Negative interest: Danske Bank changes threshold for personal customers | Hacker News Reader

Negative interest: Danske Bank changes threshold for personal customers

danskebank.com

119 pointsawb194 comments

Some context: Denmark has maintained a pegged currency policy since the 1980s, first against the D-mark, then since the Euro. To maintain this, the Danish National Bank needs to maintain inflation, and that usually entails keeping interest rates below what the European Central Bank's interest rate is.

I believe the ECB's interest rate is currently 0 or 0.5%, and thus the Danish National Bank's interest rate is negative to maintain the DKK loosely pegged to the EUR. This means, it costs money for regular banks to have their customers' money at the National Bank, and therefore offsetting the cost to their own costumers.

Initially, the limited was 750'000 DKK before the negative rates would kick in, then 250'000 and now 100'000. Danske Bank is hardly alone in this, a lot of other Danish banks have already done the same. The slow lowering of the limits is indicator that the banks more and more believe that the negative rates at the National Bank will remain with no end in sight.

Disclaimer: I am not an economist.

Also not an economist, but topics like this always remind me of the Impossible Trinity and how different countries solve for different pairs of policies out of the three available choices

https://en.m.wikipedia.org/wiki/Impossible_trinity

I might be biased here, but isn't a fixed exchange rate somewhat of a false sense of security anyway? As in it's great because it reduces volatility of unhedged contracts most of the time, but when it finally goes it tends to do so dramatically?

There are three main interest rates of the ecb: https://www.ecb.europa.eu/stats/policy_and_exchange_rates/ke...

So there are various ECB rates, the one that's key here is the deposit facility rate. It's the rate at which banks can deposit money with the ECB overnight. This means if there's tons of excess deposits from customers, this rate applies. It's currently -0.5% so banks have an incentive to not become the bank of choice for cash hoarders, plus there's obvious incentives for many banks to try and push its users to other products such as brokerage which many banks offer in some form.

This is why you find these negative rates in many more countries in Europe. The Netherlands and Germany, for example. My bank charges negative interest, too, above 100k.

100k what? Euro? That what be equivalent to the 750.000dkk limit parent listed as, old, initial limit that was lowered twice to reach the current 100k DKK limit.

The news (at least to Danes) isn’t that the bank may charge negative interest, but the at they are starting doing to savings we might actually have in the bank.

It's a 100.000 DKK limit. A Lot of people will be affected (not by much though). My girlfriend will have to pay about 300 DKK a year for having somewhere between 100k-200k in her account. I got my money in investments so I pay more than her in various fees, though I usually also make more while the market is climbing.

My post was mostly about the fact the ECB has negative rates, not a 0 or 0.5% rate as parents' comment listed. The 100k is just an example from my country to indicate the negative ECB rates have been affecting most EU countries.

I think the more interesting discussion personally would be on inflation, rather than interest rates. In purely financial terms as an individual you tend to only care about purchasing power. I have a bunch of friends who're worried about paying -1% interest while they've held cash at 2-3% inflation for years.

> I have a bunch of friends who're worried about paying -1% interest while they've held cash at 2-3% inflation for years.

I agree with you very much on inflation being a hidden interest on all our money.

There are some principal arguments that probably should be surfaced for non-Danish people:

In Denmark we have a NemKonto system that forces people to have a bank account. In short, you register an account with the government they will use to make all payments to you (social benefits, return taxes, etc). Most employers also use this system for salary.

Practically speaking, it is not possible to live in Denmark without a bank account. Therefore people might see it as a principal right to have a place to have free deposits.

Ie. When bank accounts are imposed as they are, they should be outside of the market.

Good point. Furthermore SKAT's (danish tax authorities) point of view is they should be aware of all your accounts (DK or away) once you start to have an income in Denmark.

Notice from the DB announced that the 100'000 threshold is only for customers with a NemKonto at DB. If you don't have NemKonto at DB, the threshold is 0.

If you are a foreigner living in Denmark, it is really hard to get mortgage loans due to unexplainable risks. (e.g. They don't tell you why you are in a risk group. )

Anyway, the maximum amount of deposits is now around 4 months of wage. So, I hardly see the necessity to have a bank account or banking infrastructure.

I wish I could join "We don't need banks anymore" motto. But now, It looks like It is becoming a reality.

You shouldn’t have savings. You should spend it to help the economy /s

This but without the /s.

This is not my first time that I hear about this. Two of my danish friends told me exactly the same without /s :). Why shouldn't I have savings ?

Savings are a drag on the economy. It’s negative aggregate demand and we can’t have that. While I don’t have any proof, I have a feeling that the negative rates environment is making people even more scared of spending money.

It's hard to tell whether something's sarcastic or sincere in this thread, but on the off chance that you are sincere:

>Savings are a drag on the economy

Savings don't sit in a vault somewhere. They get reinvested into the economy, providing capital.

My previous statement is not sarcastic but should also not be taken as fact. It’s more like theory and I doubt we know how far it strays from reality. Yes savings get invested but not all money flows are equal. For example, stock buybacks might have a lesser impact on economic velocity compared to consumption spending.

>"Savings don't sit in a vault somewhere. They get reinvested into the economy, providing capital. "

No they don't. Savings is only a number in a computer and lending is not limited to the available savings because private banks create money when lending. So, the quantity of savings have not effect in how much financial capital can be invested in the economy.

