Banks in Germany Tell Customers To Take Deposits Elsewhere (wsj.com) 193
Interest rates have been negative in Europe for years. But it took the flood of savings unleashed in the pandemic for banks finally to charge depositors in earnest. From a report: Germany's biggest lenders, Deutsche Bank and Commerzbank, have told new customers since last year to pay a 0.5% annual rate to keep large sums of money with them. The banks say they can no longer absorb the negative interest rates the European Central Bank charges them. The more customer deposits banks have, the more they have to park with the central bank. That is creating an unusual incentive, where banks that usually want deposits as an inexpensive form of financing, are essentially telling customers to go away. Banks are even providing new online tools to help customers take their deposits elsewhere.
Banks in Europe resisted passing negative rates on to customers when the ECB first introduced them in 2014, fearing backlash. Some did it only with corporate depositors, who were less likely to complain to local politicians. The banks resorted to other ways to pass on the costs of negative rates, charging higher fees, for instance. The pandemic has changed the equation. Savings rates skyrocketed with consumers at home. And huge relief programs from the ECB have flooded banks with excess deposits. Banks also have used the economic dislocation of the pandemic to make operational changes they have long resisted.
Banks in Europe resisted passing negative rates on to customers when the ECB first introduced them in 2014, fearing backlash. Some did it only with corporate depositors, who were less likely to complain to local politicians. The banks resorted to other ways to pass on the costs of negative rates, charging higher fees, for instance. The pandemic has changed the equation. Savings rates skyrocketed with consumers at home. And huge relief programs from the ECB have flooded banks with excess deposits. Banks also have used the economic dislocation of the pandemic to make operational changes they have long resisted.
It is a non issue for the average person (Score:2)
That seem a non issue for everybody not having a large a sum of money, e.g. the crushing majority of the population. And they seem to take the fee where they should : from large deposit and not small fish.
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That depends on what "large sums of money" are defined as. Without details, one cannot evaluate this. . .
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I've seen something similar from a french bank. It was for deposits over 50 000 euros. According to TFA this german bank charges for deposits over 100 000 euros.
The average joe is not affected by this. Not even close. We are not talking about an investment savings account here but a checking bank account.
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I don't think having 50k Euros in cash is necessarily that outrageous. In an ideal world, you should keep three to six months of living expenses in cash, just in case things go horribly wrong (lost jobs, etc.). So for upper middle class and up, that's potentially not out of bounds.
Of course, you can always spread it across multiple banks to avoid having that much in a single account, and it's probably a good idea to do so in general, so this isn't *really* a problem for most people, but it is potentially
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I don't think having 50k Euros in cash is necessarily that outrageous. In an ideal world, you should keep three to six months of living expenses in cash, just in case things go horribly wrong (lost jobs, etc.).
You don't need that amount in cash. You need it available in a couple of days in case of an emergency. It can be a credit line. It can be a liquid investment.
I have that amount on a credit line (low interest rate, backed by my house) but not in a banking account. Especially not a checking account that would give me 0-0.1% interest. And I could always sell stocks as well. No problem sleeping at night.
One thing it does make more challenging, however, is home buying/building/remodeling. (This, of course, only applies to people who save up their money to do those things, as opposed to just taking out a huge loan.)
You can always get a short term, safe investment which will give you more return than just parking your money
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It is in Germany. There are social safety nets that help during a job loss and huge medical expenses aren't a thing either. And simce the majority rents their homes and expensive remodeling isn't done that often because most houses are made of brick and concrete instead of wood, that isn't really a reason either. All this also causes the wages for the top earners being lower.
Finally EUR 50000 is way more than six months of living expenses, more like several years.
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It is in Germany. There are social safety nets that help during a job loss and huge medical expenses aren't a thing either.
Yes, the order-of-magnitude higher cap on unemployment over there certainly doesn't hurt. I'll grant you that.
Finally EUR 50000 is way more than six months of living expenses, more like several years.
Six months of loan payments on a detached single-family home in Munich would total over $60k by themselves. The fact that the majority of people rent, rather than buying, doesn't change your obligation to pay down the loan if you are buying.
