Who is going to deposit money at a loss?
Posted on 05/19/2014 5:07:07 AM PDT by DeaconBenjamin
When it meets on June 6, the European Central Bank may implement a negative interest rate for financial institutions seeking to park their money at the Frankfurt powerhouse. The move is aimed at spurring loans.
The bank wants to introduce a negative rate on bank deposits of -0.1 for the first time in its history. The ECB's deposit rate is currently at zero, and a further cut would mean that banks would effectively have to pay a fee to park their money. Normally they would be paid interest to do so. Under the new punitive rate, if a bank were to deposit €100 million in a central bank account, the ECB would withhold €100,000. The measure is aimed at encouraging banks to lend money rather than park it at the ECB. It is hoped the move will prevent the kind of credit crunch and freeze in lending seen during the height of the euro crisis, when private and corporate loans all but dried up.
Particularly within the crisis-plagued countries of the euro zone, consumers and companies are still having a difficult time obtaining loans. The lower interest rate could also lead to a drop in the euro's high exchange rate.
(Excerpt) Read more at spiegel.de ...
Who is going to deposit money at a loss?
This move may have some serious repercussions when customers start pulling their funds out en masse. What’s the purpose for a bank to exist other than loans if they do that?
well, that’s the point. They don’t want people depositing money they want people investing and spending.
What they will get is people stuffing it in their mattress,
Or converting to Gold / Silver / Property
This is a charge on banks.
There was a Shirley Temple movie that propagandized that approach. During Depression I when people who had even a few bucks were sitting on them. The movie followed the path of a $50 bill that was hoarded, then spent, solving all kinds of woes. Of course it all ended happily with the original spender getting his $50 back when someone paid off a debt to him.
Along a vaguely similar line, but more for entertainment is the movie Twenty Bucks
ping to you.
Didn't Japan have negative rates at one time?
Sounds like something was going on in that area in Japan in late 2013 & into 2014.
Sounds like something was going on in that area in Japan in late 2013 & into 2014.
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