Floodgates Are Open Negative interest is coming!

serf

This is what President Trump wants our banks here to do to stay competitive too? If This insane policy is instated then Fiat Money is nothing but a losing scenario for we the people!

serf

https://www.zerohedge.com/personal-finance/floodgates-are-open-german-banks-start-charging-retail-savers



?Negative interest rates are crazy. That means money is not worth anything anymore,? Gruebel exclaimed.

?As long as we have negative interest rates, the financial industry will continue to shrink.?

Don McManus

Negative rates exist in America already.

One can have a money market account that pays .2% interest and charges a monthly fee.

It is not smart to have such an account, but they exist and many people have them.

Around 10 years ago, my financial adviser and I were talking, and he said something about how rates will never go to zero. I asked him what was magic about zero and suggested that there was nothing that would structurally stop rates from going negative.

After he (politely) told me how stupid I was to think negative rates were possible, I let him know that I would no longer be needing his services.

In a deflationary environment, zero is a positive return.

In a 3% deflationary environment, a -2% return is positive.

To put it in perspective:

A boat floating in the Dead Sea is significantly below sea level, yet it is not under water.

Likewise, interest rates reflect the strength of the underlying currency and the current economic environment.

If you do not believe that a negative rate will serve you, put your cash into assets or stuff it in your mattress. It is a losing policy only if you make the choice to be a loser.

serf

Don McManus wrote:

Negative rates exist in America already.

One can have a money market account that pays .2% interest and charges a monthly fee.

It is not smart to have such an account, but they exist and many people have them.

Around 10 years ago, my financial adviser and I were talking, and he said something about how rates will never go to zero. I asked him what was magic about zero and suggested that there was nothing that would structurally stop rates from going negative.

After he (politely) told me how stupid I was to think negative rates were possible, I let him know that I would no longer be needing his services.

In a deflationary environment, zero is a positive return.

In a 3% deflationary environment, a -2% return is positive.

To put it in perspective:

A boat floating in the Dead Sea is significantly below sea level, yet it is not under water.

Likewise, interest rates reflect the strength of the underlying currency and the current economic environment.

If you do not believe that a negative rate will serve you, put your cash into assets or stuff it in your mattress. It is a losing policy only if you make the choice to be a loser.

I don't buy your analogue to fiat money and interest rates. There is no intrinsic value in the trade of fiat money in savings at a bank. The Economic
numbers they spew out to decide what is deflationary does not balance against how much we pay at the bank to borrow. It's going negative because if it went positive when they are creating more debt then they could not sell it because no body could buy it if they have no savings thus the whole system is build on debt .

Negative interest rates is the only thing keeping the system afloat. So they can manipulate the commodities to contain their money system of perpetual debt to wage earners. By hiding debt at a negative they eat the cake and keep the cake too while we run in a circulatory wheel like a rat in a cage.

If you can get a 30 year loan for free or have them pay you fiat money in excess to use their money then it would be fair. It ain't and will never happen. I would get a loan and spend it and then wait to die and stiff them for the loan but that"s what they are going to do when they hit the reset button with the new cashless world currency and give you 75% haircut on your savings and call it fair!

serf

gruntled2

Not only are most banks paying less than the inflation rate but just to rub salt in the wound they TAX the pitiful interest we do get.

Don McManus

serf wrote:

I don't buy your analogue to fiat money and interest rates. There is no intrinsic value in the trade of fiat money in savings at a bank. The Economic
numbers they spew out to decide what is deflationary does not balance against how much we pay at the bank to borrow. It's going negative because if it went positive when they are creating more debt then they could not sell it because no body could buy it if they have no savings thus the whole system is build on debt .

Negative interest rates is the only thing keeping the system afloat. So they can manipulate the commodities to contain their money system of perpetual debt to wage earners. By hiding debt at a negative they eat the cake and keep the cake too while we run in a circulatory wheel like a rat in a cage.

If you can get a 30 year loan for free or have them pay you fiat money in excess to use their money then it would be fair. It ain't and will never happen. I would get a loan and spend it and then wait to die and stiff them for the loan but that"s what they are going to do when they hit the reset button with the new cashless world currency and give you 75% haircut on your savings and call it fair!

serf

Pretty much by definition, a bank needs to borrow money at lower rate than it lends money.

