I Come Not To Praise The Old Krone
Just trying to get my head around negative interest rates
Denmark’s central bank cut its main borrowing costs to record lows and brought the rate it offers on certificates of deposit below zero, as policy makers test uncharted territory to fight a capital influx.
The benchmark lending rate was cut to 0.2 percent from 0.45 percent, while the deposit rate was reduced to minus 0.2 percent from 0.05 percent, Copenhagen-based Nationalbanken said in a statement today.
Attention Danish people with money: my mattress is currently offering firm (though somewhat lumpy) yields of 0%. Send your krone to Bingley Banque!
Biz, World Stuff | Mr. Bingley | 
July 5, 2012 10:35 am
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Something is rotten in Denmark.
A negative interest rate? WTF?!!!?!?! Does that mean depositors pay the bank to hold their money?
What a sweet scam that would be!
I just means that the banks don’t want deposits – “…fight(ing) a capital influx”. In the form of Lira, Drachma, Pesetas, Deutschmarks, Francs, etc, I’m guessing? If the “benchmark” rate (I’m guessing that’s equivalent to our Fed Funds rate) at 0.2%, there’s no way they can make enough money to pay depositors and shareholders. Even at if they make up for it in volume.
Maybe our upside down mortgage borrowers should give these guys a call.
And, Jeff, yes, that’s essentially what it means.
Thanks for the clarification, leelu. I just hope that the Feds don’t get the same idea here.
JeffS – oh, they have already. Really. What it’s called is no-interest checking. Then they charge you fees for things like checking your balance, etc. (Which fees used to be waived on no-interest checking.) So yeah – they’ve got the idea – just implementing it in a more…subtle? way.
I already keep a substantial cache of cash in the house (where it’s not easily found, but easily grabbable in case of natural disaster). I’m starting to wonder if I shouldn’t just keep it all “under the mattress”, so to speak, the way they did it after the Depression hit.
I’m no economist Mrs H but it seems to me that one should trade all that green paper for items of actual value as soon as one gets it.
We are currently seeing irrational behavior on the part of governments, who desperately need to keep the money flowing so politicians can continue to be elected.
This is a physical and mathematical impossibility, so prepare for government debt to be worthless. DO NOT BUY ANY OF IT. You only encourage them.