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posted by janrinok on Saturday February 07 2015, @03:57AM   Printer-friendly
from the keep-it-under-the-mattress dept.

Matthew Yglesias writes at Vox that something really weird that economists thought was impossible is happening now in Europe where interest rates have gone negative on a range of debt — mostly government bonds from countries like Denmark, Switzerland, and Germany but also corporate bonds from Nestlé and, briefly, Shell. As in you give the owner of a Nestlé bond 100 euros, and four years later Nestlé gives you back less than that. "In the most literal sense, negative interest rates are a simple case of supply and demand. A bond is a kind of tradable loan," says Yglesias. "If there isn't much demand for buying the bonds, the interest rate has to go up to make customers more willing to buy. If there's a lot of demand, the interest rate will fall."

But why would you want to buy a negative interest rate loan? The question itself seems absurd – the very idea that anyone should have to pay someone to keep their money safe rather than demand an interest payment for the use of their money is counter-intuitive. But according to Yglesias, very rich people and big companies need to do something with their money and most European banks only guarantee 100,000 euros.Plowing the money into negative-yielding government bonds can appeal to banks when the alternative is to pay even more to store cash on deposit. J.P. Morgan calculates there is currently 220 billion euros of bank reserves subject to negative interest rates, which looks set to grow exponentially because of the European Central Bank’s forthcoming colossal bond-buying program. "It may be the case that if governments push the negative interest rates thing too far the entire economy would become a cash based system," says Merryn Somerset Webb. "But that might take a while to get to."

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  • (Score: 3, Informative) by tangomargarine on Saturday February 07 2015, @06:39PM

    by tangomargarine (667) on Saturday February 07 2015, @06:39PM (#142256)

    Ironically, the first result for "nestle evil" on Google is Is Nestlé as evil as is claimed? : skeptic - Reddit []:

    My native language is German, and I must say, after comparing the text with the video interview, the author of this text is a bit of a douche. He just translated those parts who fits his story. Brabeck obviously says, that water, just like any other scarce product, should have a market value (price), just to signify that one should not waste it. He also says that for countries/regions who can't pay this marketprice, there are still other solutions for providing them with water. So in my opinion, the man has a point. Why should one of the rarest products on our planet be avaiable for free? Imagine how many liters (or gallons or whatever) a western family could save per day. It's not that I want those poor africans to pay for their water, I want the whole modern world to remember, that the hundrets of liters of water per day who are getting consumed, aren't for free.

    "Is that really true?" "I just spent the last hour telling you to think for yourself! Didn't you hear anything I said?"
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  • (Score: 0) by Anonymous Coward on Sunday February 08 2015, @01:56AM

    by Anonymous Coward on Sunday February 08 2015, @01:56AM (#142343)

    Putting a price on something does nothing to prevent it from getting wasted. Not in a world where there is such an uneven distribution of wealth.