In shocking move, Japan adopts negative interest rate as deflation fight falters

Japan Times ^ | Jan 29, 2016

[TigerLikesRooster]

P!

[Monty22002]

Man I wish I had big cash to put into a negative rate. :(

[Paul R.]

I think I read it here, a few years ago:

Japan’s economy is a bug in search of a windshield.

[alloysteel]

Like anyone has any incentive now to put any amount of cash with any bank. Storing it in your mattress makes more sense right now.

When money can no longer make money, eventually the incentive for banks to lend out money shall collapse altogether, and the whole system of investment grinds to a halt. Money lending becomes the province of loan sharks, who lend out at horrendous rates and have a rather firm collection policy. And, oh yeah, are notoriously free of regulation. Sort of a “non-bank” investment enterprise.

There is a black market for money, just like any other commodity.

[Monty22002]

I don’t think Japan is in danger of defaulting. The best thing would be to take as big of a loan as possible, since they are paying you to take it. Invest it in a mutual fund or money market. If you had millions, you could make tens of thousands per day.

[exDemMom]

This makes absolutely no sense whatsoever as fiscal policy. Or as any other kind of policy, for that matter.

Maybe the problem is that people have become convinced that government is all-powerful to control the economy, and it just isn’t true. So the government affects the economy the only way it can, negatively, and people think it knows what it’s doing.

[central_va]

Maybe they should invest in aircraft carriers.....

[grania]

Not only everything you said, but when money can no longer make money, there is no incentive for folks to save for future needs. The middle class can NEVER come back if people who are responsible about their finances can't accumulate some wealth.

Lower means people have actually had negative interest rates for years. The fees they pay on accounts without a balance beyond their means eat up any chance they have of getting ahead.

The other factor is when people don't trust their gov to not mess with their assets, those assets will be hidden. All that talk about retirement funds ending up in the hands of gov to manage them as annuities is pretty scary.

[SkyPilot]

This makes absolutely no sense whatsoever as fiscal policy

I believe it is a push from the elite to eliminate cash altogether, on a global scale. Cashless will allow them to tax and to monitor every single financial transaction - from you buying groceries, to a new suit, to ammo for your guns.

We are rapidly moving towards the time of the Antichrist. Under his hellish reign, the entire population of the world will be required to have a mark on their hand or forehead in order to conduct any financial transaction, including buying food and water.

When the next Big Crash happens (who knows when that will be, but the signs are ominous), the world will be in total financial chaos.

I believe we will move towards a single global currency, possibly backed by the IMF using the SDR.

[Alberta's Child]

Not only everything you said, but when money can no longer make money, there is no incentive for folks to save for future needs. The middle class can NEVER come back if people who are responsible about their finances can't accumulate some wealth.

I'm not sure this is really a financial problem. Real wealth doesn't exist in cash, but in assets that can be used productively and/or can grow in value. Interestingly, it's much easier to build "wealth" with cash in a deflationary environment than at any other time -- since the nominal value of the cash will grow even if you just bury it in your back yard.

How quickly we forget that inflation, not deflation, erodes the value of money over the long term.

[ShadowAce]

...since they are paying you to take it.

They are NOT paying you to take it.

They are now charging YOU interest on your savings accounts. They are no longer paying you interest on savings/investments.

[Monty22002]

Correct, you would not want to have a savings account there.

BUT, you WOULD want to take a maximum amount loan right now, they are paying you to take one.

[exDemMom]

Right—in a cashless society, how is big crime supposed to operate? I see that as a major obstacle to any move to a cash-free society.

Besides, negative interest has a negative effect only on electronic money. The paper money in your pocket is not affected.

[ShadowAce]

No—they are NOT paying you to take out a loan. They are still charging you interest for that loan.

[Monty22002]

What are they charging for that loan? A negative interest, which means they are paying you to take that loan.

[ShadowAce]

Nope. Negative interest only applies to holdings within the bank—not to loans made by the bank.

[babble-on]

If all interest rates really were negative (as opposed to just an interbank reference rate like the BOJ’s today) then the best riskless asset would be physical cash.

That’s why they have the idea of the monthly stamp (Gesell), where in an extreme case you would have to buy a stamp each month to affix to the front of your currency. That way it, too, would have a holding cost.

[WKUHilltopper]

Wow! A negative interest rate?? That’s insane. Hope they have lots of coffee cans in Japan so people can deposit their money.

[WKUHilltopper]

I think you’re right. They want “digital” money. Once they have it, all they have to do is “flip a switch” and cut you off from life (unless you know how to ‘run a trout line and skin a buck’). Digital money will be the muscle of the ‘mark of the beast’.