|
|
Hang Onto Your Wallets: Negative Interest, the War on Cash and the $10 Trillion Bail-in
Brown, Ellen
http://www.counterpunch.org/2015/11/20/hang-onto-your-wallets-negative-interest-the-war-on-cash-and-the-10-trillion-bail-in/Date Written: 2015-11-20 Publisher: CounterPunch Year Published: 2015 Resource Type: Article Cx Number: CX18245 If you’re an ordinary saver with your money in the bank, you may soon be paying the bank to hold your funds rather than the reverse. Abstract: - Excerpt: If you’re an ordinary saver with your money in the bank, you may soon be paying the bank to hold your funds rather than the reverse. ... The stated justification for this move is to stimulate “demand” by forcing consumers to withdraw their money and go shopping with it. When an economy is struggling, it is standard practice for a central bank to cut interest rates, making saving less attractive. This is supposed to boost spending and kick-start an economic recovery. That is the theory, but central banks have already pushed the prime rate to zero, and still their economies are languishing. To the uninitiated observer, that means the theory is wrong and needs to be scrapped. But not to our intrepid central bankers, who are now experimenting with pushing rates below zero. The problem with imposing negative interest on savers, as explained in the UK Telegraph, is that “there’s a limit, what economists called the ‘zero lower bound’. Cut rates too deeply, and savers would end up facing negative returns. In that case, this could encourage people to take their savings out of the bank and hoard them in cash. This could slow, rather than boost, the economy.” Again, to the ordinary observer, this would seem to signal that negative interest rates won’t work and the approach needs to be abandoned. But not to our undaunted central bankers, who have chosen instead to plug this hole in their leaky theory by moving to eliminate cash as an option. If your only choice is to keep your money in a digital account in a bank and spend it with a bank card or credit card or checks, negative interest can be imposed with impunity. This is already happening in Sweden, and other countries are close behind. Subject Headings |