Negative Interest rates and the ban on cash

[KDave]

It appears to becoming main stream news that some banks are holding cash in their vaults to escape charges, I saw it mentioned on the BBC Business news programme this morning. One of the news readers asked the guest (no idea who he was) something along the lines of how should the 'normal' person react to this and what should they do with their savings if and when they are faced with negative rates? Gold was his answer.

Negative rates are not having the desired outcome it seems - the money is not moving into the 'real' economy, but as predicted it is helping to inflate asset prices (perhaps the intention all along?) or escaping the financial system all together.

[Oldun]

 

[HawkHybrid]

is negative rates considered as a guaranteed default on debt?

 

HH

[Bumble]

1.2% charge for vaulting gold is expensive. Shop around and get 0.4 to 0.5%. If the UK pension rules require you to hold your gold with the Royal Mint, that seems a rather unfair restriction to me. As I understand it, in the USA citizens can hold physical gold in their Individual Retirement Accounts (roughly equivalent to a SIPP in the UK) so I don't see why it shouldn't be permitted here.

[KDave]

I liked the video @Oldun thanks for posting. I think the author of it has missed a few pieces of the puzzle by trying to keep it simple based only on cash savings in the bank though. 

Negative interest rates to force savers to spend might work eventually, perhaps years of it might make people capitulate and change habits and culture. I don't think it will for everyone though - in my mind people who save will just look for alternative means of doing so. There are many options for saving beyond cash in the bank it just takes some education, which years of low or negative interest rates will encourage. It is a race between which changes first - attitudes towards alternative savings vehicles or attitudes towards taking on debt. I believe the former is more likely which will ultimately damage the banking system but who knows.

[SoulUK]

On 12 June 2016 at 01:16, Bumble said:

1.2% charge for vaulting gold is expensive.

But think of it as a pension provider, 1.2% a year isn't a bad charge , and you can get at least 20% tax reclaimed when you buy the gold as its solely for a pension

[Oldun]

Here’s Why German Banks Consider Hoarding Billions of Euros in Vaults
JUNE 15, 2016
BY JOHN MAULDIN

One of Germany’s largest banks is seriously considering stockpiling cash. Sources within Commerzbank have told Reuters they are “examining the possibility” of hoarding billions of physical euros in secure vaults.

Why would a financial institution hoard cash?

Given the lending rules in Europe, this tactic makes sense. Hoarding cash allows banks to avoid the -0.4% NIRP penalty for parking cash with the ECB.

Nonbank financial institutions are also storing cash. Munich Re, one of the world’s leading reinsurers, said back in March it would store both physical cash and gold to avoid paying negative interest rates.

The real reason the ECB will no longer issue 500-euro notes

Perhaps not coincidentally, the ECB announced plans to remove 500-euro notes after 2018. The ostensible reason is that the large notes could “facilitate illicit activities.” However, few believe the deterrence of crime was the bank’s main objective.

The ECB knows that discontinuing larger bills makes cash storage more expensive and less feasible for banks. It also knows that the presence of large amounts of physical cash in an economy is inconvenient for any central bank that wants to push interest rates negative.

Now, the ECB’s move makes more sense. Draghi isn’t worried about German and French citizens stuffing their mattresses with euros. The real threat is banks doing this on a much larger scale.

http://www.mauldineconomics.com/editorial/heres-why-german-banks-consider-hoarding-billions-of-euros-in-vaults

[KDave]

BOE Mark Carnage is talking about cutting rates into the summer, potentially more QE on the cards too by the looks of things. I did wonder why my stocks today were doing better than they have done this entire year and gold was still high at the same time. People getting out of the £?

Will we see NIRP become a reality in the UK I wonder? Its working so well everywhere else is it not? 

[whitesands1]

2 hours ago, KDave said:

BOE Mark Carnage is talking about cutting rates into the summer, potentially more QE on the cards too by the looks of things. I did wonder why my stocks today were doing better than they have done this entire year and gold was still high at the same time. People getting out of the £?

Will we see NIRP become a reality in the UK I wonder? Its working so well everywhere else is it not? 

The only way out of this is to liberate people's savings.  The debt party is over, PPI cash is nearing the end of its cycle and pension freedom looked like a last roll of the dice to stimulate spending.  

Carnage did not like it when a journo questioned his motives today and queried his links to Goldman Sachs; another example of a good talker that no one understands or dares to question.

Were doomed, Captain, doomed a' tell ye.

[shemyaza]

Oil to $100+ a barrel coming, a switch out of Bonds into Commodities collapsing Bond prices, raising Yields sharply and pushing Commodities to new all time highs. I am all in on the Derivative Cycle. Brent Crude is going to explode upwards, immense Debt Deflation is coming except for Oil producing nations. I'm expecting Carney to be replaced shortly.

