Will negative interest rate be a boon to Bitcoin?

picolo

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Quote from: ffe on March 03, 2015, 02:43:37 PM

I don’t know how interesting you find this, but interest rates have, in fact, gone negative. This is happening all around the world. $1.9 trillion dollars of European debt now carries negative nominal yields, and the overnight interest rate in Swiss franc is around -1 percent annually.

Just to be clear, this is for fiat cash deposited at banks in Switzerland. See Evan Soltas;

http://esoltas.blogspot.com/2015/03/whats-actual-lower-bound.html?m=1

To paraphrase: Would investors, in response to persistently negative nominal interest rates on deposits, keep currency in bank vaults? Or would investors start bidding up the price of any asset that can function as a store of value and try to find ways to make their holdings function more like liquid deposits?

My take is that some of them will turn to Bitcoin. Highly liquid and a good store of value.

What is happening and what will happen is very positive for Bitcoin but not everyone agrees with Bitcoin being highly liquid and a good store of value but it is not a problem that not everyone agrees for Bitcoin to be valued much more. If only 1% of the richest 10% of the world store 10,000$ in Bitcoin, we are talking about 700 Billions.

tee-rex

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Quote from: ffe on March 03, 2015, 02:43:37 PM

I don’t know how interesting you find this, but interest rates have, in fact, gone negative. This is happening all around the world. $1.9 trillion dollars of European debt now carries negative nominal yields, and the overnight interest rate in Swiss franc is around -1 percent annually.

Just to be clear, this is for fiat cash deposited at banks in Switzerland. See Evan Soltas;

http://esoltas.blogspot.com/2015/03/whats-actual-lower-bound.html?m=1

To paraphrase: Would investors, in response to persistently negative nominal interest rates on deposits, keep currency in bank vaults? Or would investors start bidding up the price of any asset that can function as a store of value and try to find ways to make their holdings function more like liquid deposits?

Gold has been wiped the floor with recently, and tomorrow it will probably refresh the last few years lows. I saw whales going long last Friday in gold futures (after the drop had exhausted itself), so it may turn out to be a good alternative in the end.

ffe

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Quote from: johnyj on March 07, 2015, 01:33:59 PM

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Again, this deflation is caused by a lacking of demand, which printing more money will just make it worse long term wise. All new money is added in a form of debt, and raise the debt repayment cost later on. That large amount of debt repayment will decrease everyone but bank's spending power, but what they spend for? To buy more bonds (loan them out to trap more people in)

Creating more money is the way to increase demand. What is your solution to "lacking of demand"?
Business debt produces more prosperity than the value of the debt. Businesses pay off debt and yet show profits all the time. Otherwise businesses would not borrow. Also, the reason central banks buy debt to increase the money supply is so they can have assets they can sell later to reduce the money supply when economic conditions change.

Quote from: johnyj on March 07, 2015, 01:33:59 PM

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There is only one exit for this endless slavery, that is give up using fiat money as a transaction medium, but few realizes this

No. Slavery isn't what fiat is producing. There may be better ideas around on how to regulate the current money supply other than using a central bank, but your ideas are not among them.

johnyj

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Quote from: johnyj on March 07, 2015, 01:03:07 PM

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Quote from: countryfree on March 04, 2015, 05:59:22 PM

I still have a savings account which brings me small interest. Not much, but I'm protected from the 30% drop in value BTC has experienced in January. Somehow, it's different money. I have money in that savings account and some other money for wild investments like BTC, but I do not move much money from one account to the other.

If it's intended as a currency, it's the same.

The price of products denominated in BTC are now more expensive, not so much for major conventional currencies. Even oil has inflated in terms of BTC since months ago.

In global commerce, price of everything from US is much more expensive now for the rest of the country, comparing with one year ago

Indeed they are. The US had to pay very high prices for commodity producing countries products, but now the marginal consumer China is slowly collapsing, causing that boom to go bust. Now, the rest of the world will demand US technology to fund productivity or die and pay a high price for it.

The vast majority of the world economy is fighting near deflation, which may have already happened in February for the US:

"The latest Headline PCE price index year-over-year (YoY) rate is 0.22%, down from 0.77% the previous month."

