Negative Interest Rates

[McDonalds5]

http://www.bloombergview.com/quicktake/negative-interest-rates

Are Negative Interest Rates an end of fiat monetarism? What effects do you believe this monetary gamble causes in short- mid- or longterm?

Lets's discuss.

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[SFR10]

Well it's sort of case to case basis according to the country of origin. If there's is a deflation then the harm is lesser than what it looks but if there's inflation going on and they decide to go with negative interest rates, then the effect would be instant and both short and long term users/investors will surely face some harm but mostly the short term since the long term investors get to adopt to the changes in the long run and are affected less.

[Barnabe]

Maybe banks will build big forts to store money. 

It's just a matter of profitability, if building and keeping the fort functioning is cheaper than the interest rates they could do it. 

[OROBTC]

http://www.bloombergview.com/quicktake/negative-interest-rates

Are Negative Interest Rates an end of fiat monetarism? What effects do you believe this monetary gamble causes in short- mid- or longterm?

Lets's discuss.

I have a whole slew of problems with ZIRP, and especially NIRP:

1)  Savers are very much hit under NIRP.  NIRP makes it harder for anyone saving money to get ANY income off their savings.  Bad!
2)  NIRP will very possibly (probably?) lead to banning CA$H!  .gov will then get to see EVERYTHING you buy.  Do you like that?
3)  ZIRP and NIRP (especially NIRP) cause all kinds of weird perversions (eg, incentive to pay bills faster)!
4)  Lack of proper CA$H will encourage OTHER digital currencies, Bitcoin may get discouraged or BANNED.

Those are just off the top of my head...

NIRP is very bad, to my knowledge we have not seen this before in modern history.

[pitham1]

It is a short-term measure. I don't think any country can have negative interest rates over a long term.
Beyond a point, the economy stops responding to monetary policy.

[jayce]

It is a short-term measure. I don't think any country can have negative interest rates over a long term.
Beyond a point, the economy stops responding to monetary policy.

Negative interest rate has proven that it will increase the country's economy system. By using this kind of rate, the government are encouraging people to spend their money to make business instead of just keeping it in the bank therefore with more business around the country's economy will be increasing as well

[arbitrage]

Yes act absurd, because why would anyone want to borrow money with a negative return on assets,
when it can simply keep the money and there is no loss?

[Newmba]

there are already European countries that do this, like Switzerland, but it has never been tried before in Japan and the USA. I think it'll be a total disaster

[Barnabe]

there are already European countries that do this, like Switzerland, but it has never been tried before in Japan and the USA. I think it'll be a total disaster

In switzerland they did it because too many foreigners were buying CHF during the crisis to secure their money. In this situation, negative interest rates are not too bad...
At least the national bank is winning some money on other people's greed 

[Yakamoto]

I guess in the right environment negative interest rates are a good thing, but at the same time it just saps wealth out of the economy while slightly revaluing the currency.

I personally cannot attest to the actual effects of negative interest rates; it'll be interesting to see where it will go.

[Pab]

Crazy.Last attempt  to keep that  dead  system alive Investors  see  that in very negative light
Nikkei went down 25%  from  time whan   negative interest rates has been introduced

[Hazir]

Honestly negative interest rates are bullshit (to put it bluntly). In other words it is fail of our current economic system.
Reducing interest rates is supposed to increase spending and investment, inducing economic growth.
The problem with this solution is - it won't work. All we achieve is temporary distraction from much needed reform.

[clickerz]

I dont get this negative interest rates..Maybe the government/bank wants people to take their money from banks and invest directly somewhere or to start a business.This way it can help the economy and create jobs.

[Cyaren]

This idea doesn't work... so you take out credit, and you receive interest on the credit you take out? That doesnt' make any sense. Also it would mean when you deposit money to a bank your savings decrease... Which means that everyone would be trying to take out loans, and nobody would be offering loans. Which would not work at all.

[OROBTC]

http://www.bloombergview.com/quicktake/negative-interest-rates

Are Negative Interest Rates an end of fiat monetarism? What effects do you believe this monetary gamble causes in short- mid- or longterm?

Lets's discuss.

I have a whole slew of problems with ZIRP, and especially NIRP:

1)  Savers are very much hit under NIRP.  NIRP makes it harder for anyone saving money to get ANY income off their savings.  Bad!
2)  NIRP will very possibly (probably?) lead to banning CA$H!  .gov will then get to see EVERYTHING you buy.  Do you like that?
3)  ZIRP and NIRP (especially NIRP) cause all kinds of weird perversions (eg, incentive to pay bills faster)!
4)  Lack of proper CA$H will encourage OTHER digital currencies, Bitcoin may get discouraged or BANNED.

Those are just off the top of my head...

NIRP is very bad, to my knowledge we have not seen this before in modern history.

More...:

5)  Electrons in the bank could easily be seized should .gov want to...
6)  Credit card companies already skim some 3% per transaction, banning CA$H would mean they make even more money.
7)  We would pay to have "money" in the bank, but I doubt that they would pay us to borrow it...  Bigger save/borrow spread.

[tabnloz]

http://www.bloombergview.com/quicktake/negative-interest-rates

Are Negative Interest Rates an end of fiat monetarism? What effects do you believe this monetary gamble causes in short- mid- or longterm?