If it does not do this, it loses money and will not be in business.

30 year mortgage rates are at around 3.5% in some markets. If a bank originates and holds this note, it will receive a 3.5% return on its money.

When mortgage rates were 8% - 9%, a bank could borrow money at 3% - 4% and still come out ahead. This can not be done when loaning money at such low rates.

There is no question that interest rates are being artificially depressed. This is being done for three major reasons, IMO.

1. Keeping the Federal Government deficit as low as possible. Low rates on treasuries means servicing the debt is falsely affordable.

2. Economic activity. Lower interest rates allow for more capex by companies, and greater consumer spending as well.

3. Housing market. In addition to still allowing for a deduction in home mortgage interest, low mortgage rates artificially prop up the construction industry.

You can look at this as a serf and pretend you have no control, or look at is as a man and work it to your best advantage.

Apparently you chose the former. I am much happier choosing the latter.

serf

It's advantageous only to the people who have the most to lose when it all comes crumbling down! Just like the city of Tyre!

serf

select-fire

The banks borrow money from the Govt.
The banks run rules made by the Govt.
Trade policy is made by the Govt.

the next big hit in the economy will be credit card and auto financing failure. That will make the 08 housing market look like peanuts.

bustedknee

Its already here, they are just going to legitimize it.

When the bank charges me more than they are paying me to hold and use my money - that is negative!

Its just a numbers game. They throw around terms like "compounded daily, monthly, annually, etc.".

Bottom line is the sad truth.

Buy a car and finance it. You and the bank will settle on a interest rate you will agree to - X%.

It means nothing. Multiply your payment amount by the number of months, then subtract what you think you bought the car for.

Don"t have a heart attack if your $20,000 car is going to cost $40,000!

Same with homes.

Its a numbers game. Thats why I refuse to finance. Save up - then buy it.

Mobuck

If you have money, you might as well bury it rather than let the banks lend it to people who borrow to buy farmland and build houses on it.

mogley98

I think monetary policy is confusing to the economics professors who study it LOL, I have no clue but I would guess that eventually, (and I have no idea when that is) it has to crash. Countries are all printing money and offering to loan it at extremely low rates to stimulate the economy and as noted keep borrowing costs down. But who cares if you just print more?

I think when the Emperor realizes he has no clothes on inflation will surge and no one will really want the phoney baloney money, people will prefer hard assets like Gold, Silver, lumber, Beans and Ammo

Owning real estate might be great but tenants will be paying with dollars not beans.

Personally while it is tempting to leverage assets with low rate money I'm staying debt free and spreading my dough around, missing out on 10% a year returns in the stock market but I aint getting in high and coming out low

Quick&Dead

I refuse to have a checking account where I have to pay for the checks, a monthly service fee, etc. My checking account pays ME interest months, not much but it costs me zero to have the account.

A money market account that pays me interest, not much but some so have instant cash when needed.

An ATM card ...... banks have sent them to me but I shred them. They are just stupid to have and worse to use.

Credit cards, have several but won't have one have to pay a monthly/annual fee to carry. Also unless can pay the statement in full upon receipt, I won't use it 'cause no way in hell gonna pay the horrible interest rates they charge. I will, however, use their money every month for FREE!

Bank owners get rich, have huge fancy buildings but pay their employees squat. They are worse than most manufacturers or retailers.

BobJudy

In 1960 I opened my first bank account. It was a bank sponsored grade school account. It was supposed to teach responsible saving to young impressionable minds. 25 cents a week during the school year. It paid 4% interest. Mortgage rates were about 5.5 - 6% and the banks made money and did o.k. with a 50% mark up over what they were paying out. Now they pay .2% interest and charge almost 20 times that in mortgage interest. If you put the money in a CD and get a whopping 2% then they only double their money loaning it out. For a while I went the credit union route, but it seems they no longer have much better interest than the banks. It used to be when a CD came due I would check around for the best rates, but now most of the time I just let it roll over as it is not worth my time or gas to run from bank to bank for the tiny difference I may get. Sometimes I think the solution would be boycotting the banks. If their deposits drop then they would have to pay more interest to get them back. Bob