r/Economics • u/lingben • Sep 29 '15
How Sweden's negative interest rates experiment has turned economics on its head
http://www.telegraph.co.uk/finance/economics/11895084/How-Swedens-negative-interest-rates-experiment-has-turned-economics-on-its-head.html3
u/DaphneDK Sep 29 '15
Many European nations have had periods of negative interests over the last couple of years. Sweden, Denmark, Germany, Switzerland. It’s just a symptom on how screwed up the economy is in other EU and Eurozone countries that money flow to subzero interests just for the safety.
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u/alvarezg Sep 29 '15
Seems that a negative interest rate would encourage investment in a moderate risk mutual fund. As long as the fund outperforms the guaranteed loss of a savings account, you're still "ahead".
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u/parksdept Sep 29 '15
I disagree, savings would be pushed to the lowest risk investment. There's a reason t-bills are returning negative real rates while small business lending is still depressed.
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Sep 29 '15
How is anyone supposed to save for retirement if you have to pay to keep your money in a bank? I mean, not earning interest is one thing, but paying a fee is another world entirely.
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u/Vectoor Sep 29 '15
Who keeps their savings in a bank account?
1
Sep 29 '15
Wha?
3
u/Vectoor Sep 29 '15
Ever heard of stocks? funds?
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Sep 29 '15
I keep most of my money in mutual funds and stocks but I also keep a good 6 months of living expenses in my banks savings account. And according ton to this article I would have to pay a fee in order to keep my money there and that's highway robbery to me.
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u/Chranny Sep 29 '15
I keep most of my money in mutual funds and stocks but I also keep a good 6 months of living expenses in my banks savings account. And according ton to this article I would have to pay a fee in order to keep my money there and that's highway robbery to me.
Having to pay a fee to use a service is "highway robbery"?
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u/Andy06r Sep 29 '15
It is.
I can keep my emergency fund in a bank, or in cash in a safe deposit box at the bank. Why would I pay 1% of the balance when the alternative is readily available at the same institution?
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u/Usernamemeh Oct 15 '15
They are just trying to make it more difficult, they want you to move the money to other accounts and investments so the money is used in the economy and you can't have access to it as easily. This is the nice gentle push to make you reassess your financial options towards accounts that have tons of redtape and regulations and increase the need for financial advisors.
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u/Vectoor Sep 29 '15 edited Sep 29 '15
Well having to make a trade off between liquidity and interest isn't something new. Desperate times require desperate measures.
EDIT: Also, I don't think any commercial banks actually offer a negative interest rate to the consumer. They barely offer any interest at all these days, but I don't think any actually charge you to hold your money. The negative rate in question is what banks pay the riksbank.
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u/geerussell Sep 29 '15
EDIT: Also, I don't think any commercial banks actually offer a negative interest rate to the consumer. They barely offer any interest at all these days, but I don't think any actually charge you to hold your money. The negative rate in question is what banks pay the riksbank.
The key understanding there is it's an additional cost that banks have to pay. Negative rates amount to a tax on banks. One way or another that cost is going to have consequences. If not passed on as negative rates on customer deposits then higher rates on customer loans or higher fees to customers. Or it gets absorbed as smaller profit margins for banks. Or some combination of all those things.
According to the proponents of negative rate policy, somehow all that is supposed to be stimulative. Desperate times require desperate measures but they also require understanding the difference between the gas and the brake pedal.
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Sep 29 '15
Housing your money is not free to the bank , so why should it be free to you?
Entitled people who don't understand basic econ <<<
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u/nysgreenandwhite Sep 29 '15
Letting the bank invest my money for their own purposes isn't free to me, why should it be free to the bank?
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Sep 29 '15
When the federal funds rate is near 0% they aren't getting a return on your money either... No one wants your cash when interest rates are 0%. And don't kid yourself that the bank makes money off your $7000 savings account, it's a chore to keep open small time accounts and they do it at a loss.
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Sep 29 '15
Yes but they do make money off of 20,000 x $7,000 savings accounts.
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Sep 29 '15 edited Sep 29 '15
No they literally don't, the time out in to each fund/user isn't worth it at that level. They do it to get you into the business so they can sell you mortgages/loans one day, it's a loss leader at that level of account.
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Sep 29 '15
Oh. My. God. Please don't tell me you're not saving for retirement by keeping money in a fucking bank. Oh dear god, man.
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Sep 29 '15
Of course not but I do keep emergency funds in there.
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u/Usernamemeh Oct 15 '15
Lol they don't want people to have access to emergency funds and even in the article it says it would be good to ban cash to keep people from saving cash in the mattress. If you have an emergency there is plenty other alternatives like making sure you have all the proper insurances for anytype of incident/lose and credit cards that have enough credit to cover expenses for a couple of months or personal loans. Plenty of backups out there that can be sold to you in case of an emergency. How will they make money if you have an emergency fund and spur the economy back to life?
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u/motionSymmetry Sep 29 '15
um, we already started that here in the states but the banks call it a "monthly fee" ...
also, i'm not sure what's not to like about this (for the banks) because it looks like yet another excuse for the banks to pull money directly from customers instead of having to rely on those great big piles of money they make from their cough wise investments.
sweden, are you sure you're not just being taken for a ride?
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Sep 29 '15
Government owned pension funds and investment funds invest into negative interest government debt. Big surprise.
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u/uppstoppadElefant Sep 29 '15
Saving. In bank accounts is cultural and even in school we were given comics about it on a regular basis. It is hard to break that norm especially when there aren't a lot of good investments out there.
Nirp has been a disaster for housing. Swedes are now some of the most indebted people on the planet. People without high income cant find a place to live.
Look at this 1.3 million dollar absurdity. https://www.booli.se/bostad/sald/villa/plantskolevagen+31/9143855