Lets's discuss.

I have a whole slew of problems with ZIRP, and especially NIRP:

1)  Savers are very much hit under NIRP.  NIRP makes it harder for anyone saving money to get ANY income off their savings.  Bad!
2)  NIRP will very possibly (probably?) lead to banning CA$H!  .gov will then get to see EVERYTHING you buy.  Do you like that?
3)  ZIRP and NIRP (especially NIRP) cause all kinds of weird perversions (eg, incentive to pay bills faster)!
4)  Lack of proper CA$H will encourage OTHER digital currencies, Bitcoin may get discouraged or BANNED.

Those are just off the top of my head...

NIRP is very bad, to my knowledge we have not seen this before in modern history.

More...:

5)  Electrons in the bank could easily be seized should .gov want to...
6)  Credit card companies already skim some 3% per transaction, banning CA$H would mean they make even more money.
7)  We would pay to have "money" in the bank, but I doubt that they would pay us to borrow it...  Bigger save/borrow spread.

OROBTC,

Yes, many problems, but all just symptoms of the debt problem - there is too much debt, for governments and for the banking system. NIRP for excess bank reserves is just the trial balloon for mainstream implementation after they failed to stimulate demand via ZIRP / QE. The reason they fail is because the average Joe knows the economy still isn't right and they are scarred. There is no demand, it is the ultimate form of people power. Despite all the rhetoric for 7 plus years main street still won't rejoin the congo line. The debt life is done for this generation, much like the Depression begat a generation of frugal citizens.

So they can take savers money even more via NIRP, but it still won't spur demand. They can ban cash, make it all electronic but it won't help. People will just withdraw further, stash what they have and ride it out. And big companies and retirement funds will die a diminished returns death, anathema to the way the system is designed to operate. But when the money starts flowing from helicopters (the next move), then the game changes to inflation.

[plost24]

Who will be ok in saving money with a negative profit that is mean i will give you my money and every month take some to your self it is noy logique

[BobK71]

One implication of real NIRP (as opposed to today's "fake" NIRP) may be that gold, silver and Bitcoin will go up.

The way the elites have always made sure the system worked is that inflation must be higher than the return on "safe" fiat-based assets (short term govt. bonds, insured bank deposits, etc.), and that lower rate must be higher than the return on non-state-issued assets (gold, silver.)  Otherwise, investors would move en mass into the "wrong" assets (short-term Treasuries instead of stocks or real estate, gold instead of dollar-based assets, etc.) and the elites lose their power to profit by financial inflation.

(So you notice that gold's return is held at zero, via the gold standard, through most of the 400-year history of modern money.  It only goes up over short spans of time when the elites lose control temporarily.  During the "fiat" period it behaves more-or-less the same way.)

The problem today, for the elites, is that inflation is too low, and it's hard to make the other two rate go below zero (since people can always hoard cash, today, if their banks really give them negative interest.)  So the three rates are squeezed together around the 0 to 2% range.  People are accepting the small loss to inflation by keeping their savings in the safest assets, to avoid risking their money.

(And why shouldn't they?  Unlike the Great Depression, almost none of the debt overhang has been wiped off the books.  Investors are right to bet that the authorities will be afraid to print or borrow too much money to stimulate the economy, which would really burst the financial asset bubble.)

So, the idea is to push interest on "safe" fiat-based assets lower, below zero, so when people see their bank balances slowly evaporate (and presumably cash has been abolished, so they can't put it under the mattress,) they'll decide to spend and invest, and stimulate the economy.

(This is not the whole story, of course.  NIRP is not essentially different from centuries of the same kind of policies -- it's just that the elites hit a zero interest road block, below which they can't push interest rates, while there is cash.  These centuries of policies are what's really responsible for the current economic pain in the first place -- via propping up the values of financial assets with state power during stable times, and letting the pain fall on everyone when confidence collapses in some over-valued asset.  Only the elites really benefit from this system.)

But there's one thing not many commentators discuss -- the rate of return on non-state-based assets, ie gold, silver and Bitcoin.  Since this rate must be significantly below the "safe" rate for fiat-based assets, when the latter rate goes negative, the returns on gold, silver and Bitcoin must go even more negative for confidence in fiat money to be kept.  This may mean the elites must allow or engineer the prices of the non-state assets to go very high (again, over a short time span,) just so they will have enough power to suppress their rates of return over the period of NIRP to very negative values.  (The suppression of gold prices during the "fiat" era is well documented by two serious books -- in effect, the elites won't and can't leave the gold standard, whatever they say in public.)

[jaysabi]

I dont get this negative interest rates..Maybe the government/bank wants people to take their money from banks and invest directly somewhere or to start a business.This way it can help the economy and create jobs.

This is literally the reason they have negative interest rates.

[jaysabi]

This idea doesn't work... so you take out credit, and you receive interest on the credit you take out? That doesnt' make any sense. Also it would mean when you deposit money to a bank your savings decrease... Which means that everyone would be trying to take out loans, and nobody would be offering loans. Which would not work at all.

The negative rates are only charged by the central bank to the banks, not to consumers (because the banks don't pass the negative rates on so as not to alienate customers). So the theory is by penalizing banks for holding money by charging them interest to do so, they are incentive to loan it out instead, thereby creating economic activity and spurring the economy.