Realistically, I can't imagine anybody being able to live on $60k for several years anywhere in the U.S. or Europe unless they either A. own their home and car
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I could live for almost three years with that kind of money without compromising on my living standards. Then again I currently live in a quite expensive area. Not in Munich, though, no thanks. Had an opportunity to work there but never liked that city even as a tourist.
Could probably last four years in the part of Germany where I used to live back in the day, by the way.
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I do not need more than roughly 1500 EUR per month. ...
So 50k would give me about 33 months.
And a bit more than 1/3rd of that is rent, so no I do own my own house, and I do not own a car. Owning a car would cost money and not save any
No idea from where you picked your example about paying a loan in Munich, people do usually not earn enough to pay 50k for half a year of loan on a house. How stupid expensive would such a house be? A typical payment for a house is 20 - 30 years, so your $60k example for 6 mont
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From the median single family detached home price (Google search). I was surprised it was $2.1M, too. I'd have expected around half that.
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In an ideal world, you should keep three to six months of living expenses in cash, just in case things go horribly wrong (lost jobs, etc.).
For that you have unemployment insurance in Europe.
It is relatively stupid to have mediocre sums like this in a bank account, as the "welfare state" will force you to spent it first before you get welfare. So private persons usually put the money into state agreed savings which can not be so easily touched/liquidated.
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well if it's only temporary then you shouldn't mind paying 0.5% fee for a couple a weeks, isn't it?
But anyways we are talking about 100 000 euros, or $120k USD.
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There are different levels of fiscal responsibility. Stage 1 is just not spending it all. You're beyond that but you're missing the point. The people that advice is intended for are not keeping the money/assets anywhere. They're living above their means and have no assets.
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In the USA the savings rate is abysmal, yes many (40%) of americans can't afford a sudden $400 expense out of pocket. However, the top half of the other 60%, largely people on the upper end of the spectrum, pensioners, people less than 20 years from retirement etc are largely sitting on 30-60k+ (depends on where you live) in savings. Exceptionally low inflation rate makes it much less of a risk to keep money in the bank, rather than investing it. There are lots of retired plumbers, craftsmen, welders etc wi
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You don't have to invest it in volatile stocks. Bonds, monetary market, even a term deposit. Or if if it's to be used for retirement, you can buy an annuity, giving your a fixed amount of money until you die.
Leaving it parked in a checking account is still a bad idea, period. But if you insist on doing it, well just pay the fee and stop complaining. It's not as if there wasn't alternatives. You can probably get a secure box at the bank and put 100 000 euros in cash in there as well. The fee could end up low
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Little choice but to go to the stock market.
Another option is home equity.
Germans are less likely to own their homes than people in other developed countries.
They could buy instead of renting.
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Re:It is a non issue for the average person (Score:4)
Much too expensive and then you may move (or may not, who knows). Renting is cheaper and more flexible. Especially if EVERYTHING is adapted to that. Usually in Germany rent contracts are open-end and you can't be thrown out all of a sudden. Live there for a decade and your landlord needs to give you notice 12 months in advance. It's almost like owning the place. Most people even put a lot of work and money in making the place livable, this is not like renting in the US. When I moved in where I live now I immediately sanded and painted everything, including doors, and renewed the floors in several rooms. I live here now since 6 years and see no reason to move out any time soon. Why should I buy the place? I live here almost as if I owned it anyway. And my landlord is happy about it because he hates people moving in and out and doing nothing in between. When something important breaks (the basic rule in Germany is what is behind the walls is the job of the owner, everything else is the the job of the renter) I call him and he sends a handyman. And if I want to change anything that is not behind the walls I just do it, no reason to even ask.
I would be crazy to buy a home. And the owner gets his monthly rent automatically and with no fuss at all.
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Sounds like German banks have stopped loaning money if they can't make anything out of the savings they have.
