Bitcoin Forum

Economy => Economics => Topic started by: Possum577 on February 16, 2015, 04:42:15 AM



Title: Could negative interest rates in the US boost Bitcoin?
Post by: Possum577 on February 16, 2015, 04:42:15 AM
http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html (http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html)

YES!

The linked article talks about how a bank in Denmark is charging its customers for the privilege of holding their savings, negative interest rates. The bank doesn't pay you for your savings on deposit but you pay the bank to hold your savings secure because the market alternatives are so risky. The article speculates (very broadly) that it could happen in the US...it likely won't, but if it did guess what would provide a good alternative to traditional savings?

You guessed it...the almighty B-T-C...what an interesting turn for bitcoin that would be.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: ajareselde on February 16, 2015, 11:18:41 AM
http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html (http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html)

YES!

The linked article talks about how a bank in Denmark is charging its customers for the privilege of holding their savings, negative interest rates. The bank doesn't pay you for your savings on deposit but you pay the bank to hold your savings secure because the market alternatives are so risky. The article speculates (very broadly) that it could happen in the US...it likely won't, but if it did guess what would provide a good alternative to traditional savings?

You guessed it...the almighty B-T-C...what an interesting turn for bitcoin that would be.

it was just a matter of time when this happens, i feel sorry for all those who tought they had enough to live off the interests and are now clueless how to proceed.
bitcoin could profit on this, definetly, but first its needed to remove everyday thefts from happening and scaring people off from it.
cheers


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: Q7 on February 16, 2015, 01:36:14 PM
Generally when it comes to negative interest rate, one would rather keep their wealth in other tangible assets like property, gold. Bitcoin could actually qualify but for that to happen the value needs to be maintain at stable range. A good portfolio is to diversify rather than to continue hang on to the cash and losing its value as each day passes by.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: Febo on February 16, 2015, 02:45:40 PM
Is normal. Fiat is physical and needs storage and that cost money.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: countryfree on February 16, 2015, 02:51:29 PM
Negative interests rates are an extreme from very few banks, limited to a very small number of customers who will move their money as soon as they will hear about the change. It's a non-event. The big thing is very low interest rates at most savings accounts.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: Possum577 on February 16, 2015, 04:14:37 PM
If the bitcoin price stabilized some we could see interest being paid on deposit accounts with Coinbase and other BTC holding/savings firms.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: hazenyc on February 16, 2015, 04:22:55 PM
Keep in mind the key difference between nominal interest rates (the stated rate) and the real interest rate.
The real interest rate is what matters and that is approximated as:
real interest rate = nominal interest rate - inflation rate.

SO if the nominal interest rate is say 4%, but inflation is 4.5% you have a negative real interest rate.
Furthermore, if you have a negative nominal rate but also deflation, you can have a positive real rate-- take the example where the nominal rate is -0.5% and there is 1% deflation (and this is a real possibility in Europe these days). The real interest rate would be -0.5 - (-1.0) = +0.5%

Why would a nominal interest rate be negative? Well there are the rates targeted by central banks and that is merely a target, but an important influencer. The market for money demand - the supply and demand of loans, specifically - dictates the actual nominal interest rate. Rates markets work like any other market. A bank has $100 to lend, and there are 3 borrowers of equal creditworthiness: A, B, & C who each demand $100. Borrower A states he will borrow for 1%, B says he can afford to borrow for 2% and C for 3%. C gets the loan for 3% (this is an oversimplification, but the point is correct). Why can C afford 3% and A & B cannot? Perhaps C has a project that will return 4% on the $100 loan and he will capture the 1% difference as profit. Also, in the real world economy it is firms or companies making investment decisions that influence these rates A LOT more than individuals seeking mortgages (which are long term anyhow and backed by the collateral of the house) or personal loans.

So when nominal rates are negative it means that nobody is demanding money. No investors (firms) are bidding up the price of money via interest rates because they can't return more on investing it anywhere else. In fact, the economy is so awash with money that people will pay to get rid of it because of the cash drag it is causing. Hence the negative rates. In a nutshell.

