Bitcoin Forum

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 ;D wtf?

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.

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.

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.  

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 (http://mises.org/) 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.

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.

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.

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).

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.

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.

philipma, here in Brazil we have a great economist who are passionate about BTC, and they have a huge knowledge about market (he worked in a lot of countries), and I'm hearing about this some time ago

This is not going to end well, we are in a time where money is abundant, easy loans, companies that not have profits are worthing billions, and this is very bad, this is not a healthy market
We should be prepared for a crisis, and this is not conspiration, we can see in the news about US vs China, petroleum, Brexit and etc

Let's see how BTC will react to this, if people will trust in cryptos and the whole idea of decentralization instead of governments and banks

I hope more people will wake up and see that whole world is one big Financial Titanic that is going down.
We can be sure that 'big restart' will happen sooner or later, and after that crypto can be safe harbor for people.

Otherwise we can see nightmare with centralized digital state coins like China and FED are making now.

A negative interest rate means that the central bank (and perhaps private banks) will charge negative interest. Instead of receiving money on deposits, depositors must pay regularly to keep their money with the bank.  ::) - Source : https://www.investopedia.com/terms/n/negative-interest-rate-policy-nirp.asp

So, the direct result of this is depositors would rather look for a alternative investment option like Bitcoin, where they might see a potential profit, than having to receive no interest or profit on their investment. <Paying a Bank to hold your money, just do not make sense>  ::)

I think Bitcoin is somewhere very deep on the list of potential investments for people who are considering new investments because of negative interest rates. The affected people probably hold bonds or some other low-yield high-security investments, and Bitcoin with its volatility is completely different from them. I think a lot of current Bitcoin traders come from penny stocks and startups, they were already used to high risks and knew how to trade in such environment.

Bank of England outgoing Governor just gave a speech telling central bankers the US dollar wont continue to be the reserve currency

 cnbc.  com/2019/08/23/bank-of-england-governor-mark-carney-says-trade-war-is-having-a-confidence-effect-on-business-around-the-world.html   (forum says suspicious link for some reason)


There is too much debt in the Fiat system. We are in uncharted waters after the Quantitative Easing we saw in 2009 just left a larger hole than people could ever repay.

It isn't bad for bitcoin but to say this is good, we really can't be certain how the central bankers are going to try and change the national currencies.

It is obvious they are all planning how a digital currency solution would work for THEM (probably not US)

i think mention of "loans" in that article was misleading because the negative rates has nothing to do with the loans you take from the banks, the way i understand it. these rates are the rates that banks pay as "profit" or interest on the money people keep with them and negative that means your balance shrinks over time.
so the effects of this on bitcoin is what @Kakmakr said above, people would start pulling out their balance from banks and look for investments. one of these investment options among many is going to be bitcoin.

I've reread the article and seems like you're right - it's more like a tax on a bank account, and it's for average joes instead of the corporations and ultra wealthy. Wtf are central banks smoking, do they want to get a bank run or what. This might be good for Bitcoin, but I don't expect a huge number of people to jump the Bitcoin train, most of them will stick to cash. If people are scared to lose 1% of their savings, why would they put all their savings in Bitcoin, when they will be losing/gaining a few percents of their savings multiple times per day. Besides, people don't hold money in banks because they want to invest, they do it because it's convenient and in many cases they are forced to.

See.. the bankers are really intelligent. Fist they are taking steps against physical cash by cancelling the high denomination notes. Then they are forcing you to store your money in the banks, and here they are robbing the account holders by implementing a negative interest rate. I don't know why anyone would agree to a negative interest rate, when the retail inflation remains in positive.

because they usually have no other option. they aren't just going to pull their money out of the banks and put it in their mattresses! that wouldn't be safe nor convenient. we have to use banks since we are stuck using fiat and knowing that we need them they can do anything they want.
that is why they are scared of bitcoin, because they know bitcoin showed people that they can not-need banks!

Negative interest rates+inflation are awesome for the people and companies with big amounts of debt.
The problem is that the economy is addicted to debt and negative interest rates make it even more addicted.
I think that keeping negative interest rates is good news for bitcoin,but sooner or later,the bankers are going to go something in order to destroy the crypto competition.

I have to agree with you on this. As of now, we are stuck with using the banks and there is no other safe option. I thought about a few other options, such as converting some of the cash to gold ETF. But the liquidity will be lost and in case we are faced with some emergency expenses then we'll incur even more losses when we convert the ETF back to fiat cash. So I agree, we have no other option.