Re:It is a non issue for the average person (Score:5, Interesting)
Personally, sure, but it's a pain for companies. I received about 1M EUR for my company from a government research grant, and trying to find any bank that would let us keep this amount just sitting in our account was impossible. In the end, we had to split it between banks. First time I've ever had to face the situation of being turned away from a bank for having too much money. The first time our account manager said this to me, I just assumed he was joking. Many companies doing government-funded research will have the same problem of sitting on lump-sum prefinancing and being contractually prohibited from doing anything with the money besides parking it in an account (on account of not being permitted to profit from public funds).
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Whether it devalues at 0.9% (inflation rate) or at 0.9 + 0.5% makes little difference. It will devalue if you leave it sitting there, one way or another.
Can I get a negative interest rate loan? (Score:4, Funny)
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No, you won't. You need facilities, infrastructure and trust in spades to hold deposits of that magnitude, and you don't have any of the three.
Re:Can I get a negative interest rate loan? (Score:5, Funny)
No, you won't. You need facilities, infrastructure and trust in spades to hold deposits of that magnitude, and you don't have any of the three.
I have a mattress and some old coffee cans for the holes in the backyard...
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"All the hassle and none of the convenience of your regular bank!"
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And the ECB does ???
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Yep. They have moved to a newly built high rise in Frankfurt a coupfe of years ago, so they do have the facilities and the infrastructure. And since the euro is a strong currency, they seem to have the trust as well.
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https://www.meme-arsenal.com/m... [meme-arsenal.com]
Re: Can I get a negative interest rate loan? (Score:2)
Germany is extremely messed up here:
You need to be a bank for that, and you can only start a bank if you follow rules, so extreme, that pretty much no new banks have been started in the last decades.
The most ridiculois rule being that you *must* have a CEO who has previously done pretty much that job at another bank for ten years! So their corporate culture and old boys club of crooks is guaranteed *by law* to carry over.
Apart from that, of course you need to also be quite rich. You need to own several mill
Don't know if that will really work (Score:4, Insightful)
If negative interest rates aren't discouraging the Japanese, they may not work in Germany either. I don't know why these German people don't just invest in the stock market in Frankfurt. Any decent investment would at least go up a little bit and add to their total over letting the money sit and do nothing but pay fees for it staying put.
Re:Don't know if that will really work (Score:5, Insightful)
I don't know why these German people don't just invest in the stock market in Frankfurt. Any decent investment would at least go up a little bit ...
Well, if all did that, the prices would be so high as to have no relation with underlying values, and you could risk losing most of your money. What do I say, if a string of bytes can be priced at $50000, surely a Lufthansa stock can go to infinity, and beyond.
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https://i2.wp.com/wallstreetex... [wp.com]
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Are you sure? If we have a permanent global excess of goods, but income is still apportioned by the production of more (i.e. holding a job) then we are going to have to figure out a very different system than what we have now.
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but it's not any better to encourage spending for the sake of spending.
That's literally the economy.
I mean sure, encouraging people to spend themselves into a paycheck-by-paycheck lifestyle is no good (for the people) but otherwise, yes, spending for the sake of spending means more money is in motion, more goods are produced, and more people are employed.
This of course doesn't have to be the case (when factoring in broken markets) but in general, it is.
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Don't know if that will really be owed. (Score:3)
Well spending for a more useful result than just owning stuff. Oh like say fixing all the infrastructure we've been using and neglecting for decades. Using a lot of it to fix all the environmental damage we've been doing. Really our pasts have left a lot of IOU's that all this money could be used for. Did no one think they didn't have to eventually be paid?
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Exact quote:
There should be some incentives for people to invest instead of just sitting on their money, but it's not any better to encourage spending for the sake of spending.
The implication was, that sitting on the money is equally as economically harmful as spending it will-nilly. This just isn't true.
Now, as to whether or not one should be paying their past debts or getting that new roof instead of a new PSBox360 11, of course from a personal responsibility perspective, the answer is obviou
Re:Don't know if that will really work (Score:5, Insightful)
One way that used to be available to invest was to give your money to a bank. They would loan out that money at interest to small businesses and people buying houses and make a good ROI. They'd then keep some and give some to you. It didn't involve thinking much and was relatively risk free. That made it actively invested and allowed middle-class people to easily have a way to manage their money. The governments are loaning out money cheaply now, so that doesn't work. We haven't been capital limited since at least 2008, so you have the choice between a crazy high risk or a crazy low ROI.