Private banks don't lend reserves (or savings), instead, they lend when makes business sense and then search for reserves in the system. Central banks will accommodate any need of reserves in the system in order to keep the interest rate in their choose range.

Edit: I see I get some down-votes, maybe people is more willing to believe 'forbes' or the Bank of England that some random guy in the internet:

https://www.forbes.com/sites/francescoppola/2014/01/21/banks...

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

> Central banks will accommodate any need of reserves in the system in order to keep the interest rate in their choose range.

I think they are required to keep 10% reserve. Unless this changed very recently?

It has not changed, the problem is that the normal narrative has the causality wrong.

The explanation we get is this: private banks have a quantity of reserves and they can lend only what the money multiplier allows them. So, they are limited by the quantity of reserves they have. If that were true, they would be limited by the quantity of savings in the system.

But in reality it works the other way around. Banks lend first (hopefully only when makes business sense to lend) and then they search for reserves.

A bank lend (creating money in the process) and, after the fact, if it doesn't have enough reserves already, it tries to get the reserves from other banks (inter-bank market). This is a legal requirement, so, they have to get those reserves.

This creates an offer-demand dynamic between banks that move the interest rate up or down.

If the quantity of reserves was fixed, that would be the end of it, but, because Central Banks have a target interest rate that they want to keep (but not a money quantity target), they have to accommodate the quantity or reserves in the system reacting to the inter-bank market dynamics. Adding or retiring reserves as necessary to keep the interest rate that they want.

The central banks control the interest rate, but that means they can't control the quantity of money in the system. The quantity of money is determined by the demand of credit from the economy (and not by the available savings).

If we understand this, we see that private banks are not limited by savings in their lending capacity, they are limited by how many business or households are requesting credit (and if those request make business sense for the bank).

This is a good reading about those subjects:

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

Thanks. This makes sense of what you said before. (I'd not focus on the downvotes too much, money issues are too emotional/political).

There’s no reserve requirement anymore. It has been removed for a while.

https://www.eidebailly.com/insights/articles/2020/4/federal-...

>No they don't. Savings is only a number in a computer and lending is not limited to the available savings because private banks create money when lending. So, the quantity of savings have not effect in how much financial capital can be invested in the economy.

If that were 100% true (there is a caveat) then the ideal savings rate would be 0% and that would be truly awful for every entity in the economy regardless of whether they are companies or private individuals. All savings would become excess savings and interest rates would need to be in the double digit negatives.

In practice this would actually run into a contradiction, if the savings rate were 0% that would mean all income is immediately consumed or invested, meaning the economy runs at full capacity at all times, any increase of the monetary supply would immediately translate into inflation because all goods that are being produced are already being consumed, the additional money would result in additional consumption that causes a shortage of goods which then translates into increased prices aka inflation. At some point you would run into the physical limits of the economy.

As your savings rate is 0%, the amount of money that can be created without inducing inflation is also $0. The potential for lending is "effectively" limited by available savings.

I didn't say anything about the ideal savings rate being 0%

The quantity of savings is divorce of the quantity of money available for investing or, in other words, lending money doesn't come from savings. That's an empirical fact.

Of course, households and firms are going to choose to keep savings, and that's OK. If people choose to spend more and keep less savings then, Central Banks could accommodate the Interest Rate in order to make lending more expensive and avoid inflation, or the government could increase taxes or some other solution that retires money from the economy.

>Savings don't sit in a vault somewhere. They get reinvested into the economy, providing capital.

The problem with the US economy is that a big part of the savings do no such thing, Biden's infrastructure bill is just a scheme to tap into those excess savings and let the government become the investor of last resort.

Not all savings are created equal. Savings can be invested, the problem is with savings that nobody invests.

Excess savings are a drag on the economy because they fail to employ anyone, nor do they result in productive work (borrowing money for dividends or stock buybacks is not productive, just a shell game).

You need to be a slave to the system, always chasing the next shiny thing, who will bankroll useless material consumption otherwise? People don't save for rainy days and when things go south, everything collapses and the system is too fragile.

People in Denmark collectively save for rainy days, which is a pretty efficient solution.

You got it backwards, nobody should be a slave to the system.

Consumption doesn't have to be useless material consumption, you can consume responsibly the same way you can do anything in life irresponsibly or responsibly. For example, planting a tree is consumption, building a house is consumption, capturing CO2 is consumption.

I already have everything I need, what should I consume next?

Those examples are not consumption, they are investments for the future and are arguably a net positive and a saving's mechanism by themselves (saving the planet, your living condition, etc).

Because Danes have generous pensions partly funded by foreigners who somewhat reliably leave the country after a number of years.

And the foreigners can often use their time in Denmark as contribution credit to their own social security. Canada for example has a few such agreements, include with Denmark AFAICT:

* https://www.canada.ca/en/revenue-agency/services/tax/canada-...

* https://retirehappy.ca/social-security-agreements-cpp-oas/

There may be a few exceptions, but that is not the rule.

You mean all those expats that only have to pay half the income tax that Danes do? If you're only here temporarily as some kind of specialist it's hardly like you're being robbed. If you decide to stay for the long haul, obviously you are expected to also contribute your fair share to the welfare system.

https://skat.dk/skat.aspx?oid=2244911

There is nothing wrong with having savings but right now pretty much every government in the world is trying to encourage consumer spending to get the economy going again. And the way they do that is by making the alternative (saving) less attractive.

