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Thread: Negative Interest Rate

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    Negative Interest Rate

    The BOE's discussion about a negative base rate had me thinking.

    Their idea is to get the banks lending, however what if the idea was applied to us as normal public as well?

    The basics would mean that savings accounts would cost money monthly, whereas your mortgage or credit card debt would pay you monthly.

    Yes this is a mad idea but follow me for a moment.....

    Would this not drive a massive boost in retail, manufacturing, tourism etc.... As people race to spend as much as they can, borrow all they can, and save as little as possible. Then companies would rather dispose of money, borrow where they can, upgrade kit, expand offices, take on staff, boost pay. Etc etc. Crikey even drop prices.

    I'm thinking this could turn society on its head... While crazy it might actually be amazing.

    No I'm sure it would never and could never happen... But do wonder your thoughts on the upside down world I've tried to describe above.

    What do you think?

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    Seething Cauldron of Hatred TheAnimus's Avatar
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    Re: Negative Interest Rate

    Inflation.
    throw new ArgumentException (String, String, Exception)

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    Re: Negative Interest Rate

    We could call this the Battlestar Theory: "All this has happened before. All this will happen again."

    2008 all over again. Mortgages for EVERYONE!

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    Re: Negative Interest Rate

    Isn't that what inflation does? Check out Zimbabwe!

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    I don't know it's as simple as inflation.... After all with inflation the company selling the goods doesn't mind the pricing going up whereas in this scenario unless they were actively disposing of the money well, they'd rather reduce the price surely.

    And yes as with hyperinflation money becomes worth much less (as cost attached) and goods worth more, but as above for different reasons and so perhaps with different outcomes.

    I think what I'm saying is the effect is so counter intuitive to society while some of the effects may seem familiar their cause, people motivations and so on are not and so the outcome could well be very different.

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    Re: Negative Interest Rate

    Quote Originally Posted by phil4 View Post
    ....

    What do you think?
    I think it wouldn't work as intended. If they do that to retail savings, anyone with any sense is simply going to remove money from savings accounts. Personally, some would end up in assets designed for capital gtowth not income, some in overseas accounts, and some probably in my version of under the mattress. It'll end up leaving less funds for lending, not more.

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    Re: Negative Interest Rate

    Trouble is, none of this stuff fixes the underlying issues of huge national debt, spending more on public services / private debt repayment than we recoup in tax leading to a greater public borrowing requirement, leading to more debt.... We need to sort out the fact we're spending more than we're receiving, and hiding the difference by borrowing.

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    Re: Negative Interest Rate

    This is despicable to be even considered. Gross incompetence from those running the show.

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    Re: Negative Interest Rate

    Quote Originally Posted by =assassin= View Post
    This is despicable to be even considered. Gross incompetence from those running the show.
    In the way this thread is talking about, it isn't being considered. The move that is being considered is about banks holding funds in the BofE, and not anything to do with consumer rates. Not directly, at least.

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    Re: Negative Interest Rate

    Quote Originally Posted by Saracen View Post
    In the way this thread is talking about, it isn't being considered. The move that is being considered is about banks holding funds in the BofE, and not anything to do with consumer rates. Not directly, at least.
    The banks will never target the consumers as a result of this!!

    Sarcasm\.

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    Quote Originally Posted by snootyjim
    I don't even know how to describe how unlikely it is that something of that magnitude would happen.
    I agree completely. I think I said this could not and would not happen. I wasn't really interested in the likelihood or practicalities of how or when. Simply put it won't.

    What I was interested in how if it was/did a simple change would have massive impact to thinking. Up becomes down.

    This was more a thought experiment than a "so you think it would?".
    Last edited by phil4; 27-02-2013 at 09:40 AM.

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    Re: Negative Interest Rate


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    Re: Negative Interest Rate

    Cheers for that.... I'd been looking (well not really actively, but wondereding if I could find that for weeks.... and no sarcasm in that statement at all (unlike me normally).

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    Seething Cauldron of Hatred TheAnimus's Avatar
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    Re: Negative Interest Rate

    Quote Originally Posted by wasabi View Post
    We need to sort out the fact we're spending more than we're receiving
    No no no.

    Whatever happens your not allowed to admit you've been living beyond your means. I the rules on the barn clearly say no animal must drink alcohol to excess. It's always been that way.

    You can't possibly suggest that we've had 15 years of living beyond our means, which we have to suffer for many times over now. That's crazy talk.

    What instead you've got to do, is abuse central banks, forgetting that a lot of the financial problems now are a result of week regulation granted, but the greenspan puts which encouraged people to seek out such profits. You must never blame the public, its all the fault of the evil bankers. Two legs bad and all that.
    throw new ArgumentException (String, String, Exception)

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    Saracen (27-02-2013)

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