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Ok, I just don't know enough about economic theory, can someone explain to me what possible scenario makes "negative" interest something you want or need?
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It may not seem like a big difference, it is.
Should not happen with fiat currency (Score:3)
Negative real interest rates should never happen in a fiat based economy. Governments are able to produce as much currency as they want, so can promote inflationary pressures at any time. This means that they should be able to keep people's deposits in the bank with the promise of ~2% interest even though inflation might be running at ~3% - they are losing value on their deposits but it still makes sense to keep it in the bank.
So the real question to be asked is where has inflation gone for the last decade?
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The question is what you want to call inflation.
The official inflation is super low. The perceived inflation is super high.
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You know that (a) the stimulus didn't pass yet and (b) that money is borrowed, not printed?
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Borrowed from future earnings, either the workers already here, or future workers.
Re:Another 1.9 Trillion Dollars (Score:5, Interesting)
Borrowed from future earnings, either the workers already here, or future workers.
Not necessarily. Money works quite differently these days [taxresearch.org.uk] than it did up to the 1970s (it's about the UK, but the situation in the US, and the Eurozone, is comparable).
Some summary points:
* These governments no longer actually finance anything with taxes. They borrow as much as they need from a central bank to finance things (creating money), and then destroy money when they collect taxes and pay those loans back.
* There is no need to keep the borrowing and paying back side in balance just for principle's sake, or because "the debt will get too high" (since the government is basically borrowing from itself, it can destroy that again as well if absolutely necessary).
* Government-issued bonds are no longer "the government borrowing money", but "the government offering an investment opportunity/savings facility"
* This does not mean a government can just spend as much as it likes. A balance between borrowing and taxes is required to keep inflation/deflation in check, but that is pretty the only reason, and the main thing you should look at.
But please do read the entire article, because it gives more background information that substantiates those conclusions.
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The stimulus will pass thought. The GOP does not have to votes to stop it. Because "its COVID relief" even if the DNC suffers a defector or two or three, in the shape of Joe Manchin, or some freshmen from purple places like AZ there are certain to be at least couple GOP defectors, who will step forward if it looks like a vote really will fail.
Mitch does not have the votes to stop it. Budget reconciliation isnt subject to filibuster. So really they only need 49 Senators + Harris to do this thing now. This is
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So really they only need 49 Senators + Harris to do this thing now.
You might be misunderstanding how that works. First, 49 + Harris only gets to 50, so if the rest of the Senators vote against, that's 51, and it will lose. Second, the VP only gets a vote if the Senators tie. So the only way Harris comes into play with 49 votes in favor is if there are 49 votes against and two abstentions. That's not impossible, but I haven't heard any talk of any Senators planning to abstain.
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Are lending interest rates negative as well? (Score:2)
'Your money is worth less here' - no bank should be saying this unless the economy is fucked.
It's the spread that matters (Score:2)
A negative savings interest rate does not require a negative lending rate.
The bank's profit is on the spread between the two. So if the savings interest rate is -0.5%, then I'd expect the mortgage interest rate to be a bit above that.... and it is at 0.8% [hypofriend.de].
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Banks do not lend out the money that other people put in a savings account with them. They haven't done that for 40 years or so. When they lend money, they create it out of thin air.
Whenever a bank makes a loan, it simultaneously creates a matching deposit in the the borrower’s bank account, thereby creating new money. ...
Rather than banks receiving deposits when households save and then lending them out, bank lending create deposits.
In fairness, I have no idea what they actually can do with money that's put in savings accounts, other than placing it for safekeeping with a Central Bank. I doubt they're allowed to gamble with it on the stock market.
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Sorry, the link to the supporting document [bankofengland.co.uk] got lost in my previous post somehow.
