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Comment by unyttigfjelltol | Hacker News Reader

If chartered banks charge for ... holding cash ... don't people next create a new industry of unchartered financial institutions to hold money without charging so much? Like, safe deposit? Or insurance?

This seems like an ivory tower exercise that has not yet met the messy realities of the world.

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My understanding is that Dutch banks already have negative interest rates. They charge a negative interest to large account holders (over 1M euros) and a minimal positive rate for less wealthy clients. In reality I suspect that few end up in the 1M+ category since you can spread your money and keep the rest invested in the stock market or T-Bills if you really want security.

Any idea what happens when T-Bills go negative as happens in Germany? Do people hoard physical cash or gold?

I assume you just find rock solid corporate bonds. Apple issues bonds and they have assets far in excess of their debt load + massive profitability. Realistically as an individual you just move into equities. Institutions have different equations. Hoarding physical cash is probably not a good idea, since you have inflation (which probably exceeds the negative rate by quite a bit). It’s worth mentioning that cash holdings in a bank already have negative real growth because inflation exceeds interest (at least in my shitty low interest savings account)

Hoarding highly liquid physical assets like gold or paper requires security which costs money. The negative interest rates are cheaper than buying equivalent security.

It's above 250.000 now..

I don't have that much but mind you, even at a slight positive rate (like 0.1%) you're already losing money every year due to inflation!

It's really ridiculous.. My confidence in the banking system is super low. I feel like they're just screwing us with the ECB's blessing (who initiated the low interests).

There is a pain threshold that cannot be exceeded and people would opt-in to store paper bills. Central banks know this.

Here is a good speech from ECB:

https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp200...

Those already exist. My credit union pays me to store my cash there.

Switzerland and Denmark already have negative interest rates higher than Japan [1]. In Switzerland is will start to affect you if you have more than ~250k in the bank.

[1] https://en.wikipedia.org/wiki/List_of_countries_by_central_b...

And that's why my money's in crypto and not a Danish bank.

That is exactly my thought. All this can do in practise is reduce mortgage and other loan rates further and punish anyone holding cash. I'm not saying that's a good or bad thing, but I don't think any normal people will be able to borrow a billion pounds and then just live off the negative interest rate...

This is the fundamental problem. 0% interest rates make it easier to start a business, but your startup doesn't get to borrow at 0% because there is the very real risk that your startup will fail. You'll get a nice 8% interest loan at best and no loan at all in most cases.

That risk doesn't exist for large companies but they don't have to invest their dollars domestically or even productively. They can spend them anywhere outside the US or just dump them into acquisitions and other stock market shenanigans.

I think this is like morphine: really stops the pain, until you're so addicted it kills you.

> This seems like an ivory tower exercise that has not yet met the messy realities of the world.

Honestly, that's how the economy is run today, it's one big ivory tower exercise. It's shameful, toying with people's lives that way, exploiting them, and then we cry about why everything is messed up.

Yes, negative interest rates are a jobs program for safe manufacturers.

I think you can already see this playing out in gold and crypto.

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