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: 0) by Anonymous Coward on Thursday July 28 2016, @01:06AM
Because the faster two people pass a dollar bill back and forth is really important? Well, maybe if they hit relativistic velocities...
(Score: 0) by Anonymous Coward on Thursday July 28 2016, @02:04AM
Yes, if one of those people is borrowing that dollar from the other and investing it and paying wages and growing a business and then paying back a dollar of debt to the first person. Everybody wins.
The whole point is to use the money to do something useful. The faster and more that that dollar circulates the better the chance something useful will be done with it.
(Score: 0) by Anonymous Coward on Thursday July 28 2016, @06:44AM
Not directly back and forth, but as long as the members of the velocity thread are adding value, yes money velocity matters. Consider a simple thread of dairy farmer, cheesemaker, and cheese eater. The faster the cheesemaker sells the cheese, the sooner he can buy more milk, the sooner the farmer can expand his herd, the sooner the farmer can supply more milk, the sooner the cheesemaker makes more cheese, the sooner the cheese eater has more cheese to buy. This thread becomes part of a bigger web when we start adding hay farmers, cheese cloth makers, etc.
Where velocity doesn't matter is when you start including rent seeking middle men who only add themselves to the thread, no additional value. For example, if a middleman knows that there's new cheese before the cheese eater and is also aware of how hungry the cheese eater is then acts on this knowledge by buying the cheese from the maker then selling to the eater and pocketing the profit, that adds no net value to the thread, just weakens the other threads in the web especially when in order to pull that off the middleman needs to already have more money than can be spent in 2 lifetimes. IOW, a plane flying from Madison to Detroit to St. Louis might have a 10% higher air velocity than one flying directly from Madison to St. Louis, but those of us who understand reality would realize the direct flight is going to be more valuable, productive, etc.
So as long as the velocity vector is only considering transactions between producers and consumers, money velocity matters. When considering rent seeker transactions, those transactions should have a negative velocity.
(Score: 2) by TheRaven on Thursday July 28 2016, @12:53PM
If you and I both have some skill that the other lacks, then after exchanging a few dollars in both directions we will both have some of the product of the other's skill which, in combination with our own skill, is more valuable than just having the output of our own ability. The economy is now in a more healthy state, because we've both exchanged something that we had more than we needed of for something that we needed and are both better off as a result.
Now, at this point, you might wonder why we'd pass the dollar back and forwards at all, why not just barter? The answer to that is that most real economies have more than two participants. I might not want the thing that you're selling, but if you want the thing that I'm selling and someone wants the thing that I'm selling then we can use some counters to keep track of the debt. Let's say I'm selling eggs and you're selling corn. I want to buy some corn from you, but you're a vegan so have no use for eggs. Instead of giving you the thing I want to sell, I give you a counter that says 'I owe you something of equal value to the thing that I've given you'. You accept this IOU because there is some guarantee that you can exchange it for something else. Older currencies were backed by banks keeping an equal value of some precious metal in a vault (Pounds Sterling were tokens allowing you to claim a pound of sterling silver, for example). This didn't work so well because the number of trades that people wanted to make and needed money for are proportional to the value of the economy, not relative to the amount of a particular commodity (and especially not relative to the amount of a particular commodity in a particular cupboard). Modern currencies are backed by the guarantee that, even if no one else wants to buy them, the issuing government will accept them in payment for taxes. If we're both in the USA, then at the end of the year we'll need to pay some taxes and so we both need some dollars. The same holds for everyone else in the USA, so we can both be confident that we'll be able to exchange dollars for something that's actually useful.
sudo mod me up