You should have as many savings as the economy demands, right now it demands very little savings. The best choice would be to increase the demand for savings but that would require consumer spending, which then increases demands for investments which increases demand for savings.

Nah

You should have an emergency fund. After that you should be investing for retirement, or any other larger goals you may have, e.g., home ownership, replacing car.

But having a pile of money beyond those things "just because" does not really serve the purpose of money: as a medium of exchange for goods and services. Money in itself is not useful, it is only useful for the things it can give you: shelter, water, food, and the various other things as you work your way up Maslow's hierarchy.

At most having a (digital) pile of cash may help you sleep at night (assuming it's covered by deposits insurance). Paying a fee may be worth peace of mind.

And can you really define where this beyond lies? You know, emergencies costs variance is huge, and home ownership too.

Also, "piling" money in a bank account doesn't remove money from economy.

It removes it from the demand side of the economy, which, in period of low interests, is the part you want to boost.

The demand side of the economy doesn't seem to be the problem right now. There's enough demand that there's shortages and price increases for almost everything at this point.

The shortages seem to be caused by hiccups in the cupply-chains bottlenecks that have a hard time to adjust to the slowdown and recovery of the economy. It is not caused by a unusually high demand, but compared to its depressed self six month ago, it is comparatively high.

Interest rates are still very low. There is still a strong case to argue that the demand is lagging.

But isn't that "removed" money being lent out by the bank?

Yes, typically as investment, that feed the supply side.

Which pays their workers and suppliers, and the money circulates.

No, investments typically feed growth, not normal operations, which are funded by clients, ergo the demand-side.

That’s only true if you are saving your money under the mattress. Savings in a bank account will be loaned by the bank to another business. There was a time when politicians encouraged saving to help the economy; and I’m not really that old.

If you have a growing economy that cannot do all the investments it wants to do, encouraging more savings will lead to more growth. Right now something is preventing investments from being made and nobody knows what that something is.

> Savings in a bank account will be loaned by the bank to another business.

This has not been how banks have worked for decades:

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625

Banks create loans typing something into a computer screen and money shows up in the businesss' account. No savings required.

99% of money created is not by the Fed "printing money", but rather by private bank loans. A twenty minute video summarizing the above paper:

* https://www.youtube.com/watch?v=K3lP3BhvnSo

Interview with the paper's author:

* https://www.youtube.com/watch?v=uZi4QE_EfCw

For most people in Denmark, emergency funds are not necessary. If you live somewhat frugally, dagpenge will take care of you (and if you maintain yourself within the framework). It ensures a living wage for up to 2 years if you get laid of (or if you resign, just with the caveat of one month quarantine).

> For most people in Denmark, emergency funds are not necessary.

So you'll never have a car break down? With a home ownership rate of 60%, people who have burst plumbing and flooding, leaky roofs, etc, will never have to deal with a sudden repair bill?

I live in Canada, and we have decent employment insurance, but if by water heater bursts and floods the basement, or my furnace dies in the middle of winter, EI won't be useful.

I stand corrected.

> But having a pile of money beyond those things "just because" does not really serve the purpose of money: as a medium of exchange for goods and services. Money in itself is not useful, it is only useful for the things it can give you: shelter, water, food, and the various other things as you work your way up Maslow's hierarchy.

Neither you nor anybody else has any business in telling me what my hard-earned money is meant to be used for. I put blood, sweat and tears into earning it, and I deserve the reward for my work. Maybe I'm saving it up for my future descenants to finally lift my family line from poverty that they've been in for generations, or want FIRE for myself. Maybe I'm saving up for a flight into space. It's none of you g-damn business. Get your hands off my money.

This is exactly why I'm against both negative bank interest rates, and high inflation.

If your idea of achieving generational wealth involves a bank savings account there are some bigger educational issues you need to address first. Bank savings accounts rarely, if ever, keep up with inflation regardless of interest rates. You are losing purchasing power in a savings account even if the nominal value of the account increases year over year.

I'm not saying it's anyone's business what you do with your money, but keeping more than 6-ish months of expenses in a savings account is objectively burning money and a pretty idiotic thing to do in general. Anything more than that should be invested. Hedges exist for a reason. There are dozens - hundreds? - of ways to hedge your investment and keep market exposure by limiting or even eliminating downside. Hell, Mark Cuban has a great story about after the broadcast.com acquisition where he was fully invested in the market but also heavily hedged in case his stocks tanked. When the market crashed he made money.

All that is to say that yes it's totally your right to keep half a million dollars in a savings account. But it's an objectively stupid thing to do.

>This is exactly why I'm against both negative bank interest rates, and high inflation.

The reason why we have negative interest and mild inflation (2%-3%) is that the Fed wants the economy of the US to continue to exist in the next 100 years, which is in line with your goals.

Owning a growing share of a shrinking economy is amazing for people born in the past and terrible for people born in the future, owning a shrinking share of a growing economy is acceptable for people born in the past and good for people born in the future. The former is deflation, the latter is inflation.

The Fed can print dollars, but not future consumers and taxpayers. As long as the total fertility rate continues to decline, they’re bailing water out of a boat forever.

> This is exactly why I'm against both negative bank interest rates, and high inflation.

