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Posts: 759

Shifu

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Q: Negative interest rates, your thoughts...

So, there is alot of ink in the press lately about banks doing negative interest rates. What are your thoughts about this ?  Will this see capital flight out of savings accounts into other areas of investment ?  will people and organizations just suck it up and see it as a "monthly fee" to keep their funds liquid?  Do the think tanks see something the masses dont see when it comes to this pheonemona ? Let me know what you think ! thx.

8 years 5 weeks ago in  Money & Banking - China

 
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http://www.thetimes.co.uk/edition/news/bank-threatens-charges-for-deposits-as-negative-interest-rates-loom-rx0p3cgsv

 

ambi, looks like your were right. negative interest rates coming to England and America may be next.

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7 years 35 weeks ago
 
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https://www.sovereignman.com/trends/you-know-negative-interest-rates-are-bad-when-18544/?inf_contact_key=ac80619f248883582ac4158dd5a66fad43eae556cf973bbf319bceed022c40bc

the whole premise of printing money to make economic growth has not worked and now people still refuse to spend the money and grow the economies, well if the interest rate sucks and you need stable income and you dont gamble in the stock market, then i need to save more money now because i get 1 percent instead of 5 percent at the bank.
i knew this was coming and will make quite a bit of scratch on stock in companies in the safe building industry, why keep your money in a negative trap.
so central banks say be a good boy and spend so we can brag about our wisdom, and when the serfs dont obey, well we will fix you a hole, we will just take your money for no reason.
all because these arrogant pricks think they understand economics and still believe debt is a good thing above moderate levels. this actually was predictable by watching japan for the last 15 years if anyone was paying attention. they actually want inflation to eat up the printing of money that all countries have been doing, but to have inflation, people actually have to spend.
the cash went to the top 10 percent in the markets and none of went to a decreasing soon extinct middle class, too bad they want come off the clouds to see the reason they failed.

the article above tells swiss citizens not to pay taxes early because the government accounts are being charge -.075 for keeping their money in the bank, swiss citizens are prompt in nature and usually pay taxes early without asking, i would have called this statement the ravings of an idiot 10 years ago, sadly its not.

Englteachted:

But China is not doing this. And this is not for banking customers (individuals). So what's the point? Who cares?

8 years 5 weeks ago
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ambivalentmace:

negative interest rates are hitting individual customers in europe and switzerland started it up after the europeans, american banks are discussing and putting in press articles as a preliminary trial balloon to see if they can get the politician and the fed to go along, china will follow the rest of the world and do the same thing, they really have no choice, nobody is spending all this money they printed, nobody is making a business by taking loans because nobody will buy the product or service. a worldwide slowdown and all the fats cats saying spend and underclass saying spend what "a#hole", we did not get any of the money, the top elites got it all.

japan has very low interest rates and lots of fees for an account which indirectly makes you lose like negative interest, thats why they found thousands of home safes scattered all over the beaches after the tsunami a couple of years ago.  customers are better stashing the money in a safe deposit box but you have to pay a fee for that also.

8 years 5 weeks ago
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retiredinchina:

http://www.bloomberg.com/news/articles/2016-08-11/negative-rates-for-the-people-arrive-as-german-bank-gives-in

 

If you have more than 100000 euros, sorry we charge you to keep your money and it is time to buy a safe. Ambi you got this right also, I hoped you were wrong.

7 years 32 weeks ago
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8 years 5 weeks ago
 
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In general, non acceptable for the consumer, great for the bank..  Cheaper to keep under mattress as they do here, just do not smoke in bed, please. 

 

Use other time deposits, such as CD's, money market, etc.

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8 years 5 weeks ago
 
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Wow, it's amazing how people don't understand a simple concept.

Bank holds money for it's customers. Before, customers would have to go to the bank and withdraw cash in order to spend their money. This was easy for banks because people were moving the cash as they spent the money. Banks had to store, move and protect less cash. 

Today, the dawn of ebanking. One of the benefits of spending and moving money electronically is less branches. But fewer branches must store and move more cash (can you understand that the cash used to be on the person and now it stays in the bank).This creates 2 problems for banks. Storage and movement (both requires protection). When we paid in cash, we moved the money from one place to another. Think, When I spend money in a store that uses a bank different from my bank, The banks have to make that right. That means eventually my bank has to move that cash to the store's bank (this is something they didn't have to do before, on a large scale at least). I don't know how often banks move money to make things right, but when banks move money , it must be done with armed guards which is not cheap. Just because someone doesn't tell you something doesn't mean you shouldn't be able to figure it out by looking at all the facts.

Now there is a lot more to this. Some countries will store some of the money for banks (I think America does this).  This is just the business side of it. 