But one question. A negative interest rate of -0.25% or even -0.5% may be OK for now. But what you'll do in case they further decrease the rates. Will you be OK with -2% or -3% per year? There is no guarantee that they'll not do that.

It's not actually awesome in a way that you think! It has severe impact on the economy. Banks are the still the main pillars of the economy as it controls the public money and majority of the common people still use banks for depositing their money, thinking it is a secure way to do it. Now think this similar situation from the perspective of a common man who deposits more money in order to get less amount at a later date. Banks are going to earn from the difference in interest rate anyways, their strategy is not going to change. They will probably offer -5% interest rate for checking accounts and -3% for borrowers. Their income is a straight forward 2% no matter whatever the market prevailing interest rate is!

Bitcoin is supposed to be benefited from the negative interest rate regime. But the main beneficiaries are precious metals like Gold, Silver or Platinum. If you look at the price chart of Gold from last one year, the trend will be clear to you! Check the below link,

https://goldprice.org/gold-price-chart.html   

Wow!
These countries have a surplus amount of reserve cash and that might be one of the reasons they are giving a negative interest rate. Good opportunity for anyone to invest in Bitcoin or the local stock market. I say, its a great opportunity for a fund manager to create funds that are investing in the third world country.

That is why there are lots of Bitcoin Investors based in these countries. Any country that has got an economy issue, a citizen from those countries will invest in Bitcoin.

I can't say directly if this will favor the Bitcoin but i could say that this is bad for the banking industry as the banks are alive because of the loans with interest. Except if these countries are just helping their people in talking of entrepreneurship thru bank financing with negative interest then it will probably help Bitcoin as people could buy more Bitcoin and used it to build businesses with the support of the banks.

Well, Japan is a special case, because they have deflation. Their fiat becomes more and more valuable with time (I think it was not done on purpose, and people mostly think it's a problem but that's how it works there), so it makes sense that one should pay back less that one borrowed. As for countries with a stable inflation rate, it seems that the lender loses significantly in this case, but I can see how people might be interested in that. It's just like discounts and promotions. If nobody wants to buy your product for a certain price, you make it lower, and then people buy it and probably even more stuff they never intended to buy. Likewise, if nobody wants to loan from you, and you really need an active flow to get going, you make a negative interest rate.

Interesting of course is the comparison of traditional deposits with bitcoin.There are many contradictions in these conditions.I am surprised of course such an absurd situation.In this case, it makes no sense to invest in a Deposit.But whether there is a better choice as an alternative to choosing bitcoin, I don't know.Although if we consider bitcoin as a long-term investment (30 years) then I think it makes sense.By and large, those countries that treat their Klients this way, paying them even less than the amount that they invested, create pre-links so that people themselves look for an alternative. And as you know, an alternative more than promising is Bitcoin.Slowly many are beginning to realize this.

Paying for the bank to hold your savings is known for a really long time in Switzerland. They have an independent banking industry and they're (the Swiss banks) nearly the only trusted banks by the richest people. If all the economies collapse, the Swiss banks will remain and will hold the savings in their national currency (Swiss Frank, CHF) and it will preserve the value.
Those people only trust these banks to hold their money, because they don't want to lose any of the value of their saving over the time. This is why Swiss banks could offer negative interest rate, because they're so trusted, and the demand is very high for their services, so they can just directly charge their cost with negative interest rate.
German bonds are pretty similar, Germany has a really good economy (on the long run), so people trust them enough to buy bond with negative interest rate because people speculate like the normal economies will fail, currencies (not EUR but the others) will lose a part of their value in a recession, so if you buy German bond even with negative interest rate will help them to preserve the value of their savings...
This is a signal for a coming recession or for a coming financial crisis... no one knows this for sure, but this is a signal...

Parents do it all the time... "I'll 'lend' my son Jimmy the money to help him out." Of course many times, that is a 100% negative interest rate ;-)

Did you see Bitcoin's trend this year? It's still up like 130% after a 43% correction. If we go back in time exactly one year; Gold is up ~26%. Bitcoin is up ~22%.

What usually happens is that when investors think certain events may affect the price of Gold, or even Bitcoin, they'll buy into it hoping that those who seek a safe haven asset do so too and further inflate the price. In other words, investors are front running future demand. It happens in every market pretty much.

Looking at the Gold price right now, it seems that it has topped out for now and is consolidating sideways. I'm kinda leaning towards a retest of the lower $1400 area or even $1350, which would provide a nice entry point. Just like Bitcoin, Gold won't keep going up endlessly without a solid correction every now and then.

I don't know if they are, but sounds like full reserve banks, where the entirety of your money is always there. Think bank vault instead. And this of course requires a fee for keeping that inside the vault without ever touching it until you want it back.

