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Negative interest rates are coming! You want to know more about them!

 
Anonymous Coward
User ID: 73817748
Netherlands
08/14/2019 05:55 PM
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Re: Negative interest rates are coming! You want to know more about them!
This is like having a bail-in.

It will cause a bank run when savings accounts start earning negative interest.
 Quoting: SilverCyprus


True that, as soon as negative rates are coming I will withdraw all my savings on my saving account, no way I am gonna pay for putting my money on an account where they make money from it....
Anonymous Coward
User ID: 590644
United States
08/14/2019 07:12 PM
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Re: Negative interest rates are coming! You want to know more about them!
From page 71:
Thread: Get rid of the money system, then get rid of goverrments (Page 71)

Occupy School of Money dot com has a book you can purchase or read online:
[link to www.occupyschoolofmoney.com]

Here is a chapter on demurrage:
[link to www.occupyschoolofmoney.com]

Bullet points from Chapter 16 (I have picked and selected):
1) Demurrage discourages hoarding by raising velocity.
2) Food Price Hyperinflation could be stopped by demurrage.
3) The nineteenth flaw of economics is that money is not a store of value
4) Hoarded Money is a money avalanche waiting to create hyperinflation.
5) Exchange is circulation. Hoarding destroys circulation.
6) Buy Assets; Do not hoard the means of exchange. Buy real assets.
7) Demurrage successfully prevents money from becoming a store of money.
 Quoting: Levi Philos 590644
Levi Philos
User ID: 590644
United States
08/14/2019 07:40 PM
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Re: Negative interest rates are coming! You want to know more about them!
We say "time is money" but then do not have a token dominated in time...

What is the time value of yesterday?
Anonymous Coward
User ID: 77816329
Brazil
08/14/2019 07:51 PM
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Re: Negative interest rates are coming! You want to know more about them!
THis is excellent for the stockmarket !
Anonymous Coward
User ID: 77345463
United States
08/14/2019 08:47 PM
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Re: Negative interest rates are coming! You want to know more about them!
Okay, finance ain’t my bag, so here are a couple of (probably dumb) questions:

1) What does it mean for the ‘little guy’, like me? I’m right side up on my mortgage, and our house has appreciated in value.

2) Suppose I have the money to pay off my mortgage all at once. I don’t, but I’m curious. Would it be advised to keep paying my monthly note or pay it off (again *if* I could)?

3) Should I keep money in savings? I’d think not, but still want to ask.

Please explain in simple words if you don’t mind - again, I’m NOT a finance savvy guy.

Thanks :-)
 Quoting: GenX Dude


There are two schools of thought on this. Some will tell you to just keep paying the minum monthly payments as the longer it takes you to pay then the dollars you pay toward the end are worth much less.

I went the complete opposite route. I paid my house off as soon as I possible could and it has worked out very well for me. There are a couple of reasons for this.

If there is a SHTF situation then no one can kick you out of your house except the taxpayer. You don't want to be in debt when it all comes cashing down.

Say I borrow $200,000 to buy a house. If you have a 30 year mortgage then the real price you are paying for the house is triple that. You actually pay over 30 years $600,000 for the house. Now it seems to me that saving $400,000 and putting that in my pocket is much better than the fear of the dollar being worth less over time.

But you have to know how to do it. Most people make the mistake of paying ahead on payments. So you pay the March payment and also the April payment at the same time. You have done nothing as you still pay their interest.

The correct way to do it is to pay the March payment and there is place on your Mrch payment that you can add some money to the March payment. That money goes directly to paying down the principle and none of the extra money goes toward interest. Then you still have to pay the April payment.

Even if you can only afford $100.00 extra each payment you will be surprised at how fast you can pay down the principle and on average you can pay the house off in 10 years instead of 30 years.

One big mistake people made in the past was to get a 20 year loan instead of the 30 year loan. Always get the 30 year loan. The 20 year loan has higher monthly payment compared to the 30 year loan. You can make a 30 year loan into a 20 year loan by paying extra every month but you can never make a 20 year loan into a 30 year loan. If you lose your job in a SHTF situation then you will be glad you have the lower monthly payments.

3) Should I keep money in savings? I’d think not, but still want to ask.
 Quoting: GenX Dude

I do. Once I paid my house off and no longer had those monthly house notes then the money started building up very fast in my bank account. It is too the point that I am my own banker and no longer worry about getting loans because I have the money and can buy anything, any time I want to.



