Negative interest rates, explained — and how they could turn the world of banking upside down

Bankrate.com ^ | March 20, 2020 | Sarah Foster

[dp0622]

Weren’t interest rates like 18 percent in the 70s?

I was a kid but for some reason I remember hearing crazy rates thrown around

[Zhang Fei]

At one point in the 1970’s, Switzerland had a -41% (not missing a decimal point) interest rate on foreign deposits.

https://www.bloomberg.com/opinion/articles/2019-08-22/swiss-history-of-negative-interest-rates-is-ugly

[moovova]

With all of this hullabaloo about zero interest rates, lenders are still going to have to come down significantly before mortgage rates are below zero.

Rates aren’t bad now, but I’ve seen better. Actually have better currently.

[entropy12]

Excellent suggestion. Paying the bank to hold my savings? A gun is lot cheaper! Stay safe FRiend.

[moovova]

Yes. Having a money market acct back then was like having a part-time job...without working.

[KarlInOhio]

How many of those countries restrict their companies from moving lots of money overseas? Can BMW move a hundred million Euros to the US or do they have to accent the German negative rate?

[StAnDeliver]

Yeah I sold a little at 1662 last month but it begs the question why did gold invert now, when it probably should have broken through the 1670 double-peak test (from a month ago) this week?

[entropy12]

If negative interest rates are a good thing, why are European economies doing so poorly? They have very low economic expansion rates, high unemployment rates and lots of immigrants who will not assimilate.

[E. Pluribus Unum]

So you’re fine with them taking interest payments OUT of your bank account?

[entropy12]

I had a bunch of utility stocks then (because dividends from utilities were partially tax exempt then) and recall receiving 14% dividends from some of them, least was 10%.

[dp0622]

WOW. That’s a phenomenal rate!

[ConservativeMind]

Yes, if I set up an account with such a thing.

Remember, the bank does keep the money safe, while it can be stolen from your home.

[rlmorel]

Negative interest rates are a leftist dream.

Tie that into a cashless society, and ...Tah Dah! A way to “finance” debt.

[rlmorel]

Exactly. Which is why the same people who scratch their chin at the thought of a negative interest rate go hand in hand with those who want a cashless society.

[PGalt]

Interesting/educational discussion. Thanks to all.

[BipolarBob]

Why aren’t credit card companies charged for price gouging when everybody else is?

[alloysteel]

While counterintuitive, negative interest rates are a demonstration of deflation, in which a dollar spent in the future buys more in goods and services than a dollar spent today.

But folks are right, keeping the money in your mattress or in a home safe is better than keeping it in a bank.

[Maine Mariner]

Yes, but remember the inflation rate was about 12-14% per year. So the nominal rate of interest is 16%, the rate of inflation is about 14%, so the real rate of return is about 2%.

[forgotten man]

Are the banks going to pay me for the debt that I carry on my credit cards?

[Born to Conserve]

Banks make more money on overdraft fees etc then they do on lending out your money.