Most banks in the world do not do this, sadly they use fractional reserve, which is a form of legalized ponzi scheme, since they use your money for their interest, they pay you to give you an incentive to not withdraw your money...

Because if enough people withdraw their money, the bank has no way to respond, since the money isn't there anymore. At least not the whole of it, only a small "fraction". The only reason you don't see banks going bankrupt more often, is because they also came with the idea of a bank of banks that works with the same principle, called "The Central Bank". And to break that, a % of the population in that country would need to withdraw at the same time. But wait! they also made a World Bank just in case... which means... I hope you get it, if the world starts withdrawing, the bubble pops and everything collapses.

Which is why, it is wise for you to learn about the only school of economy that advocates the use of deflationary money, the Austrians: https://mises.org/books-library

Then you will understand where everything fits.

Should you get rid of your fiat for bitcoin or metals? Absolutely, leave in those Ponzi banks only the absolute minimum. It might not happen in your lifetime, but if it does, you will belong to the few that acted in advance and protected your funds by moving them away from fiat. You can also go with some more old fashioned assets like properties and such, but the main point remains: As little fiat as possible. Money in the bank is money at risk, think of a bank like an online wallet, very dangerous, could disappear tomorrow without warning (and yes, banks have gone before, leaving the people without their money).

But of course they want you to depend on them, their life depends on it...

Well for an instance it would look fancy to people thinking of the fact that you can take a loan for yourself worth 100$ and return back $99 after 5 years. But it's a catch here. Interest rates on Loans are set to compete with inflation in the economy. Which means the rate of interest is a bit higher than rate of inflation. Now, In a scenario of negative interest rate signifies deflation in Economy. Which means thing would get cheaper in future. So the banks adjust themselves to set a rate less than deflation rate to gain more. But this situation of deflation is short lived maybe for a year or two because economies can't survive on deflation. Either it will self balance itself to a mode of equilibrium or an Budgetary Injections would be needed to increase aggregate demand otherwise economy would implode. If you think it in a wide picture yes it might help btc because economies won't be able to run in such a situation but this is a self rectifying situation so it might not have any real impact on btc.

Rates below zero and QE means inflation
In a case of inflation bitcoin price will increase same like in a case of QE. With lot of printed money apetit on risk is increasing
 Generally fiat currencies are losing his purchase power that is maybe reason why bitcoin price is rising overall

Thank you for explaining this I was confused. Wow banks are evil AF. I have always thought so but man this is just cheeky. I think I will start protecting peoples money from my home and buying a huge security system and some massive dogs. That is what it will come to, private unofficial banking or simply to crypto which is where it will really go. People will rather hold their funds in crypto and it will have to be some sort of stable coins though I do not even understand how stable coins work. Perhaps it can be tied directly to the value of the USD or gold or something? Even with negative interest as a deterrent I still think most people will take that over crypto volatility.

I am not fully understanding this. Slight inflation is good for economy in some way and negative interest would be disaster.
However, they must have thought it through a lot. Don't know how it will end.
Let days say their words.

Negative interest rates will make people lazy to save money in the bank, they will find out safe and profitable ways to save their money
of course this will have an impact on bitcoin, they will save money in bitcoin because saving money in banks with negative interest rates will only reduce their money.

They basically want to charge us to "protect" our money. Se we pay the bank back 1% a year. It's an absolute joke. It is cheeky as hell. The bank will ask you even at prime maybe 10% and that is a very good rating. That is not enough and they want to make more so they decide not just to not give interest but to charge it too. Mostly the bank gives 5%-8% interest for you and loans it for 10%-22% so they already make
10%-5%= 5% and 22%-8%=14% so they make between 5%-15% on peoples holdings when they loaning it. Now they talking about going down form 5%-8% to -1% that is a crazy amount.

If this happens people will have little reason to use banks and it would be better to just invest your money. It will lead to more people investing in things. Better to hold stocks that will slowly increase or even stay the same over time than risk a guaranteed -1% with the bank.

Bank always give negative effect for costumer but they have other option how to keep money safe, by saving in bitcoin maybe bank will be less interested and many people want to hold their assets in bitcoin.

Bank, in my opinion, is just a place to save money, of course, we will be hit by interest rates. I know Bitcoin, I prefer my money to buy Bitcoin and Altcoins. Although in this industry it has a risk, it is able to generate many advantages when compared to the Bank.

Perhaps in the future will be more people who choose Bitcoin to place investments. Bitcoin has a very good development and can be used for payment media. We know already many large corporations adopt much of Bitcoin. Bitcoin is a good payment and makes a profit.