"Take your filthy Lucre and go!" (Score:2)
Old news (Score:2)
This has been a thing here in Denmark for the past year, though it’s gotten more so since the beginning of the year (limits before negative interest rate kicks in have dropped). Basically, if you have more than about 40’000 USD in the bank, you’re getting charged negative interest on that.
Kinda sucks, but encourages me to get my money put to work, either in investing or in paying off debt (though motivation on that is low, since my mortgage, for example, is 1% 30-year fixed).
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1% APR is a 1.5% ROI over a negative 0.5% interest rate. However, this neglible-zero-negative interest rate goosing since 2008 seems like a horrible macroeconomic policy.
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Re: Old news (Score:2)
I don't get the problem. Why would you not withdraw it? Invest it in something if it's so much that hiding it becomes too dangerous. Like starting a bank and lending your money to banks for a lower rate than thr ECB. ^^
Not an economics/finance guy, but: (Score:2)
Hey, nice bundle of cash you've got there, would be a shame if someone.. stole it from you.. but hey, we're here to help, you know? We're happy to keep an eye on those fat stacks of cash for you; we got your back! All we need is a measly little 0.5% of it annually to, you know, cover expenses..
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The bank has costs to keep your money safe. Normally, those costs are covered by the difference between the interest (remember those days!) between what your account pays and what they loan the money out for. If no one wants to borrow money, the bank still has costs and no income to offset it. So they need to charge their depositors.
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No one wants to borrow? What reality is this? I'm sure someone wants to start up a nice drug empire and needs some cash. Heck borrow some and start a nice cryptofarm. I hear those are popular.
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"You can put your money in the bank and pay 0.5% interest to keep it there OR you can buy my bond and I will pay you 0.1% interest!"
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It sounds like a protection scam
Oh totally- remember that time the guy from JP Morgan Chase came to your house and forced you to store your huge fucking stacks of money that you were hiding under your mattress in their vault?
Banks only offer positive interest if they can make money off of your money. Otherwise, you need to pay them for holding on to your cash in their vault using their resources and their security.
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It's just so ass-backwards that you don't want to wrap your head around the idea.
I had a similar reaction last year when I was hearing that crude oil futures had gone negative; they'd *pay* you to take the stuff away, literally.
I'd also like to say that something like this makes me wonder if banks are going to collapse somehow. Not 'worried' about it, just 'wondering', because
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Most people seemed to misunderstand what the negative oil futures thing was all about. Most activity on a futures market never is completed into actual transactions. Most futures contracts are paper contracts only, and the buyers have no intention of actually owning any actual oil and the sellers have no intention to actually sell oil. In any trading period, the majority of the future contracts at play get canceled out. What happened this time around was that those who had bought futures positions coul
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My understanding is the following:
Private banks can get some money or deposit at the central bank. Usually the central bank has a positive interest rate, say 5%.
So the private bank can get money at 5% and give you a loan for 6% to buy a house. They profit from the 1% difference. But they also have to cover their risk of you not paying back. They can also give you 4% when you deposit money since they can put that money in the central bank and again, profit. That operation is not very risky for them but they
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Private banks can get some money or deposit at the central bank. ...
f you deposit some money now... what do they do with it? Either they loan it to someone else.
They don't do either of those things. They create the money directly themselves [bankofengland.co.uk], and never use money from deposits to create loans (nor is the money created for loans backed by the deposits or so).
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That doesn't explain why they would charge a yearly fee of 0.5% of 100k euros to merely keep track of a number (account balance) on a hard drive. They must have some regulation forcing them to deposit that money, or at least part of it, with the central bank. Therefore a negative central bank interest rate explain why the german bank do not want anymore money.
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They must have some regulation forcing them to deposit that money, or at least part of it, with the central bank.
