Topic: Negative Interest Rates and Cryptocurrencies (Read 1664 times)

It sure seems like the traditional banking system is shooting themselves in the foot. The question is, can they really be that oblivious or is it part of a bigger plan?

Great point heh

It sure seems like the traditional banking system is shooting themselves in the foot. The question is, can they really be that oblivious or is it part of a bigger plan?

"real" interest rates are below zero once you factor in inflation

I'm from the US. I believe yes, there's a very good chance we will. Hence, the thread.

Looks like you learn something new every day - kind of helps being the admin on BetMoose; this is what drew my attention to the issue:

https://www.betmoose.com/bet/us-interest-rate-to-fall-below-0--within-12mo-190

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Would we not see 0% for at least a year or two before it going negative (if things don't improve)?

It's pretty much all they can do.  Lower the interest rates, raise the debt ceiling and kick the can a little further down the road to delay the inevitable.  Default.  If interest rates had stayed at "normal" levels, around 3% - 5%, it would have been all over by now.  But instead they pretend it's not an issue and move the goalposts yet again.  The spiralling debt vortex is out of control and there's no way to fix it.  Enjoy life on life support. 

Prognosis:  Terminal

I'm from the US. I believe yes, there's a very good chance we will. Hence, the thread.

I'm wondering if we'll see a negative interest rate in the U.S...

It's been at 0.25 for awhile and growth is less than expected.

http://www.tradingeconomics.com/united-states/interest-rate

Let me start by saying I'm a big supporter of Bitcoin. I like everything about it. I love the technology, how it's an alternative to fiat, etc. However, as a supporter, I've grown more and more dubious of its founding.

Even more recently, I've started to see more reason to fear how governments could use this technology in ways currently unforeseen. For example, let's just say governments convince the public of Bitcoin's merits as a replacement for cash, and decide to do away with cash. Let's say they institute their own crypto. The Fed, governments and the public moved towards a system similar to Bitcoin for cash-like exchanges. Maybe we even kept our non-cash, bank-related transactions as they are - digital. What becomes extinct under this scenario? Non-gov't sanctioned cryptos and cash.

To me this presents a very large problem and the problem is in regards to interest rates. As you may know, the ECB recently announced a negative interest rate policy. To many this seems straight-up confusing. So, you're charging people to save? Basically, yes.

The one defense against this is - cash. What do I mean? Well, cash can be put in your pocket or under your mattress and in a sense save your money (because the alternative is you losing money by putting it in a bank). You can't do this with digital cash stored in a bank under this scenario. Of course, one could argue that independent cryptocurrencies (as they currently are) would also be protection. But, I think my issue with that is, governments at large could ban them. Yes, whether we want to admit this or not, this is possible.

So, for example, the US gov't (and gov'ts like it) could create their own crypto, ban all "free" cryptos", do away with cash and institute negative interest rates - sucking out all monetary wealth to pay for it's ever-growing debt.

I'm probably reading too much into this, but this scares the crap out of me... please calm me down...

I think you overestimate people. I can almost guarantee that people would use a government backed digital currency regardless of how rational it is.

It looks like you go wrong when you describe a scenario where governments do away with cash, institute their own crypto, and make Bitcoin et al extinct.

For the same reason that (some) people choose Bitcoin over Dollars right now, nobody would choose NewStrongCryptoDollars over Bitcoin, especially if there's an expectation for governments to abuse controlling it the way you describe. Check out Gresham's Law. http://en.wikipedia.org/wiki/Gresham's_law

Another thing to think about is that Bitcoin as the core of a monetary system does not preclude the existence of "cash". Are you familiar with Casascius coins? Also, keep in mind that at the core of the US dollar system is just a bunch of computers run by the Federal Reserve keeping an account of who owns how many dollars. Certain dollar liability accounts, associated with the Treasury Department, are matched up with physical notes ("cash"). Aside from the decentralized aspect, that's exactly how it works/could work with Bitcoin, except that instead of the Treasury Department, it would just be a trusted institution producing and circulating the notes.

I thought the negative interest rate was just for central bank loans?  I hadn't heard banks would charge consumers negative interest on savings.