 

Now the Economics of negative interest rates are completely different. Do you understand why banks pay you interest? Because they loan out your savings at a higher interest. Let's imagine for the sake of argument that people are not using credit cards or borrowing money to buy homes/ cars and businesses are not borrowing money to start up/ expand (signs that the Economy is not growing or shrinking). Will banks resort to negative interest? That would possibly be suicide, people will take their money out of banks. But that would only be poor people, people with huge savings would not want to take on the cost or risks of storing the money themselves. So there are 2 ways of looking at it.

Here's why I want to see a link talking about this with regards to China and banks doing this to consumers. That would be a huge red flag because that would mean banks are losing on their investments and are desperate. The article about Switzerland is complete different, that is a matter of supply and demand. Holding your savings in Switzerland is in high demand because they cater to people trying to hide money. 

I'm not an expert but the basics a simple. Today, banks have to hold and move more cash than 30 years ago with fewer branches (because people bank online or at the ATM).. 

Hotwater:

Don't you think there is a contradiction now in what you write? With more and more banking done online do you really think that banks move masses of cash around when people use their cards with other banks or take out loans?

 

The vast majority of it is done electronically. So if there was a need to store loarge amounts of paper cash then surley the bansk would just need a couple of huge paper stores/vaults and they'd reckong up with each other every few months or so. Most of the digital trandsfer intra-bank woul dbalanace of. If not, then there could be a cash transer eventually. But if the banks have sense, these huge sums of physical cahs could be kepy in a shared vault and not actually mnoved around. Just transferred as "bits" electronically while note actually moving.

8 years 5 weeks ago
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ambivalentmace:

the banks have a suspense account with the federal reserve or central bank that keeps a  running total and keeps the money, banks have less cash now, direct deposit by social security, nobody cashes a check, if you go in a bank with cash, you are looked at with suspicion, some jerk economists 2 weeks ago wrote an article supporting the idea of getting rid of the 100 dollar bill. fuel for trucks is lower than it has been for 15years ago.

moving money is overhead cost like salaries or electricity, the banks are using fees to make money because they cant make it on loans,

as the government goes further in debt the control of any money will tracked more suspiciously in america, china requires 16 to 20 percent cash on hand against deposits, in america most banks cant meet a 7 percent requirement even with the suspense account with the federal reserve.

so they get rid of the 100 bill to get cash only workers and drug dealers to pay more cost (taxes)  next they will tax retirement accounts,

yes sadly banks will commit suicide and go to negative interest, if the europeans did it then we should do it, wish i was wrong, but im buying stock in companies that make safes. this could change if people become optimistic and start spending again, but im not holding my breath. i should for full disclosure note that i am a cpa and made the youthful indiscretion of actually working as a federal reserve auditor for 18 months, and my hatred of banks is very severe. if the american media is the 4th branch of government, banks are the 5th branch of government.

8 years 5 weeks ago
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Englteachted:

Hotwater: Remember there is no such thing as electronic money. All money is cash. and has to be kept somewhere. Lets say a bank has 1000 customers who each have 100,000$ in their accounts. They spend the money using their check cards. The bank still must have and store 100,000,000$ (most loans are not in cash form, loans are placed into an account of the borrower). 

Amb and hotwater: Some governments will store a portion or most of the money for the major banks. I know America does. As for the Swiss, from what I read , it seems  they don't. 

 

I'm not in this field so I don't know the details of how it works. But think about it, would a bank want to hold money for another bank for free? 

8 years 5 weeks ago
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Englteachted:

Amb : You're talking about China and the US as if they're one in the same. Completely different. Loans do make money in the states. Fees and interest. The banking industry is booming in America. The government covers their big loses. Every time I use my credit card the vendor pays a small fee per transaction to the bank. 

8 years 5 weeks ago
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ambivalentmace:

you would be right about banks making a profit, but its not what it appears, mortgages are only 3 percent interest for good credit risk customers now, the middle class is shrinking and credit card interest is falling because less people are using them, the government cant raise interest rates because then they have to pay more interest on the national debt and get the money from the shrinking middle class to pay the extra interest which takes even more money out of the economy. banks are making profits by being bought out and merging and consolidation right now because the small ones are getting squeezed,

people are saving more for retirement because they dont get 5 percent on a money market account like they did a decade ago.

 

all of this can be tracked back to the overuse of debt and the unintended consequences and china is following the same path, japan and brazil have already fallen and china is next.

 

the sad part is as irresponsible as the economists and politicians are that put us in the mess, every body else copied us into the debt trap and america just happens to be at the top of the trash pile instead of the bottom, so the dollar is stronger compared to the bottom of the barrel, but we are still in the stinking barrel. i personally never use american banks except usaa from my military background or credit unions only, i have never paid an atm fee in my life, and i really hate banks.

