRP / QE. The reason they fail is because the average Joe knows the economy still isn't right and they are scarred. There is no demand, it is the ultimate form of people power. Despite all the rhetoric for 7 plus years main street still won't rejoin the congo line. The debt life is done for this generation, much like the Depression begat a generation of frugal citizens.

So they can take savers money even more via NIRP, but it still won't spur demand. They can ban cash, make it all electronic but it won't help. People will just withdraw further, stash what they have and ride it out. And big companies and retirement funds will die a diminished returns death, anathema to the way the system is designed to operate. But when the money starts flowing from helicopters (the next move), then the game changes to inflation.

More...:

5)  Electrons in the bank could easily be seized should .gov want to...
6)  Credit card companies already skim some 3% per transaction, banning CA$H would mean they make even more money.
7)  We would pay to have "money" in the bank, but I doubt that they would pay us to borrow it...  Bigger save/borrow spread.

This idea doesn't work... so you take out credit, and you receive interest on the credit you take out? That doesnt' make any sense. Also it would mean when you deposit money to a bank your savings decrease... Which means that everyone would be trying to take out loans, and nobody would be offering loans. Which would not work at all.

I dont get this negative interest rates..Maybe the government/bank wants people to take their money from banks and invest directly somewhere or to start a business.This way it can help the economy and create jobs.

Honestly negative interest rates are bullshit (to put it bluntly). In other words it is fail of our current economic system.
Reducing interest rates is supposed to increase spending and investment, inducing economic growth.
The problem with this solution is - it won't work. All we achieve is temporary distraction from much needed reform.

Crazy.Last attempt  to keep that  dead  system alive Investors  see  that in very negative light
Nikkei went down 25%  from  time whan   negative interest rates has been introduced

I guess in the right environment negative interest rates are a good thing, but at the same time it just saps wealth out of the economy while slightly revaluing the currency.

I personally cannot attest to the actual effects of negative interest rates; it'll be interesting to see where it will go.

In switzerland they did it because too many foreigners were buying CHF during the crisis to secure their money. In this situation, negative interest rates are not too bad...
At least the national bank is winning some money on other people's greed 

there are already European countries that do this, like Switzerland, but it has never been tried before in Japan and the USA. I think it'll be a total disaster

Yes act absurd, because why would anyone want to borrow money with a negative return on assets,
when it can simply keep the money and there is no loss?

Negative interest rate has proven that it will increase the country's economy system. By using this kind of rate, the government are encouraging people to spend their money to make business instead of just keeping it in the bank therefore with more business around the country's economy will be increasing as well