Use it however you wish. But having it sit around, even with positive bank interest rates and low inflation, will still have it lose value over time. If you have a savings goal, then for any period beyond 5-10 years you'll have to invest it.

And negative rates are not unreasonable:

* https://www.bloomberg.com/news/articles/2019-08-08/the-non-w...

* https://archive.is/zlyRi

Actually, this is too simplified. You're supposed to either invest your savings (investment in the amazon sense, use money to grow a business) or spend it. Bank deposits are a form of investment, assuming borrowers invest on the behalf of lenders, something which isn't happening, indicated by negative interest rates.

If neither investment nor spending happens, then excess savings occur which are savings that are simply doing nothing. Excess savings are bad for the economy because they break the investment = savings equation. If one person earns more than they invest/consume, then some other person must consume/invest more than they earn.

The negative interest is mostly aimed at companies that are hoarding money. The current increase in the household savings rate is a reversal of that trend and it is actually a good thing because it puts even more pressure on companies to do productive investments. As it is right now, the bottom 90% of consumers shouldn't feel bad about having savings.

Do the mortgages also have a negative interest rate or are they cappoed at 0?

Some actually do

Yes, but there are costs associated which when included in calculations brings them back up over zero.

I was looking at mortgage for a house, paying 30% upfront, so I would only need to borrow 500k USD.

At fixed rate 30yr, it was 1% + some fees.. so total cost of the loan over 30 years would be 35k USD.

The flex interest rate (adjusted every 5 years) was a current rate -0.25 + fees. In total that would cost around 10k USD over 30 years. (Of course with flexible interest rates, the rates could go up).

So I think most of the cost is now just fees... Looking at owning vs. renting it's quite competitive.

This doesn’t seem like the right math for a mortgage. Are you saying it was a 1% simple interest loan? Because if so, that’s astonishing. I’ve only ever heard of compound interest mortgages.

Hmm, I might have read the numbers incorrectly.

I probably need to read up a bit more...

Last time I looked, the interest is negative if you get a mortgage that floats. However, they’ll add some fees that are also a percentage of the remaining loan, so that you are in effect are still paying interest.

So no, it is not capped, but the interest has to become even lower before the interest on your Mortgage helps pay itself off.

In Finland we apparently used to have mortgages that were just Euribor + bank margin, meaning that if the Euribor rate went enough into the negative, the bank would be paying you interest.

These days mortgages are capped though. My mortgage rate is MAX(Euribor 12m, 0%) + 0.5%. Unsurprisingly I have never paid more than 0.5% interest.

0.5% interest is insanely cheap.

But the houses aren't.

0.5% interest makes houses cheap in relative terms. You get a lot of leverage for basically nothing.

I don't know about Finland but where I am house prices have gone up as interest rates have gone down.

Yeah. It’s only fair as the interest on accounts is at 0% in Finland.

If they would bring negative interest to normal acocounts they’d likely have to do the same with mortgages. Bringing it to euribor + margin.

>Anyway, the maximum amount of deposits is now around 4 months of wage.

Sorry, I don't get it. What if you have ...shudder... more money?

> What if you have ...shudder... more money?

Hopefully almost no one has more than that in a normal savings account. There are lots of better alternatives.

I have to admit that I'm guilty of this.

Just an example, but if a significant part of your pay is stocks, it's possible that you need several (4+) months of salary in an account for the tax payment to go through plus afford normal expenses.

> What if you have ...shudder... more money?

You buy Bitcoin.

This is exactly what it was designed for.

The opposite actually. According to the whitepaper it was designed to be peer-to-peer electronic cash.

> peer-to-peer electronic cash.

... designed as an escape hatch to the banking system.

If you are a foreigner living in Denmark, it is really hard to get mortgage loans due to unexplainable risks.

You are somewhat right so I think it needs to be clarified to non Denmark living people that it has nothing to do with banks and all about Danish government regulation. They have specific laws that look differently on foreigners depending if they are EU, non EU, living for 5 years in Denmark, living less than 5 years. I think what OP might refer to is that he comes from a specific non-EU country that Danish system doesn't look kindly on. (check the recent changes in the way citizenship is granted to read more about it)

If you are EU and if you have stayed more than 5 years in Denmark you should have no trouble getting mortgage. Basically also if you are non-EU if you have been in Denmark continuously and hold permanent residence.

If you are EU citizen you can get a house and mortgage immediately if you have 5% (or better 20%) but in case you leave Denmark you won't be able to rent it. (as I remember correctly).

Current mortgage rates for 20 years are around 1% if you deposit 20% of house value. Most of the time if you are looking to buy something that hasn't skyrocketed in value, you will be paying the same (with taxes) as you would the rent equivalent. (aka if you can, go for mortgage)

Not a Dane; 1% is very low compared to where I am, which is about 2.7% for 20 year. Is that subsidized by the government at all or just a different market?

The loan isn't subsidized in any way.

You can use this calculator from Jyske bank as it is the most simplest one. https://www.jyskebank.dk/bolig/regn-paa-bolig/beregn-laan-ti...

If you want a rough numbers try putting like 2.5 million which get's you a 4 room house in a small town or outskirt of a larger one.

I'm sorry to say that I have no intention to escalate this thread. So, I will not reply to your arguments.