Negative rates should spur investment because otherwise it is too costly to hold cash. Buying bitcoin as well as any other asset is a good alternative and all asset prices should increase if the theory plays out according to plan. However, people have a tendency to hoard money, or become so risk averse that owning money, even for a small fee is preferable to undertaking a risky investment.



Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: hazenyc on February 16, 2015, 04:24:40 PM
If the bitcoin price stabilized some we could see interest being paid on deposit accounts with Coinbase and other BTC holding/savings firms.

Interest is only payable if Coinbase et. al begin creating loans. This is the only way to generate cash flows to pay interest. They could decide to pay out a pro-rated portion of business profits generated from advertising on websites, transaction fees, etc. but that is not interest, that is dividends.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: (Lithium) on February 16, 2015, 04:37:06 PM
Is normal. Fiat is physical and needs storage and that cost money.

usually banks invest people's money to get even more money.

They don't just sit and hodl it.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: Possum577 on February 16, 2015, 06:21:31 PM
If the bitcoin price stabilized some we could see interest being paid on deposit accounts with Coinbase and other BTC holding/savings firms.

Interest is only payable if Coinbase et. al begin creating loans. This is the only way to generate cash flows to pay interest. They could decide to pay out a pro-rated portion of business profits generated from advertising on websites, transaction fees, etc. but that is not interest, that is dividends.

I disagree. Earning revenue on loans is the traditional approach for banks but doesn't have to be how Coinbase or others do it. You share several other examples that would work to fund the interest payments...since offering loans with bitcoin is a very difficult endeavor.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: hazenyc on February 16, 2015, 08:55:41 PM
If the bitcoin price stabilized some we could see interest being paid on deposit accounts with Coinbase and other BTC holding/savings firms.

Interest is only payable if Coinbase et. al begin creating loans. This is the only way to generate cash flows to pay interest. They could decide to pay out a pro-rated portion of business profits generated from advertising on websites, transaction fees, etc. but that is not interest, that is dividends.

I disagree. Earning revenue on loans is the traditional approach for banks but doesn't have to be how Coinbase or others do it. You share several other examples that would work to fund the interest payments...since offering loans with bitcoin is a very difficult endeavor.

I didn't say they could pass through payments - they certainly can.
But as dividends and not interest.

And this is not just semantics there are real, important differences between the two and what ownership of those residual cash flows imply.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: ajareselde on February 16, 2015, 10:20:51 PM
Is normal. Fiat is physical and needs storage and that cost money.

usually banks invest people's money to get even more money.

They don't just sit and hodl it.

They're earning by giving you 4% per year interest on savings, and then giving me loans at 10% per year interest.
No work, no money, and they earn 6% of the base savings, thats what theyre doing, and god forbid that state intervenes and gives bussines loans without interest to those that want to break free of slavery and
start their own bussines.

cheers


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: hazenyc on February 17, 2015, 12:30:59 AM
Quote
and god forbid that state intervenes and gives bussines loans without interest to those that want to break free of slavery and
start their own bussines.

cheers

Well if the gov't did that, it would be a socialist policy..


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: lyth0s on February 17, 2015, 03:33:59 AM
Is normal. Fiat is physical and needs storage and that cost money.

usually banks invest people's money to get even more money.

They don't just sit and hodl it.

They're earning by giving you 4% per year interest on savings, and then giving me loans at 10% per year interest.
No work, no money, and they earn 6% of the base savings, thats what theyre doing, and god forbid that state intervenes and gives bussines loans without interest to those that want to break free of slavery and
start their own bussines.

cheers

4% interest on savings? 10% interest on loans? Where do you live?


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: Q7 on February 17, 2015, 06:06:30 AM
Could be Philippines. 4% is considered nothing compared to higher rates like Venezuela, Brazil and Russia which are more than 10%


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: Undermood on February 17, 2015, 07:06:11 AM
It means hoarding cash in bank is to losing value.The savers have to find alternative investment, which may boost the demand of btc.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: polynesia on February 17, 2015, 12:59:49 PM
We already have negative real interest rates, which were supposed to boost BTC.
Negative nominal interest rates are a big step further.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: drugs on February 17, 2015, 02:38:13 PM
If this did happen I suppose it would boost bitcoin as some people may choose to not keep their money in banks anymore and choose to hold it in bitcoin instead, though I think that would be risky. I do think a lot of people would stop using banks if they started charging though but I can't see them doing this.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: zimmah on February 17, 2015, 03:04:24 PM
so does the bank than also pay me if i hold their money for them?


