Skip to comments.Banks are seriously discussing negative interest rates for normal people's savings
Posted on 10/24/2015 5:12:37 PM PDT by SeekAndFind
The concept of earning interest on money in the bank is so deeply ingrained into economic life that few people even know that the opposite can happen too: Banks can take a percentage of cash from your account in the form of negative interest rates, under certain conditions.
Normally, this doesn't happen. Banks want your cash, and pay you interest on it, because the more deposits they have, the more they can lend it to others who pay them even more on their investments.
But interest rates in Europe are so close to zero and economic activity is so sluggish that some central bankers are seriously discussing whether they should drive interest rates into negative territory in the future, as a sort of economic punishment for not spending money. The theory is that if you are deterred from keeping cash in the bank you'll withdraw it and spend some of it, thus creating economic growth.
Europe's central banks and the US Federal Reserve have kept interest rates near zero for years now in the hopes of making money cheap to borrow. The intent is that because it costs next to nothing to borrow money, you'll take advantage of that and invest it in anything that pays more than a 0% return. That usually creates inflation too, as the influx of cheap, new cash devalues the existing stock.
But inflation is nowhere to be seen. The price of oil has fallen dramatically, making anything that requires fuel cheaper. And with prices falling, people hold off on spending today because they know their money will be worth more tomorrow. That lack of economic activity despite the cheapness of lending is exactly what is holding the economy back.
(Excerpt) Read more at businessinsider.com ...
I’ll just keep it in a safety deposit box. No bank is going to “nudge” me into unnecessary spending.
Perhaps the gov’t bonds should be paying big interest...
How will they determine who the normal people are? And why should they discriminate against normal people? Is this more pandering to the LGBT activists?
They already do: things like fees for maintaining the account.
” whether they should drive interest rates into negative territory in the future”
I guess driving rates into negative territory in the past would be too messy.
Cyprus II here we come...
I use Bank of America and pay no management/service fees on any of my accounts. Shop around.
They’re fudging the numbers, intentionally lying about what is really happening with prices.
And then they’re believing their own lies.
Ah, Shiite! They ALREADY do that by ‘fee’ing us to death in Kanada!
With only a few, powerful banking competitors, they CAN and DO do that through limiting competition!
Say what? Wouldn't cheap new cash cause the price to rise?
Maybe that’s who the economics and financial editor.
Safe deposit boxes cost money (perhaps $35 annually for a small 3x5) and any cash in it is not insured unless you purchase private insurance.
If you give to the gop you pay 5% penalty for having money
Would sure make sense to factor in ALL OF THE BELOW - not just base it on energy costs:
“”Inflation over the past year, as measured by Consumer Price Index for All Urban Consumers (CPI-U), was 0%, according to the Bureau of Labor Statistics. But that was due largely to the 18.4% decline in energy prices.
Other costs, however, were up: Food was up 1.6%; shelter, 3.2%; and medical care, 2.4%. That means Social Security recipients might have to search for ways to cut back to balance their budgets. At the moment, according to the BLS’ consumer expenditure survey, housing represents 33.9% of annual expenses for households over age 65; transportation, 15.9%; health care, 13.4%; and food, 12.5%.””
how do you pay bills though if they do it to checking account?
0 percent to borrow and no new business is being created in the countries that are doing this.
so QE will go on and on and on and when/if it is finally stopped, oh brother!
no business now with 0, see what happens when its 2 3 4 5 percent.
dont know the answer.
Heck that’s what Apple stock is for!
You mean to say it isn’t ZERO already? How can you tell?
Most of those fees come with a minimum balance. It's negative interest for those who can least afford it. And because it's a fixed fee, it amounts to a larger negative interest rate the less money you have.
One bank around here is beginning to charge fees unless there's a minimum of $25,000 on balance in that bank!
I'm thinking it has the opposite effect from what's intended. People are having to save more and spend less in order to have any cushion at all for the future. Most people I know are getting in the habit of having substantial cash somewhere (not a bank) in case of emergency.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.