I wasn't trying to argue as much as summarize, perhaps to quickly, the Danish housing market. Sources of information is my personal experience and experience of few (4) other couples that bought their houses within last 2 years.

> it is really hard to get mortgage loans due to unexplainable risks. (e.g. They don't tell you why you are in a risk group. )

Wait, isn't this illegal ?

Negative interest rates are impossible because people will withdraw cash or purchase cash equivalent assets like government bonds (the seller of the bonds may have to hold onto cash).

Explain that to the Danish banks.

This is not terribly uncommon in Europe; let alone Denmark. As with the other banks in Denmark doing the very same thing, Danske Bank is merely passing their own expenses onto their customers [0]. There is probably a discussion to be had about where the specific thresholds should be in terms of both stimulating the economy through encouraged spending versus ensuring people save an adequate amount.

[0] https://www.nationalbanken.dk/en/marketinfo/official_interes...

What other banks do this in Europe (outside of Denmark)?

Major banks in the Netherlands do.

I know it is also happening in Switzerland.[0][1]

[0] https://www.moneyland.ch/en/swiss-banks-with-negative-intere... [1] https://www.swissinfo.ch/eng/business/swiss-national-bank_wh...

In Austria the Supreme Court of Justice (OGH) specifically ruled that banks aren't allowed to do it. At least for private people's savings accounts. Banks are pretty happy to raise various service fees though, so I guess they'll get creative about getting their money back.

Some german banks do it also.

About every bank in the Netherlands, though it usually starts at either €100K or €250K, so that's a bit higher limit than this Danish bank.

I don't think this policy is actually a problem for many people here. Most people above that limit either invest it, put it into a "savings deposit" (you agree to not touch the money for some pre-definied time and in exchange you get better, positive interest rates), or spread it out across multiple banks (since savings accounts are usually free, but only guaranteed up to €100K when the bank fails).

in italy fineco bank decided to enable itself to kick out clients with more of 100k in checkings accounts because by law they cant charge negative interest rates. Other italian banks will probably follow

Thinking this through, as a rational economic actor.

You won't save cash in a bank, it's literally better to put it in a safe.

You won't buy a productive asset, that'll just lose value as more people buy the same asset - lowering the value of the goods it produces.

Which pretty much leaves assets that are inelastic to demand e.g. housing, stocks, art, unique jewelry etc.

Yes, the whole point of these ultra-low interest rates is to increase spending.

As a rational actor, all returns are the same when adjusted for risk, so you continue to stick your emergency savings in the bank, and diversify your less immediate investments. As a real investor you're probably just going to flee domestic investments in favour of the returns of the S&P500.

All returns in the space of rational strategies* are the same when adjusted for risk, which is tightly related to those vehicles subject to classical market forces. A lit oven is not a particularly great place to stash your cash, even on a risk-adjusted basis. I don't know the particulars of the situation in Denmark, but they could be intentionally making savings an irrational decision so that rational money flows elsewhere.

>You won't save cash in a bank, it's literally better to put it in a safe.

That costs money too. You need a safe, space to put the safe, and bear the risk of the safe getting robbed. Sometimes paying 0.75% might be worth the hassle.

Burglars can crack or steal safes. I wouldn't keep my life savings in one.

You can get a safe deposit box holding 10kg for a few hundred dollars in Australia, I would assume it's cheaper elsewhere.

Seems like a terrible deal unless for for small amounts of money.

Or you could buy stakable cryptocurrencies with it and earn 15-60% APR. The price might fluctuate but unless crypto completely tanks all around it’s going back up. Also it’s way more secure than hiding it in a safe because it’s cryptographically protected. If you put in a safe you might as well put it in a chest and make a map of where you buried it because it’s going to be making you just as much money that way.

The type of person that considers getting a safe for cash isn't looking at cryptocurrencies.

I have a bad habit of trying to suggest a solution when I hear people complaining about something that’s avoidable.

Alternatively you won't save as much and spend more on things without future monetary value (experiences, services, etc)

If this impacts the psychology of people saving money, it's just as likely to prompt them to save more. It's not like we're saving our money just for the sake of having a big number on our accounts. We usually have specific goals in mind such as large investments, funding a business, moving, home ownership, early retirement, etc. It's also making precious metals seem a lot more appealing despite their inconvenience.

This is true, if you lose 25€ per year, you will just save 25€ per year more, which actually makes the problem worse.

"Which pretty much leaves assets that are inelastic to demand e.g. housing, stocks, art, unique jewelry etc."

Which is a fallacy of composition because whoever is selling you the house etc, ends up with the same choice.

Assets always reach their indifference level, and some bank somewhere has to end up holding the reserves the Central Bank has created.

Good job people aren't rational isn't it.

I'm actually surprised how low the threshold is... 13500€ isn't too much.

You have to consider as well that the typical down-payment for an apartment is around 40k EUR. So it's incredibly frustrating for those that are looking to save.

That really is quite low. I guess they don't get the constant PSAs that you should always maintain 6 months worth of salary in savings to handle emergencies?

You could also sign-up for unemployment insurance if you live in Denmark.

At around 2500 USD / month for up to 2 years, it's a pretty decent deal for average Joe. I think I pay around 800 USD / year for unemployment insurance.

In practice, I'll probably never need it though.. so I have considered dropping it.