If I remember correctly, the reason on why the Japan's Central Bank imposed negative interest rates was to encourage its people to spend since most of them are saving their money either in the bank or on their respective houses. Due to this phenomenon, there lacks an inflow of cash in the economic machinery which makes the prices lower and cheaper BUT no one spends their money.

This would be a good opportunity if Bitcoin were to be introduced as an investment alternative since people would be spending and purchasing bitcoins, just like what they are currently doing. It would be a both win-win situation to their economy and to the price of bitcoin as well.

There’s been a domino effect of monetary policy of high-interest rates for centuries creates an unstable economy that occurs among the people due to the massive amount of debts. The central bank has been stockpiling so much money for centuries which could giveaway to low-income residents. Negative interest rates motivation was to refinance the government, corporations and even citizens to stimulate the economy in order to battle the global financial crisis and to counter inflation in their currencies. Countries in Europe such as Switzerland, German, Denmark, Sweden and from another side of the world, Japan have allowed rates to fall slightly below zero as they have low inflation, it's a good solution though.

I was kinda lost with this statement... So I basiy doesn't get what negative interest you're talking about until I rrad some comments and it enlightened me. Cause base on my understanding with the statement, omce you borrow you'll only pay lessen than what you've borrowed.

But it doesn't necessarily mean that because of this, people would automatically move in crypto. This could be positive towards crypto but it would not directly affect crypto I guess

Banks are changing their interest rates policy but I don't think that this would affect cryptocurrencies or Bitcoin in particular.
No matter what people are still depending on fiat money and attitude of banks doesn't mean they will choose Bitcoin as alternative. And with negative interest rates they would actually profit.

Negative interest rates are outrageous. Assets that lose value over time are not worth keeping, they are meant for using then. I think if times come when people will lose money for keeping them in banks instead of gaining (at least a little) it will be a demise of current banking system.

I don't think you understand how inflation works. Keeping your fiat in a bank results in a net loss as long as your interest rate is below the rate of inflation. With interest rates at a severe low for the last several years, the best rates you can get will give you an introductory offer of 1.5 - 2.0% APY, if you shop around. That rate will usually be cut to <1% after a year. With inflation sitting at around 2 - 3%, that means although the amount of fiat in your bank account goes up, the net value of your assets (your purchasing power) goes down.

Any interest rate below the rate of inflation is already a net negative. If you want to earn money you need an interest rate at least above 3% APY, which you will usually only get from longer term investments such as bonds or mutual funds.

I know that banks and even countries in Western Europe, like Germany, have started to introduce negative interest rates but I always thought that my country, Croatia, is very far from such a scenario.
Recently I heard that the Governor of the Croatian National Bank, Boris Vujcic, speaks about such an opportunity in Croatian banks also.
Since I have some savings, I am thinking of investing all this in bitcoin and thus avoiding negative interest and losing money.
A lot of people in Croatia still haven't heard or don't trust bitcoin so in the short run it won't help bitcoin but in the long run it might help.

No one wants to lose their money, interest will be lessen if banks failed to handle this situations, that will lead finding new ways or options to save money. Investment will be the very best option and aside from real states and insurance crypto also will have a piece of those people who are seeking for new place to put their money. There's  a lot of things to consider but chances is open for risky people to find interest in this industry.

At present, everyone is investing in bitcoin with great interest. It is more profitable than backing interest rates in all countries. But the risk here is high. There is no risk to the bank. Not everyone knows whether or not to invest in this digital currency of Bitcoin. Because of that the bank is still alive.

Now that depositors have to pay money to keep their money in the bank, instead of receiving interests on deposits, people may be discouraged to put their money in the banks, and might want an alternative to store up their funds and get some interests maybe, so this could be could for Bitcoin, and other cryptocurrencies, as this would be a good way for them to achieve that.

I didn't know that. I thought they would be investing in things instead? Wouldn't that be much better and stimulate the economy? Surely in Tokyo people spend? I know there are a lot of old people living in japan compares to other countries so maybe they the ones that are saving? I can see people in rural areas saving. The people living in cities have to many flashing lights and adverts in their face all the time. It still makes no sense to me to have negative rates. It is just going to annoy people. I think it' a cheek. If I lived there I wouldn't even use the bank then I would juts invest my money and withdraw directly from there once a month to my bank and spend the money before too much negative interest incurs.

As an alternative to all banks, now you can choose to invest in cryptocurrency. Very reliable investments will be Bitcoin and Ethereum. If you want more profit, then you need to invest in Altcoins with low capitalization.