Negative interest rates- coming to a bank near you soon?

[myp]

The Bank of New York announced earlier this month that it would charge fees for large deposits, effectively creating a negative interest rate where the depositor pays money to keep money in the bank. This week, Switzerland and Singapore have seen certain market rates fall negative as well as some banks continue to sit on a lot of excess cash while depositors continue to want bank security. This could turn interesting and is virtually unprecedented under this sort of system.

Thoughts on negative interest rates?

 

[David]

The Bank of New York announced earlier this month that it would charge fees for large deposits, effectively creating a negative interest rate where the depositor pays money to keep money in the bank. This week, Switzerland and Singapore have seen certain market rates fall negative as well as some banks continue to sit on a lot of excess cash while depositors continue to want bank security. This could turn interesting and is virtually unprecedented under this sort of system.

Thoughts on negative interest rates?

Thieves...

 

[DodgeFB]

People will be looking for other places to park their cash. There may be a bunch of wall safes, floor safes and even gun safes being installed. Of course there is always the mattress, oil can, and digging a hole in the yard.

To be honest as I always should be, I wish I had the problem of more money than I had a place for.

 

[myp]

Thieves...

Not really thieves; it's a matter of costs- they have no need or place to hold all that. Historically, it is only with fractional reserve banking that the depositors get paid interest- any full reserve bank always charged since they don't make money off loans. This dip into negative rates is largely the effect of loose money and low rates around the world from central banks like the Fed.

 

[David]

Not really thieves; it's a matter of costs- they have no need or place to hold all that. Historically, it is only with fractional reserve banking that the depositors get paid interest- any full reserve bank always charged since they don't make money off loans. This dip into negative rates is largely the effect of loose money and low rates around the world from central banks like the Fed.

The point of a bank is to store and move money. They charge interest on lones to turn a profit but they do so with the consent of the borrower. Charging neg interest on someones checking/savings account is taking money without the consent of the depositor and despite the point of the account being to store/move money. So yes, it's theft.

And even if it wasn't, if I have to pay (and I'm not talking a 1 time or once a year service fee) to keep money in a bank, it defeats the purpose of the bank.

 

[myp]

The point of a bank is to store and move money. They charge interest on lones to turn a profit but they do so with the consent of the borrower. Charging neg interest on someones checking/savings account is taking money without the consent of the depositor and despite the point of the account being to store/move money. So yes, it's theft.

And even if it wasn't, if I have to pay (and I'm not talking a 1 time or once a year service fee) to keep money in a bank, it defeats the purpose of the bank.

They aren't doing it without consent- they let the depositors know ahead of time and as always those depositors are free to pull out their money before the changes take effect.

As for your second point about defeating the purpose of the bank- not necessarily. Banks increase convenience and security- that is why most people keep money in banks as opposed to under mattresses anyway- are you really telling me it is the few cents they add a month that keeps you with them?

 

[David]

They aren't doing it without consent- they let the depositors know ahead of time and as always those depositors are free to pull out their money before the changes take effect.

As for your second point about defeating the purpose of the bank- not necessarily. Banks increase convenience and security- that is why most people keep money in banks as opposed to under mattresses anyway- are you really telling me it is the few cents they add a month that keeps you with them?

No, it's the over drafting with no fees that keeps me with my bank.

 

[myp]

No, it's the over drafting with no fees that keeps me with my bank.

Okay, but even that only happens because the bank can make a net profit off most depositors. Your last post misses the point of why people use banks and what banks are. They are there to make money and since holding money and hiring tellers, etc. costs money, naturally the consumer has to make them a profit to stay profitable. That profit happens in today's banking system because they can loan out your deposits and the reason they give interest is to get more depositors so they can make more loans. The way current money markets are, some of these banks can no longer make money with more deposits and as a result, more deposits add to their operating costs while not adding to profit- hence the introduction of this sort of negative interest rate.

Historically and originally banks charged money to keep your money there (effectively a negative interest rate)- it was only with the advent of fractional reserve banking that they started paying interest on deposits because the profits were greater. That is also why even today full reserve banks (the very few that exist) and bank vaults cost money to keep things there (even if it is money) and it doesn't cost money to keep money in fractional reserve bank accounts.

 

[Jarlaxle]

The Bank of New York announced earlier this month that it would charge fees for large deposits, effectively creating a negative interest rate where the depositor pays money to keep money in the bank. This week, Switzerland and Singapore have seen certain market rates fall negative as well as some banks continue to sit on a lot of excess cash while depositors continue to want bank security. This could turn interesting and is virtually unprecedented under this sort of system.

Thoughts on negative interest rates?

I think if my bank starts this nonsense...I'll change banks!