That's significantly less required in most EU countries due to the social safety net, affordable healthcare, public transit, etc. There are fewer types of financial emergencies to cover ( like your house's roof collapsing) and even if you lose your job you get unemployment for up to years while you find a new one.

The advice i've heard for France is to have roughly 3 months, preferably in a liquid savings account which even has some interest (0.25% atm, so not much).

Chase charges a $15 or $35 (dont remember exactly) minimum balance fee or something monthly - seems like the same idea. Banks are kinda hilarious in what they think they can get away with.

So, I'm switching more and more accounts over to DeFi infrastructure over the last year, but getting direct deposit there is still a bit of an issue for employer.

The institutions I do like are smaller Credit Unions.

The problem with Defi is that you can't actually get loans, despite that being the whole purported point. It doesn't replace a mortgage if you need to put down 125% collateral.

From the saver’s perspective it doesn’t matter - it pays regardless. From the borrower’s perspective it lets you get a loan on crypto without actually selling. It is the same principle as a portfolio line of credit except overcollateralized.

Chase collecting money from a depositor for maintaining insufficient money seems like the opposite of Danske Bank collecting money from a depositor for maintaining too much money.

I have Danske Bank, but I'm changing. It was the bank given by my employer to me for free, but it's the shittiest bank with the shittiest customer service I ever used.

They deserve to fail.

Wow, talk about a dark pattern, all checks but the necessary ones are checked by default, which looks good, but then the big green button will check and accept them anyway! So the primary option negates the standard settings! I almost fell for it but I'm getting better and better at catching myself.

It's the new online advertisement. I remember my grandma being completely flustered by all the "you're the 10.000th visitor" flashy stuff and my brain ignored it completely. In this vain my brain now hunts for that button that does not really look like a button but just enough to identify it as a button. That is the one to hit.

Whatever are you talking about? The article is about interest rates in Denmark.

He is talking about the pattern the website is using to increase the cookie acceptance.

Most banks in Germany do this too, and have been doing it for a while, both for private as well as business accounts. The limits are sometimes well below the €100k insured deposit that you typically don’t want to exceed.

Wouldn't this cause a bank run? Why are people keeping money there if they're getting charged 0.75-1% interest.

So far, it appears that most people are either willing to suck up the interest or invest them. There aren't a lot of withdrawals going on. Probably still less safe to sow the cash into a mattress than paying about 600 DKK a year per 100'000 you have above 100'000.

I'd think the competition would be safety deposit boxes, not a mattress. So it depends on how much the smallest safety deposit box costs per year.

Too bad 500€ notes have not been issued since 2 years ago... Makes it much harder to store money as cash...

A lot of banks explicitly prohibit storing currency that is still in circulation in their safety deposit boxes.

In the US I'd just get a money order from the post office and put it in there. No currency, no expiration, backed by fedgov.

Maximum per money order is $1000. Couple that with $1.75 per money order, the rental of the box, and needing extra insurance to get the same protection as in a bank account and it might very well be cheaper to accept negative interest in many cases.

For those who are outside of US, can you please explain what is "a money order from the post office"?

* upd after some Googling, so it's like a cheque. Got it

They exist many places outside the US too. It's closer to a bankers draft, which is pretty much like a cheque except you buy it and it's drawn on the issuing organisation rather than your account, which both makes it less risky for a recipient and is what would make it potentially work here (since with a cheque the money would still be in your account).

The biggest issue with this is that it usually costs money, there are often limits ($1000 for US Postal Service money orders), you'll have to expect reporting requirements above certain limits, and you'll still need to buy extra insurance if above relatively low limits if you want your money to be remotely as secure as in a bank account.

The upshot is that while this gets you around bank limitations on storing actual currency, it takes effort to store lots of money cheaply.

Thing is that safety deposit boxes are rarely insured for as much money, and they do also cost something.. Another problem is that since our economy is almost entirely digital, you can't actually withdraw or deposit large amounts of cash without significant problems with paperwork and fees. You're going to have a bad time trying to buy a new car, house or even high-end TV with cash here :D

Hmm, I have personally considered if I could pay my taxes extra early!!!

I even if I loose my job and don't need to pay so much, I'm sure the government is good for it and can pay me back :)

Sadly, I still have to pay interest if I don't pay taxes on time.

People are willing to pay the government to specifically not invest in the trash options in the market

They’d probably be willing to pay a lot more, -5% yielding government bonds anyone?

For Homo Econimus, the fake economic model, sure.

Real humans tend to move in crowds, though. Everyone will stay in until relatively suddenly, everyone will start getting out. Perhaps there will be a precipitating event, maybe it'll just be time. It's the same thing as trying to time the market.

When everyone wants to get the money out, they won’t be able too. There are limits on how much cash you can take out and those limits can be decreased.

Problem is that all banks have this.. so you either suck it up, or put your money in many banks to keep below the threshold, but that becomes difficult to manage.. The alternative is investing them which is probably okay if you know you won't need funds immediately available, but since everything points to the next financial crisis, it'd probably be better to wait a bit with investments..

No it just causes more money to go into the stock market as people put everything except a nest egg, there. I wonder whether this ends up decreasing consumption, as people are less able to buy impulsively when their money is locked away.

But in my opinion what our problem in Europe is, is a very conservative investment culture at the very top. It is very hard to get funding for anything. No wonder there is barely any growth. Even most flashy startups here get money from government grants.