Afaik they don't:
1) there's the minimum reserves [europa.eu]: the amount of money from savings/current accounts they have to keep on hand, for stability reasons
2) the rest are excess reserves [europa.eu]. Banks can deposit those with the ECB at a (currently negative) interest rate (called the deposit facility rate [europa.eu]), or they can invest in more risky products like "longer-dated government bonds" [europa.eu]
Of course, many government bonds also have negative rates right now. In the end, I think it's simply that banks have no place to invest the
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So they can put it in the ECB, or purchase negative rate bonds. How about they keep it in their own vault? Since most of the money is digital anyways, why can't they do that instead of paying someone else (such as the ECB) to keep the money?
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I honestly don't know. That said, even if they don't do anything with the money, then they get 0% interest. And they still want to make profits, so rather than getting the interest differential from the governemnt/ECB rate minus what they give to their customers, they now get them directly from the customer.
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Half right, but also half wrong.
If money is deposited at a bank, the bank has to deposit a fraction of it at the central bank.
If the bank is "creating money from thin air" by creating a loan, the bank has to take a fraction of that amount from the central bank as a loan.
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Thanks. Of course you wouldnt charge for that.
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Oddly enough the storage locker industry is rather financially successful. Low risk too.
https://youtu.be/iEUInseXXsQ [youtu.be]
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The reserve bank both lends money to and holds money as deposits for banks, a bank for banks as it were. Normally, interest is charged for lending out money. But, a negative interest rate means that interest is charged for deposits rather than lending. Think of it as rent for space in the safe. Positive interest rates encourage saving. Negative interest rates encourage spending and lending because it the less one has in the bank, the less one pays.
Just change the "Federal Reserve Rate" (Score:3)
Or the equivalent government lending rates in any country. Here in the USA, a few powerful, highly conservative, economists have managed to convince the gov't that inflation is a TERRIBLE THING and that it's much better for profits and gains to go entirely to stockholders.
I'm old enough to remember when home mortgages in the 11% to 15% range were standard, and we earned 5% on savings and checking accounts. This worked extremely well for retirees, among other non-1%er people.
And no, microscopic home mortgage rates don't help anyone: they just let the sale price of housing go astronomical.
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First, inflation is bad if allowed to continue for too long so yeah, might want to reread and actually understand your economics 101 again. Second, where else should profits and gains to from a business? I guess the people that actually did risk their money and invest in the company shouldn't be allowed to make the money.
What is really freaking funny is that you remissness about home mortgages being 11-15%, but they complain about profits going to investors....just WTF do banks do with the money they make.
Virtue (Score:2)
But all that saving is surely virtuous and can only lead to good things?
Negative mortgage rates? (Score:2)
There was discussion in the UK about how mortgages that were tied to base rates would handle a negative interest rate.
I thought that I had read that, ultimately a judge decided that mortgage rates could not go below zero, but I can't find anything to support that.
Sounds like banking is ripe for disruption (Score:2)
Re:Almost like Banking should be a Public Utility. (Score:5, Interesting)
If the thought of someone else earning a profit from your money really irks you that much, join a credit union. Congratulations you're now a partial owner of the bank. I've been with one for decades now and wouldn't consider switching. Granted I don't always get the best interest rates, but the customer service is well worth that.
Almost like sex shouldn't be a Public Utility. (Score:2)
Is there anything that some person won't claim should be a public utility?
For this crowd pornography. Capitalism has been doing well enough with free looksies.
Re:Almost like Banking should be a Public Utility. (Score:4, Insightful)
It does feel like the current system we have (private banks supported by a public central bank) is probably not correct, though I'm not about to propose an alternative (I don't have the skill to do so).
My intuition is that any time you have private profit supported by public taking the risk, that is a mistake.
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Is there anything that some person won't claim should be a public utility? I'm not even convinced that every public utility we have now needs to be one. Considering that there aren't any physical infrastructure problems that could prevent someone from opening a competing bank, I'm not sure there's a good argument for why it should be declared a public utility, which is why water, electric, etc. companies are typically treated differently.
As long as you can easily get cash, and pay for things with cash, the current system is probably fine. If everything is cashless, you suddenly can't exist without being forced to do business with a private financial institution, especially since they can basically decide they don't want to do business with you.
We already have a situation where poor and homeless people that have trouble opening a bank account have to pay insane fees just to cash a paper paycheck.