[KDave]

Hope you are right on oil. I am also positioned, for different reasons, but I suppose its the price movement itself that ultimately matters to us. Still staying away from bonds completely and currency as much as possible. For now anyway. 

I see that Osborne has said he is going to abandon the plan to rid us of the deficit by 2020 and will instead go on a debt splurge. Its the 'Long Term Economic Plan' don't you know! Brexit will no doubt be the completely unrelated excuse for this madness. The sooner we get rid of both of these idiots the better.

[Scuzzle]

1 hour ago, shemyaza said:

Oil to $100+ a barrel coming, a switch out of Bonds into Commodities collapsing Bond prices, raising Yields sharply and pushing Commodities to new all time highs. I am all in on the Derivative Cycle. Brent Crude is going to explode upwards, immense Debt Deflation is coming except for Oil producing nations. I'm expecting Carney to be replaced shortly.

If these reports about frackers needing $60 a barrel to see profit are true surely OPEC will keep it under or as near to this as possible for the foreseeable future?

[Bumble]

As far as I am aware, there is still an oil glut. Lots of tankers steaming round in circles offshore Singapore. Storage facilities full to capacity. What's changing to push prices up?

[shemyaza]

Do you know what a credit default swap is? This is going to be a fascinating few months.

[Daz147]

On 30/06/2016 at 21:26, whitesands1 said:

The only way out of this is to liberate people's savings.  The debt party is over, PPI cash is nearing the end of its cycle and pension freedom looked like a last roll of the dice to stimulate spending.  

Carnage did not like it when a journo questioned his motives today and queried his links to Goldman Sachs; another example of a good talker that no one understands or dares to question.

Were doomed, Captain, doomed a' tell ye.

I never really thought of pension freedon as a way to stimulate spending, you could always take 25% tax free.  If you can't get people to spend their savings then surely they are not going to splurge their hard earned pension savings.  Don't forget, the people with the largest pensions are the ones that can't liberate them, e.g. company pensions and government pensions.

[HelpingHands]

On ‎02‎/‎07‎/‎2016 at 20:33, KDave said:

 

I see that Osborne has said he is going to abandon the plan to rid us of the deficit by 2020

That was always a con anyway.  He was just going to do increase the spending the year before and defer tax income to create a one year anomaly.

[Cointreau]

Deutsche Bank sp now down to 11 Euros.

[HawkHybrid]

http://www.gold-eagle.com/article/seb-closes-sweden’s-tavex-metals-wholesalers-bank-account…-what-store-us

 

https://smaulgld.com/swedish-gold-dealer-bank-account-closed-without-notice/

 

HH

[HighlandTiger]

On 7/3/2016 at 00:06, Bumble said:

As far as I am aware, there is still an oil glut. Lots of tankers steaming round in circles offshore Singapore. Storage facilities full to capacity. 

Totally correct, except for the fact that the ships are at anchor, not steaming around in circles. Costs too much burning fuel for no reason. ;) 

[HawkHybrid]

http://uk.advfn.com/news/DJN/2016/article/71930425

 

mexico raises rates to defend the peso.

 

HH

[HelpingHands]

Will benefits in the future be paid in GovCoin?

http://www.thecanary.co/2016/07/13/snooping-on-benefit-recipients-spending-and-is-totally-legal-with-this-phone-app/

 

[KDave]

17 minutes ago, HelpingHands said:

Will benefits in the future be paid in GovCoin?

http://www.thecanary.co/2016/07/13/snooping-on-benefit-recipients-spending-and-is-totally-legal-with-this-phone-app/

 

Good find. An interesting development, didn't really expect this but at the moment it looks much like a political gimmick rather than a template for wider use perhaps. Is not block chain technology the opposite of the current inflationary system? Removing the ability to ease and moving towards a form of hard money seems counter intuitive. Perhaps the next system is being tested out here, a possible reset scenario given the state of the current system, the inevitability now staring hard at anyone with the will to see it. Perhaps not  

It is an interesting experiment though once you get past the ultimately meaningless morality arguments. I would like to see the results regarding how easy it is to use this kind of digital currency in the every day. I would expect it requires some form of buy in from a selection of companies, shops, ect? Or is the infrastructure already in place for this to work?

[HelpingHands]

Not all cryptos have a set value. Some can be QE'd to infinity.

[HelpingHands]

I think the main downside is that people might have pawned their smart phones

 

[Oldun]

http://www.bbc.com/news/business-36889828