Negative interest rates
Discussion
OK, so this is something that we are bit by bit heading towards. Maybe it won't happen but maybe it will, so let's think it through.
We know how stuff works at the moment. But what happens when it flips the other way? What effect will it have on investors, and can they capitalise on it somehow? I think that for every threat there's an opportunity.
We know how stuff works at the moment. But what happens when it flips the other way? What effect will it have on investors, and can they capitalise on it somehow? I think that for every threat there's an opportunity.
BoRED S2upid said:
I read somewhere that if they did go negative it would only benefit banks and the likes not us we wouldn’t see a zero percent mortgage but yes money would be stupidly cheap you could borrow to invest.
Would it ever happen here though? Has it ever happened?
It might be like inverse inflation - ie you sit on a big pile of cash and watch everything around you get cheaper... and yes, whilst people currently tolerate minuscule interest on savings 'because it's safe', once they have to start paying to keep it there, they'll take it out and either spend or invest in the markets, which would surely give them a massive boost. Can't see it being sustainable though.Would it ever happen here though? Has it ever happened?
There must be someone with a big computer who can put in -1 instead of +1 and see what comes out.
Isn't Japan negative?
deggles said:
So it's affecting trading/investing platforms holding client funds now. As long as paper currency exists I don't see how direct retail deposits can cross the zero bound but private investors being charged to hold cash is definitely now a thing! 
Interesting isn't it. Nobody's going to want to pay charges for cash deposits so what are the alternatives? Take it out and keep it under the bed, or invest it and try to make it grow... anything else? Will billions start to be withdrawn and invested? Or will people be too lazy and just ignore it? With that and inflation it's a double hit.Joey Deacon said:
I would imagine the government would love it if all the money that is being hoarded was withdrawn and spent. Negative interest rates would encourage people to borrow more as well as encourage the hoarders to spend, a double win for the government.
It's such an obvious solution that I can't help but think we will see negative interest rates in the next few years.
Expect asset prices to rise even more as cash becomes more and more worthless.
Negative interest rates wouldn't encourage me to spend, because I'd have less money faster. They'd encourage me to find a better home for it.It's such an obvious solution that I can't help but think we will see negative interest rates in the next few years.
Expect asset prices to rise even more as cash becomes more and more worthless.
I'm not sure it's quite fair to call people who save 'hoarders'; they may be planning independence rather than living on the State like the spendthrift and unfortunate.
I can't think that an economy where people just borrow money and spend it is sustainable. If it was that easy we'd all do it.... The First Law of Stuff says it has to be paid back sometime.
Joey Deacon said:
I am a self confessed money hoarder, just like any other type of hoarding it is doing me no good at all aside from a warm feeling when I check my bank balance.
It might mean that you don't need to work, or can retire early while your mates have to slog until 67+. It can buy you quality of life and options.Joey Deacon said:
The government are doing a great job of building an economy built on debt, just look at how much they are borrowing for Furlough payments. I am sure they have some plan somewhere to make all this debt disappear somehow.
To be fair they had no choice; every other sanguine government has to do the same because the alternatives are worse. I'm sure it wasn't in the Conservative game plan in Dec 2019.Joey Deacon said:
I am not seeing the people who live their life on debt being punished in any way aside from having a better standard of living that the prudent
They pay interest - unless they're serial bankruptees. Given the choice of no money or a big pile, I know which I'd prefer.gangzoom said:
but I don't want to pay 1.67% interest if 0% is coming!!
I don't think 0% could possibly work for lending, because it would mean money was free. You could simply go out and buy a 12-bed house in the country, a fleet of luxury cars and a yacht, and never have to pay anything back. Furthermore there wouldn't be enough 12-bed country houses, luxury cars or yachts for everyone. We call this reptile logic 'Simponomics'... It's often wrong, but often a good starting point!
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