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It seems to me there's a good argument to be made for a public basic banking system, perhaps via the PO offices as done elsewhere, specifically because of all those people who have trouble getting a bank account, and as a result have to pay a huge "banking tax" in fees just to cash their paycheck. We're already publicly insuring practically every bank in the country, we should make sure people get their money's worth.
Or... there's an alternative idea - use the leverage that already exists: require all FDI
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Obviously - that's why banks don't like dealing with some people, it's a money-losing proposition. Unfortunately our economy pretty much depends on everyone having access to banking services. But insurance costs money too - and potentially far more than service fees for handling deposits and withdrawals (especially electronic - which are nearly zero) And if the government is providing insurance using our tax dollars, it's quite reasonable to demand something in exchange, rather than simply subsidizing the
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The more informed people get and the more they see *hints* of better systems elsewhere, the more they will want it. They won't want all the other stuff that comes with co-opting another nations' "one thing", they'll just want THAT one thing. In essence, the idea is that if there are service-based systems or systems that provide constant access to a product that are necessary for typical modern existence, many will say, "This should be highly regulated and not-for-profit" to minimize risk with the ebbs and f
Re:Almost like Banking should be a Public Utility. (Score:4, Insightful)
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They're just following the idiot who came up with negative numbers or for that matter, imaginary numbers.
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It's very far from the textbook definition of inflation. When there's inflation, prices and wages rise (as they don't right now), and interest rates also rise because lenders take into account that the money they lend out will be worth less when they get it back.
But right now, lenders have no choice, because there are too few good investments. It's not money chasing the same limited goods and services, the problem is that there's too little money chasing goods and services, and way too much money chasing in
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We use the consumer price index for that, you know?
And housing prices are not included in that, because they're an asset, not a consumer good. The money chasing investment opportunities loves real estate. So you'd expect housing prices to rise compared to everything else, when there's a surplus of money chasing rent and a deficit of money chasing products and services.
That's what's happened.
Maybe you don't trust the CPI? Fine, provide an alternative. But try to be quantitative, not just go with your gut fee
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Consumer price indexes is a tool used by all modern states, and by most sensible investors. Even if you lie to your own population about inflation, foreign investors and foreign states aren't going to play along.
The CPI is supposed to estimate all the things people actually buy. Or are you taking issue with the decision (universal across states) to exclude investment o
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We are talking about Germany, remember? Maybe they aren't in the US, but Germany seem to be quite transparent about what they actually use to calculate the CPI [destatis.de].
There's no conspiracy to underestimate inflation. I'm increasingly thinking you're just trying to talk up your bitcoin "investment".
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There's no conspiracy to underestimate inflation.
Yes there is. And the fact that they way how inflation is calculated is transparent proofs that.
Simple example: they weight in the report you link housing, electricity, and other fuels quite high. However housing is stagnant since years, and electricity etc. is dropping. So this makes the look of inflation lower.
On the other side, the stuff you feel everyday, as buying food, is increasing and relatively low weighted in the end result.
In Germany they tell us
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So instead of losing 0.5% nominal value, you're subject to the possibility of considerably higher nominal loss along with potential gains. If interest rates rise back up , commodities tend to fall not rise. Even if everything were priced in gold, you'd have to pay out to insure your physical gold and/or secure it.
In an odd sort of way, negative interest rates are like an orderly return to the gold standard, with the insurance premium of a vault built in.
There are opportunity costs associated with keeping
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Because the wealthy has defined "the economy" as the thing that makes them more money. And they don't make that without a mechanism to concentrate their wealth (because they own actual assets) and devalue the common man's cash.
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Basically all old main stream religions outlaw money lending - or money lending for interests. In old Egypt it was not only religious outlawed but enforced by the legal system.
I think it was the romans that "undermined Christianity" so much that we still have the outlawing of interests in the Bible but pretend in daily life it is an evil to live with.
There is an interesting book: The Future of Money.
There is a close short story in it, why interests do not work in the long run.
A man comes on an island where