Banks are offering Negative interest rates! will this help BTC

[philipma1957]

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 wtf?

[AB de Royse777]

"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!

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.

[bill gator]

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.

[Rozita]

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.  

[Artemis3]

What if I said I wanted to borrow $100 from you and pay you back $99 five years later? Would you do it?

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 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.

[Alert31]

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.

[Rozita]

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.

[DdmrDdmr]

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).

[o_e_l_e_o]

You may have seen for instance that Germany just sold the first negative yielding 30-year bond issue.

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.

[gentlemand]

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.

[rdluffy]

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

[dkbit98]

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.

[Kakmakr]

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> 

[hatshepsut93]

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.

[BestBitcoinBuyers]

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)

[pooya87]

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.

[hatshepsut93]

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.

[Vishnu.Reang]

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.

[BrewMaster]

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!

[davis196]

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.