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: jabo38 on February 17, 2015, 03:34:38 PM
http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html (http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html)

YES!

The linked article talks about how a bank in Denmark is charging its customers for the privilege of holding their savings, negative interest rates. The bank doesn't pay you for your savings on deposit but you pay the bank to hold your savings secure because the market alternatives are so risky. The article speculates (very broadly) that it could happen in the US...it likely won't, but if it did guess what would provide a good alternative to traditional savings?

You guessed it...the almighty B-T-C...what an interesting turn for bitcoin that would be.

Can't this trigger a run on the banks?  Why pay them to store my money when I can just hide it under my mattress? 


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: hazenyc on February 17, 2015, 04:11:27 PM
http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html (http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html)

YES!

The linked article talks about how a bank in Denmark is charging its customers for the privilege of holding their savings, negative interest rates. The bank doesn't pay you for your savings on deposit but you pay the bank to hold your savings secure because the market alternatives are so risky. The article speculates (very broadly) that it could happen in the US...it likely won't, but if it did guess what would provide a good alternative to traditional savings?

You guessed it...the almighty B-T-C...what an interesting turn for bitcoin that would be.

Can't this trigger a run on the banks?  Why pay them to store my money when I can just hide it under my mattress?  

That is the beginning of a deflationary spiral -- why spend today when your money can buy more tomorrow?
This might sound great for savers but in reality it wrecks economies. Because spending is the origin of wages, nobody gets paid if nobody spends and ultimately unemployment increases, and well it is a spiral so the negative effects are self-reinforcing.

A zero- or negative- interest rate policy is meant to encourage spending. Why save your money if it will buy less tomorrow? However, this can have unintended consequences, not least of which is a large amount of inflation-- why sell your stuff for a low price when people want to get rid of their money at any price?



Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: countryfree on February 17, 2015, 11:39:31 PM

why sell your stuff for a low price when people want to get rid of their money at any price?

Come on, we're still far from that! I still have a savings account which brings me some interest.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: v.mariette on February 18, 2015, 01:03:08 PM
http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html (http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html)

YES!

The linked article talks about how a bank in Denmark is charging its customers for the privilege of holding their savings, negative interest rates. The bank doesn't pay you for your savings on deposit but you pay the bank to hold your savings secure because the market alternatives are so risky. The article speculates (very broadly) that it could happen in the US...it likely won't, but if it did guess what would provide a good alternative to traditional savings?

You guessed it...the almighty B-T-C...what an interesting turn for bitcoin that would be.

Can't this trigger a run on the banks?  Why pay them to store my money when I can just hide it under my mattress? 

 in this scenario your money just sits there. no way of using that money to earn.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: picolo on February 18, 2015, 01:12:21 PM
http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html (http://finance.yahoo.com/news/banks-in-europe-are-charging-to-hold-deposits--could-it-happen-here-195532627.html)

YES!

The linked article talks about how a bank in Denmark is charging its customers for the privilege of holding their savings, negative interest rates. The bank doesn't pay you for your savings on deposit but you pay the bank to hold your savings secure because the market alternatives are so risky. The article speculates (very broadly) that it could happen in the US...it likely won't, but if it did guess what would provide a good alternative to traditional savings?

You guessed it...the almighty B-T-C...what an interesting turn for bitcoin that would be.

It is the case in some german banks as well. Maybe in Switzerland too.


Title: Re: Could negative interest rates in the US boost Bitcoin?
Post by: Fabrizio89 on February 18, 2015, 09:03:33 PM
It could, yes, but it depends on the global market situation. We already saw how a strong dollar affected all commodities and currencies and Bitcoin was not left out of these shenanigans.