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 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)
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.
>Savings are a drag on the economy
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-...
I think they are required to keep 10% reserve. Unless this changed very recently?
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-...
https://www.eidebailly.com/insights/articles/2020/4/federal-...
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.
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.
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.
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).
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.
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).
* https://www.canada.ca/en/revenue-agency/services/tax/canada-...
* https://retirehappy.ca/social-security-agreements-cpp-oas/
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.
Also, "piling" money in a bank account doesn't remove money from economy.
Interest rates are still very low. There is still a strong case to argue that the demand is lagging.
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:
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.
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.
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.
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.
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...
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.
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.
I probably need to read up a bit more...
So no, it is not capped, but the interest has to become even lower before the interest on your Mortgage helps pay itself off.
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.
If they would bring negative interest to normal acocounts they’d likely have to do the same with mortgages. Bringing it to euribor + margin.
Wait, isn't this illegal ?
Sorry, I don't get it. 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.
You buy Bitcoin.
This is exactly what it was designed for.
... designed as an escape hatch to the banking system.