Again, this deflation is caused by a lacking of demand, which printing more money will just make it worse long term wise. All new money is added in a form of debt, and raise the debt repayment cost later on. That large amount of debt repayment will decrease everyone but bank's spending power, but what they spend for? To buy more bonds (loan them out to trap more people in)

There is only one exit for this endless slavery, that is give up using fiat money as a transaction medium, but few realizes this

johnyj

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Those who demand money want no change in a currency's value by the general price level.

Are you suggesting that Venezuela type inflation is desirable or 2009/2008 crash deflation? BTC provides many tens of percent of each almost every half month.

Everyone know now that it was the crazy credit expansion caused housing bubble and triggered that crash, the crash is inevitable under an inflation based monetary system, since it gave everyone a wrong judgement of real demand thus over invest and over spending

On the other hand, when you have a constantly deflative economy, everyone will expect that and prepare themselves well, the economy will be extremely stable

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Quote from: johnyj on March 03, 2015, 04:54:56 PM

Negative interest for currency means banks push others to borrow money, however, they borrow money to only buy bonds, resulted in negative interest for the bonds. It seems there is no real meaningful investment that money can go nowadays, due to saturated production and demand

They can push forever, but if there's no demand for credit by the creditworthy, it mean nothing.

Banks do not buy bonds except where forced. They produce loans, in the US almost exclusively mortgages and corporate loans.

All except long term bonds are undervalued at the moment, but there is below average demand, and production is well below historical trends.

As oil continues to collapse, US wage & labor incomes will skyrocket. As the US expansion continues, technology will bubble. The Fed could easily blunder and stop it all if they raise rates while the US deflates in the coming months.

BTC will benefit from none of this. Its fundamental problems are too great.

Producing loan is the same as buying bonds, MBS are also bonds in essential

The real problem is on the demand: When people were really poor, they had lots of demand, but now when they are relatively well established, there is no need for further expansion of economy, they don't need so many houses and cars and useless things, they might want to retire earlier

This is a very natural phenomenon, no matter you use inflation or deflation based monetary system, it will reach that stage sooner or later, monetary policy can only do minor adjustments

In such a long term trend, people will tends to work less and save more, so bitcoin will fit into the picture well, while fiat money is losing its value faster every year, and all the other investment baiscally have no return due to shrinking long term demand

johnyj

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Quote from: countryfree on March 04, 2015, 05:59:22 PM

I still have a savings account which brings me small interest. Not much, but I'm protected from the 30% drop in value BTC has experienced in January. Somehow, it's different money. I have money in that savings account and some other money for wild investments like BTC, but I do not move much money from one account to the other.

If it's intended as a currency, it's the same.

The price of products denominated in BTC are now more expensive, not so much for major conventional currencies. Even oil has inflated in terms of BTC since months ago.

In global commerce, price of everything from US is much more expensive now for the rest of the country, comparing with one year ago

countryfree

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Your country may be your worst enemy

I still have a savings account which brings me small interest. Not much, but I'm protected from the 30% drop in value BTC has experienced in January. Somehow, it's different money. I have money in that savings account and some other money for wild investments like BTC, but I do not move much money from one account to the other.

krigger

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Presale is live!

Quote from: ffe on March 04, 2015, 10:33:44 AM

One point to add. Bitcoin is the most liquid of these assets. There is a demand for liquidity. If you want to spend money at a moments notice but don't want to haul around cash and don't want to pay the banks %1 for the privilege of a checking account, then you may turn to Bitcoin. This will cause a slow rise in the value, further reinforcing the trend.

Yes, that is correct. Bitcoin is for everyone, everywhere, anytime, 24/7 where you want it to be.
It's value is big as it enables instant payments and verification by Blockchain. Never failed, so it's awesome.
When it become available world wide for shopping, but I mean real shopping as you buy anything you want and pay by Bitcoin, instantly, now that will be the real power and value. Paper money have to exist still, as Bitcoin needs to have market (buy/sell). But global acceptance worldwide will make it more valuable and used by entire population, well, at least I believe in it as it is very possible. Can't wait to see that future where we will pay only by Bitcoin or some altcoin if possible too. For example, if you want to stay anon, you can use some of existing ones, which are 100% anon (for now).
Also, about the banks, no taxes for Bitcoin. It should be tax-free. Banks should stay on paper money and not in crypto.
Maybe some crypto bank would be brilliant idea, that would take care of your coins, e.g. you wanna put some BTC and gain some % by time - why not? And so.

ffe

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Quote from: Q7 on March 04, 2015, 06:30:38 AM

With negative interest rate, nobody would want to keep their money in vaults and having to pay the bank just to do a favor for them. That's a logical thinking. With that in mind, assets would definitely be a better bet. You somehow won't find a person who converts all his/her fiat to bitcoin but you will most probably find the investment portfolio spread around, like holding property, stocks, trust fund, gold, and of course, bitcoin will be one of them.