8 years 5 weeks ago
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Janosik:

Vow!

I do not blame you for lack of knowledge as economics apparently is not your field, as you also rightly write:

'I'm not in this field so I don't know the details of how it works.'

 

But I am absolutely astonished at your arrogance.

If a person does not understand something so the best approach is to politely ask. Not to shout arrogant nonsense to the world.

 

If you Bing, Baidu, Google a bit so you may find out that real money (physically existing banknotes and coins) are just a small fractions of all the money existing.

For instance FED calls them M0 and in 2013 there were about 1.2 Trillion USD.

But M2 (which includes M0, M1 [money in checking account, travelers checks etc.] and money market funds, saving accounts) so the amount is already 10.5 Trillions USD. And these are still not all the money ...

 

So as you can see 'electronic' money really do exist.

 

And negative interest rates have nothing to do with the costs of keeping and protecting physical money ...

8 years 5 weeks ago
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Englteachted:

Jano the loser: If you're going to use information from another source then post a link. You are saying that when I invest USD in a money market the money only exists electronically? I think confusing the laws concerning how much cash banks must have on hand. I'll give you an example. Bank of America holds a mainly keeps their money on deposit with the Fed. Let's say they hold 5% of their total holdings in cash, that doesn't mean 95% of cash doesn't exist it's just kept with the fed. 

Maybe you're confusing assets with currency. The problem with googling a complex subject is that you end up presenting information you don't understand and it ends up not making sense.  That's why I stuck to the basics. You use terms like M0 but you gave no explanation of what it really means (in your own words) because you have no clue. 

 

 

 

To prove my point I'm going to post this from investopia.

"

What is 'M0'

M0 is a measure of the money supply which combines any liquid or cash assets held within a central bank and the amount of physical currency circulating in the economy. In the United Kingdom, the M0 supply is also referred to as narrow money.



Read more: M0 Definition | Investopedia http://www.investopedia.com/terms/m/m0.asp#ixzz40tnltbpI 
Follow us: Investopedia on Facebook"

 

You confuse being held in the central bank as it 'not existing in bank notes' . Not all bank notes are circulating.

Go back under the bridge Jano. You are outed as a troll. You post random nonsense you ripped from the internet with no basic understanding of the English language. 

 

 

8 years 5 weeks ago
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8 years 5 weeks ago
 
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Englteachted:

I curious to find out if their government stores any cash for the banks like they do in the states. My guess would be no because Japan is too capitalistic.

8 years 5 weeks ago
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8 years 3 weeks ago
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8 years 5 weeks ago
 
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Shifu

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8 years 3 weeks ago
 
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http://www.thetimes.co.uk/edition/news/bank-threatens-charges-for-deposits-as-negative-interest-rates-loom-rx0p3cgsv

 

ambi, looks like your were right. negative interest rates coming to England and America may be next.

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7 years 35 weeks ago
 
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Hmmm... banks make BILLIONS of dollars through investments, and fees and charges... but no, still not enough. Now, let's make even more from the money that people are giving to the banks to DO the investments with....

 

Yeah, smart!

 

I can see bills being introduced into parliaments requiring employees salaries and wages be paid in cash soon! Or, credit cards will be used for EVERYTHING... which is much easier to trace (and hack, and crash).

 

In a way, I see this as a good thing.... because it will bring about change (revolution) much faster!

 

I ask people to recall (or search for) 'Sesame Credit' - where Tencent and Alibaba etc are in cahoots... so that social media will be connected with electronic payment methods... 1984 anyone?

retiredinchina:

The elites in power, regardless of country, "we allow you to have money, cash, but we printed it for your benefit and don't make the mistake of thinking it's your money and you have any power or rights accumulated by having cash, we know what is best for you and we can take it away from you anytime, now come here and lick my ass and thank me for letting you have some cash."

7 years 35 weeks ago
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7 years 35 weeks ago
 
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Don't heed the naysayers: negative central bank rates create disincentives to hoard when prosperity is waning. It's a vaunted formula to recapitalize the maligned manufacturing sector and invigorate the equities market, which, is, as you may have noticed for the latter, so sluggish of late! 

A sure fire remedy for making bankers feel warm and fuzzy! As for the general economy, it will sustain yields far in excess of those gleaned in 2007/8.

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7 years 35 weeks ago
 
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http://www.thetimes.co.uk/_TP_/article/rush-to-withdraw-savings-as-threat-of-negative-rate-looms-pxzhxmq3n?ni-statuscode=acsaz-307

 

Well, this should make brexit move along nicely, no money in the bank to borrow for investments or growth, all those economic eggheads should be so proud, pat yourself on the shoulder and move back into the basement of your moms house dufus.

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7 years 34 weeks ago
 
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