SoylentNews is people
SoylentNews
The RBS banking group has warned 1.3 million customers they could be charged negative interest rates if the Bank of England cuts base rates below zero.
The group, which includes NatWest, wrote to its business and commercial account holders about the potential changes, which mean they could lose money even when they are in credit.
The letter said: "Global interest rates remain at very low levels and in some markets are currently negative.
"Dependent on future market conditions, this could result in us charging on credit balances."
The Bank of England's base rate currently stands at the historically low rate of 0.5%, where it has been for more than seven years - and some economists believe it should be cut further to stimulate the economy.
Source: Sky News
From October 1st, the Dutch bank [ABN Amro] is adjusting its conditions to state that the bank can give negative interest rates to account holders with a business checking or -savings account, ANP reports.
Source: NL Times
(Score: 4, Informative) by krishnoid on Wednesday July 27 2016, @07:40PM
So if a bank can "pay" negative interest rates, does that mean that there's too much cash around and nobody needs to borrow any? What actual money/economic situation does "paying" negative interest rates correspond to?
(Score: 4, Insightful) by Dunbal on Wednesday July 27 2016, @08:12PM
The retarded idea is that it penalizes people that "save" money and forces you to spend every penny you have. For a ridiculous apparent short term "boost" to the economy. The problem is though if you've spend all your money, you won't have any for stuff you really need. No problem, the bank says, we'll LEND you some money (at interest). Gotcha. So basically even money becomes "rented".
Now this idea is completely flawed for two reasons. First, the incorrect assumption that individuals are not those who can best determine where they allocate their wealth. This flies into the face of economic theory but is VERY convenient for those who have monopolies and oligopolies, because they know that your dollars are invariably headed into their hands the minute they leave yours. The second reason is the ridiculous assumption that saving is somehow "bad". Because presumably when you have money in a bank account the bank just sits on your money and does nothing with it. Wrong. The bank takes your money and lends it out ANYWAY, so it doesn't really matter if you have "savings" or not - the money is STILL in circulation.
If you have savings in an account you are much more likely to consider many discretionary purchases with your income. If you have no savings, you are forced to spend your money - but on survival.
(Score: 1) by nitehawk214 on Wednesday July 27 2016, @08:28PM
Banks managed to convince the government that people saving money hurts the economy. That somehow the answer to our economic problems is to get individuals out there spending what little money they have left. That this will give us a short-term gain, boost confidence, and get politicians reelected. (hey, it might actually work)
And anyone with enough money to save any must be some evil rich person. (hey, they might actually be evil)
Of course this really only hurts middle class people that were trying to save up to buy a house because they were afraid to take a loan when the rates dropped through the floor in the crazy BUY BUY BUY EVERYTHING MUST GO era post-2009.
"Don't you ever miss the days when you used to be nostalgic?" -Loiosh
(Score: 4, Informative) by Dunbal on Wednesday July 27 2016, @09:12PM
This is all about slavery. If you have no savings and only debt, you work for the bank.
(Score: 1, Funny) by Anonymous Coward on Wednesday July 27 2016, @10:04PM
if you have no slavings
(Score: 1) by caffeinated bacon on Thursday July 28 2016, @02:20AM
If everyone is saving and nobody is spending. What kind of idiot do you need to be to borrow money from a bank and invest? You will just lose all your money. Better to wait until the economy recovers and spending picks up. Oops, it never will because people will just save more and more. Now that deflation has also kicked in and things are getting cheaper. Why buy something today when next month is will be cheaper? So people spend even less and save even more, and there is even less incentive to invest. Since all the businesses are now less profitable due to decreased spending, how many workers will be getting pink slips? Now there is even less spending, and also less reason to invest. This will not end well...
(Score: 2, Disagree) by nitehawk214 on Wednesday July 27 2016, @08:22PM
Banks don't really want people putting their money into accounts. With the reserve requirements the way they are (10% in the USA, 1% in the EU and by per-bank contract in the UK (In fact I think they actually penalized banks for having TOO MUCH in reserve)), banks hardly need to hold any money at all in order to lend out.
Even better (for the banks), these are the same institutions that have credit cards. If people manage to spend all their money they start running credit cards (Why hold on to money if it will just disappear, eh?). Those are VASTLY more profitable for the banks than secured or personal loans.
Banks are evil and people are stupid. Yet some how smart people with no debt end up paying for it all.
"Don't you ever miss the days when you used to be nostalgic?" -Loiosh
(Score: 0) by Anonymous Coward on Thursday July 28 2016, @01:12PM
Rubbish, if banks didn't want people putting money into their accounts, why even pay them interest in the first place? Banks are competing with other banks for your money, because the more money you lend them, the more money they can lend other people, multiplied.
What do you think the overnight cash rate is? It's banks that don't have enough deposits borrowing from other banks to make up the difference. It's much cheaper for them to borrow that money from you.
(Score: 0) by Anonymous Coward on Thursday July 28 2016, @06:36PM
You are asking the right question.
Here's the simple answer: negative interest rates exist when there is more money to invest than good ideas about how to invest it.
Banks serve two functions; and both reasons are important when deciding to give them your money: in addition to lending your deposited money into productive investments and giving you back a portion of its profits in the form of interest, it's a convenience service for you to not have to keep the cash inside your mattress, not to mention cheques, credit cards, and online transactions. So when there are no productive investments where the banks can park the moneywith interest, clients can still be willing to pay to have the convenience service.
The interest rates are low because few want to pay to build factories or purchase equipment (or office buildings, or support development of new products, etc...). Basically, we need revolutionary new inventions like the steam engine, electricity or the internet to drive innovation and create new opportunities for the growth of new industries. Only then will good new investment opportunities arise, driving interest rates up again. Government's central banks like the Fed can only react to keep the inflation around 2% by adjusting the interest rates according to the state of the economy (following a rather narrow set of rules with little to no leeway); they are not the problem.
States could increase their importance in the economy with public works programs like building roads or social redistribution schemes like paid parental leave, but that is politically difficult, and the long term effects of a sustainably more present State in the economy are not entirely clear --although at current historically low interest rates and low overall government debt levels, we're passing on a great opportunity to improve the public infrastructure that would not really crowd out private investment in this context--. But that requires more taxes at the same time as more public spending, so I don't see that happening at the necessary international scale fast enough to make a difference on real interest rates.
So basically, the lack of good new ideas about what to do with money saved by individuals, corporations and sovereign funds like Saudi Arabia's and Norway's is what keeps interest rates low.
I hope this helps.
- An actual economist