One point to add. Bitcoin is the most liquid of these assets. There is a demand for liquidity. If you want to spend money at a moments notice but don't want to haul around cash and don't want to pay the banks %1 for the privilege of a checking account, then you may turn to Bitcoin. This will cause a slow rise in the value, further reinforcing the trend.

Q7

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With negative interest rate, nobody would want to keep their money in vaults and having to pay the bank just to do a favor for them. That's a logical thinking. With that in mind, assets would definitely be a better bet. You somehow won't find a person who converts all his/her fiat to bitcoin but you will most probably find the investment portfolio spread around, like holding property, stocks, trust fund, gold, and of course, bitcoin will be one of them.

chennan

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Quote from: johnyj on March 03, 2015, 04:54:56 PM

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BTC is too price unstable to be an attractive alternative to satisfy money demand. For now, it is a small cap stock with high volatility. It's good for traders but not for money demanders.

Besides, short term rates have almost always offered a negative real yield, yet no one seeks to hold JPY though many periodically borrow in other denominations for better nominal yields.

BTC must correct its fundamental price instability problem first.

Volatility can be easily dealt with lower leverage/less exposure, never a problem for investors, lower volatility means lower return, not an interesting thing

Negative interest for currency means banks push others to borrow money, however, they borrow money to only buy bonds, resulted in negative interest for the bonds. It seems there is no real meaningful investment that money can go nowadays, due to saturated production and demand

I think only the speculators fancy the volatility and can benefit from it. However, the new cryptocurrency just born no more than 5 years, BTC probably hasn't yet been recognized as legit investing tool by the most investors. So I still doubt that Bitcoin will boom from the negative interest rate. The money will be seeking some other reliable investment instruments.

Silly Money

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Re: Will negative interest rate be a boon to Bitcoin?

It's very possible, especially if bitcoin keeps rising either gradually or quickly, though it is still very risky putting your money into bitcoin especially withe volatility and collapses which may scare people off or be a bad idea.

Quote from: ffe on March 03, 2015, 02:43:37 PM

I don’t know how interesting you find this, but interest rates have, in fact, gone negative. This is happening all around the world. $1.9 trillion dollars of European debt now carries negative nominal yields, and the overnight interest rate in Swiss franc is around -1 percent annually.

Some places around the world are and there's always the threat of negative interest rates but most wealthy countries are there yet.

grendel25

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Sure it will but I'd attribute it to an overall better economy. Less unemployed and more disposable income makes expansion of bitcoin more likely.

johnyj

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Quote from: ?? on ??

BTC is too price unstable to be an attractive alternative to satisfy money demand. For now, it is a small cap stock with high volatility. It's good for traders but not for money demanders.

Besides, short term rates have almost always offered a negative real yield, yet no one seeks to hold JPY though many periodically borrow in other denominations for better nominal yields.

BTC must correct its fundamental price instability problem first.

Volatility can be easily dealt with lower leverage/less exposure, never a problem for investors, lower volatility means lower return, not an interesting thing

Negative interest for currency means banks push others to borrow money, however, they borrow money to only buy bonds, resulted in negative interest for the bonds. It seems there is no real meaningful investment that money can go nowadays, due to saturated production and demand

ffe

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I don’t know how interesting you find this, but interest rates have, in fact, gone negative. This is happening all around the world. $1.9 trillion dollars of European debt now carries negative nominal yields, and the overnight interest rate in Swiss franc is around -1 percent annually.

Just to be clear, this is for fiat cash deposited at banks in Switzerland. See Evan Soltas;

http://esoltas.blogspot.com/2015/03/whats-actual-lower-bound.html?m=1

To paraphrase: Would investors, in response to persistently negative nominal interest rates on deposits, keep currency in bank vaults? Or would investors start bidding up the price of any asset that can function as a store of value and try to find ways to make their holdings function more like liquid deposits?

My take is that some of them will turn to Bitcoin. Highly liquid and a good store of value.

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