> No it just causes more money to go into the stock market

A bank run is when people pull their money out the banks. If you want to put your money in the stock market you need to pull it out of the bank.

The banks themselves act as the brokers in most cases. Sometimes the banks themselves get the money because a lot of people put their money in structured investments managed by the bank itself.

They aren't pulling the money out of the bank and using a third party broker.

This isn't how it works. When customers pull their deposits out of their bank accounts, the bank can't turn that into loans, which is what drives a lot of the income.

If the customers shift that money from the bank account into a trading account in a brokerage, they can't do the same thing with those funds that they do if it were in a savings account.

That's the idea, less money in the bank; less money to keep at ECB

If you buy stocks, someone else sells stocks and has the same problem as you.

For context, 100k DKK is approximately 13k EUR or 16k USD. The largest DKK banknote is 1000. This would take 100 banknotes. I'm not talking about affordability. I'm just saying - someone who already has 100k DKK in their bank account could convert it to 100 notes.

Realistically speaking – will this policy spur spending, or will people go back to just hoarding cash?

Hoarding cash would be bad since it would loose value due to inflation.

What? Evidently it looses more value being deposited in the account.

First of all having a negative interest rate is exceptional and this is not true for most of the banks in most of the world. Also there are of course more ways to use cash than to spend it, save it in banks or save it in cash. You could for instance hoard gold or invest in stock instead.

Now tell me, why should anyone have funds in such bank accounts? Obviously it is cheaper to have money at home under the pillow.

Don't you know that all people must help all banks at all times or society will crumble? If I don't help my bank with the cost of holding my money then who will?

If you withdraw cash you are actually helping the bank.

A prediction, if I may: the first of many.

Post COVID, things will get so bad, this may even happen in the US.

To those surprised by this: do you have lots of savings in regular bank accounts? Why? Why not invest it in some instrument like a 0% fee money market fund with a low yield/risk?

I learned "max 2 salaries in a bank account because you are being stiffed otehrwise as the bank doesn't pay interest rate" since I was a kid. It's as much hammered into me as "keep N months salary in savings".

How about I keep my money in the bank with 0 risk and 0 fee? Why is that not allowed?

I just bought a house. Do you know how nice it was to not have to cash out investment accounts and move cash around? I just wired the cash directly, as it should be.

In that case, the national inflation just becomes your fee since your money loses power in real terms over time.

Denmarks currency will still inflate on top of the 1%

What are those instruments? Let's say I'm only interested in keep pace with inflation with not risk. I don't know a lot of options nowadays.

"Interest rate funds" they are called here. Unsure what the best english translation is. A fund that invests in interest rate carrying instruments like bonds. With a large diverse portfolio you get a small but steady interest similar to a savings account. It is still a fund though - not savings - so obviously there is risk involved.

> To those surprised by this: do you have lots of savings in regular bank accounts? Why? Why not invest it in some instrument like a 0% fee money market fund with a low yield/risk?

Funny world. Negative interest rates would have been unthinkable a decade ago. Yet, here we are about to normalize that savings in a bank account are not okay.

> I learned "max 2 salaries in a bank account because you are being stiffed otehrwise as the bank doesn't pay interest rate" since I was a kid. It's as much hammered into me as "keep N months salary in savings".

There was a time when you put your money in a savings account and the bank will pay a reasonable interest to cover inflation and give you some extra. (The power of compound interest, anyone?). People's memory are insanely short.

Here is also what you might be missing: Central interest rate will gradually affect all aspects of economy and thus all investment vehicles. 0% interest means that any investment with yield will carry risk. Negative rates will mean that for society, on average, they'd be losing money on their investments.

> the bank will pay a reasonable interest to cover inflation and give you some extra. > all investment vehicles. 0% interest means that any investment with yield will carry risk.

A consumer can offload all of the risk to the bank (and the underlying guarantee, usually state), in return for most of the reward. Example: I can open a savings account with some restrictions (minimum balance, or restricted withdrawals) and since the bank is now in a better position to invest my money, they can offer me an interest rate despite central rates being 0%.

For example, a $50 minimum balance but free withdrawals gives me 0.6% interest rate, with state deposit insurance. That's not "risk free" since there are other risks than that the of the bank (currency risk, not least) but it's the exact same risk as any savings account.

> A consumer can offload all of the risk to the bank

There is a pattern/trend, and the banks started with a certain amount and now lowered it. If the trend carries on, it's a matter of time before what you suggest is no longer possible.

> Funny world. Negative interest rates would have been unthinkable a decade ago. Yet, here we are about to normalize that savings in a bank account are not okay.

Going from receiving interest to paying interest is psychologically shocking, but not financially. We have always paid the bank to hold our money, it's just called inflation.

We still have inflation. It's actually worse now since we don't know the actual inflation rate, or how much potential inflation there is given the money printing going on.

> There was a time when you put your money in a savings account and the bank will pay a reasonable interest to cover inflation and give you some extra.

Around 15 years ago, I was getting something like 8% interest from my UK-based ISA account (an ISA is a kind of tax-free saving account in the UK). Now typical rates are more like 0.5%.

What was inflation and central rates at that time? Is the real return similar?

Bank of England interest rates at the time were between 5% and 5.75%, and inflation rates were between 2.5% and 3.5%.