.
niphtrique  (OP)

User ID: 77025818
Netherlands
08/15/2019 01:43 AM

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Re: Negative interest rates are coming! You want to know more about them!
I'd love to see the rate drop to 1% so I can refinance my house!
 Quoting: Bloodreddeuce


Just wait a little longer for -1% :).
Anonymous Coward
User ID: 51832604
United States
08/15/2019 01:54 AM
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Re: Negative interest rates are coming! You want to know more about them!
Negative interest rates are coming! And they may be here to stay. To explain the situation I make use of simplification for clarity's sake. Basically this is the tale of two opposing economic forces: capitalist spirit versus time preference. And basically, there are two types of people: ordinary people and capitalists(1).

Ordinary people suffer from a condition called 'time preference'. It makes them spend their money on frivolous items sooner rather than later. Ordinary people will only forego stuff in the present if they can get more stuff in the future. Hence, interest rates need to be positive to make them save.

Capitalists on the other hand are special people. They suffer from a condition called 'capitalist spirit'. They believe that money spent of frivolous items is money wasted because if you invest instead, you end up with more money in the future that you can invest again. They keep on saving and investing, even when interest rates are low.

What's the point of that? The capitalists invest in the corporations that make the frivolous items ordinary people buy. And because ordinary people would have spent their money on frivolous items, these items wouldn't have been produced in the first place. And so capitalists can be very useful.

But there is a problem. For most of history, returns on capital were higher than the economic growth rate.(2) This can't continue forever because returns on capital would take a growing portion of national income. In the past this issue was often resolved by economic depressions and wars that destroyed a lot of capital.

... more at link

(1). Sapiens: A Brief History Of Humankind. Yuval Noah Harari (2014). Harvil Secker.
(2). Capital in the Twenty-First Century. Thomas Piketty (2013). Belknap Press.

Short introduction:

[link to www.naturalmoney.org]

Further reading on why interest rate go negative and how the future financial system might look like:

[link to www.naturalmoney.org]

[link to www.naturalmoney.org]
 Quoting: niphtrique


Great synopsis OP.
Anonymous Coward
User ID: 77922073
New Zealand
08/15/2019 05:15 AM
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Re: Negative interest rates are coming! You want to know more about them!
Yes this is accurate. It was in the news here in NZ the other week. Our reserve bank said they wouldn't be suprised to see negative interest rates.
niphtrique  (OP)

User ID: 77025818
Netherlands
08/17/2019 04:40 AM

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Re: Negative interest rates are coming! You want to know more about them!
This is like having a bail-in.

It will cause a bank run when savings accounts start earning negative interest.
 Quoting: SilverCyprus


True that, as soon as negative rates are coming I will withdraw all my savings on my saving account, no way I am gonna pay for putting my money on an account where they make money from it....
 Quoting: Anonymous Coward 73817748


The point is, there is still cash, and cash is still important, so this has to be fixed, otherwise people will take their money from the bank once interest rates go below -1%.

The fix is to make cash and digital currency separate currencies so that a negative rate can be applied to cash by allowing the digital currency rise relative to cash.

Cash in a sense is a loan to the government so the interest rate on that loan could equal the short-term interest rate on government loans like this:

[link to www.naturalmoney.org]
niphtrique  (OP)

User ID: 77025818
Netherlands
08/21/2019 02:59 AM

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Re: Negative interest rates are coming! You want to know more about them!
Jyske Bank has become the first Danish lender to impose negative interest rates on customer deposits and has warned that sub-zero rates were looking “rather permanent”.

[link to www.ft.com (secure)]

Rather permanent: slowly, reality is kicking in.
Anonymous Coward
User ID: 76273531
United Kingdom
08/21/2019 03:14 AM
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Re: Negative interest rates are coming! You want to know more about them!
The Federal Reserve isn't going to pay us!
 Quoting: Anonymous Coward 12009496


No they won't, I've never heard a bank say ' here's amillion, pay it back in 10 years if you've got the money ' and yet they expect that of us.
niphtrique  (OP)

User ID: 77025818
Netherlands
08/21/2019 06:54 AM

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Re: Negative interest rates are coming! You want to know more about them!
The Federal Reserve isn't going to pay us!
 Quoting: Anonymous Coward 12009496


No they won't, I've never heard a bank say ' here's amillion, pay it back in 10 years if you've got the money ' and yet they expect that of us.
 Quoting: Anonymous Coward 76273531


The US tries to spend its way into prosperity, and this policy pushes up interest rates, but it might not be sustainable. Something has to give.

If the US were to balance its budget, interest rates would crater, unless they are propped up by the FED.

The stimulus could then come from rich people handing over their money to the rest of us, for example via negative interest rate mortgages. It is already happening in Denmark.





GLP