Investments go down as well as up has been hammered into me since I was a kid. My parents lost a lot in the 2000 crash, then 8 years later 2008 wiped out millions of people.

Not using a short-term bank account doesn’t necessarily mean investing in something higher risk. There are savings accounts that offer real return in exchange for some restrictions (e.g minimum balance). Buying bonds or funds of bonds is also a very low risk investment of the same kind.

For a lot of people repaying other debt like mortgages can be an efficient form of saving.

I don't understand how the bank incurs an expense by accepting a deposit? Is the bank required by some government regulation to do something expensive with the money?

Or is the "expense" just that the bank's profit would decrease when interest rates on loans go down but those on deposits stay put?

The banks also have to pay negative interest rates to store money.

Interest rates are invariably linked to exchange rates. You get to pick one of the two to determine the other (assuming free capital flows)

Nasty dark pattern on this site. The cookie dialog presents four checkboxes, one of which is disabled (being for "necessary" cookies) and all have a check in a small square. However, when clicking on the presumably checked boxes, the background of the box turns blue instead, and the check remains. The "necessary" box does not have a blue background when selected (as it's always selected), but the others do.

Not sure what you mean, they are all (except for the "necessary" one) unchecked by default. I just clicked "OK to necessary" and it worked fine.

Correct. But there is the visual impression that they are all checked by default. I could see a less savvy user clicking on them and them selecting "ok to selected" thinking "well, I deselected the rest of them", due to the difference in background between necessary and the other three buttons when selected. Maybe "nasty" was a bit hyperbolic, I will admit, but it has the potential to be confusing.

might be your browser? in firefox on linux the unchecked options are just an empty white box.

I'm stupid. I'm so used to using a "dark mode" extension in my browser that I'd forgotten it was enabled.

surprised you'd call that a dark pattern - it's one the best cookie popups i've seen. it had four clearly labelled boxes, the one you needed was checked, the optional ones were unchecked by default, and all four boxes were presented up front, not checked by default and hidden behind a "see advanced options" link. there was also a large and clear button to say "ok to necessary" that changed to "ok to selected" when i clicked to allow functional cookies, and at no point tried to trick me into clicking "ok to all" instead. in fact the only nudge towards selecting "ok to all" was the fact that it was a dark bold blue and "ok to necessary" was a washed out grey.

“Bitcoin has no utility”

Everyone who bought Bitcoin 2 weeks ago has already experienced far greater negative losses than any Danish bank customer will over the next year. Danes can buy US government bonds quite easily if they want risk-free positive yields.

In all of Bitcoin's existence, at today's price, there's only few time ranges where you would have lost money, if you just held on, you made it back and then some.

Of course, past performance doesn't indicate future, but so far, BTC has performed much better than fiat consistently.

While this is true, there has actually been no point since Dogecoin's inception where buying Bitcoin was the better option (denominated in fiat, of course).

For much of doge's existence, it was worth practically nothing and still has very low trading volumes compared to BTC, so you can't easily get in and get out of a position. Tesla was able to sell 200M$ worth of BTC relatively easily, can't necessarily do the same with Doge.

So how does this invalidate the parent comment’s point? If Dogecoin was a better hold than Bitcoin does that somehow imply that Bitcoin is a worse hold than dollars?

And before you lecture about the function of fiat currency, remember the bottom half of society is forced to keep their entire net worth in cash because they are in a continuous financial emergency...

It doesn't. I just don't believe in advocating for regular people to hold highly volatile assets with unpredictable performance.

The bottom half of society also hold large amounts of debt, one of the key functions of inflation is eroding the value of that debt. A currency like Bitcoin does not provide for this.

It goes up and down very much like stocks, gold, etc... if you sell every time it goes down, of course you will incur losses.

>Danes can buy US government bonds quite easily

Then they are exposed to exchange rate movements.

Bitcoin is many things, but it is not a savings account.

You could argue that that is what is best for due to its deflationary nature.

Consequence of easy money environment. I would say Buy Bitcoin but that goes over on HN like a lead weight.

Bitcoin is a very volatile investment while people who keep money are looking for extreme safety. Because if they could accept just a bit more risk they could be investing in a lot other things with better returns like, you know, bonds.

So no, bitcoin is definitely not a replacement for cash deposit.

As to "lead weight", that is very good. There is enough people on HN to see through bullshit and understand Bitcoin for what it is or is not.

It is very volatile yes, and over twelve years this volatility has returned a 3x on investment on average, every year. Conversely, for someone deciding between the two, holding fiat has been equally as volatile, and returned a ~66% loss each year by comparison.

People looking for extreme safety might want to at least put a tiny bit into Bitcoin or some other crypto. Certainly, they'd be significantly "safer" now had they done so at any point over the past decade.

>People looking for extreme safety might want to at least put a tiny bit into Bitcoin or some other crypto.

This. This is why people put money in bonds and gold. It's not a get rich quick scheme, it's an uncorrelated asset. Which BTC absolutely might (heavy emphasis on might) be. BTC is a perfectly valid hedge, but beyond that it's speculation.

At the start of 2018 BTC hit around ~17k, it took 2 years to get back to that price and the history of this asset means you can't even expect that to be predictive. So be careful.

Bitcoin is exactly the insurance policy you want on the possibility of fiat collapse.

Also please point me in the direction of these "better-return" bonds.

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