4 ms·

Why should anyone lose money because they've decided to save it for the future, with no inherent risk? It's one thing to lose it to investments. It's another t

Why should anyone lose money because they've decided to save it for the future, with no inherent risk? It's one thing to lose it to investments. It's another thing to expect the money to sit without gaining appreciable interest, and effectively losing value because of inflation. If someone puts 1,000 units of currency into a bank, why should they ever not be able to retrieve that 1,000 units at any reasonable point in the future?

Mithaldu 11y ago
Keep in mind that Sweden, like many european countries, has much stronger social policies than the USA. In the USA, due to the anemic social care programs for people in dire straits (long-term unemployed, sick, young, old), it is necessary for people to individually save up money to guarantee safety in emergencies. To that end, saving in banks is rewarded with interest rates. In more social countries though such emergency savings are spread across the entire population in big pots. People saving their money in bank accounts are effectively keeping it out of those pots, and from society at large, which society punishes by making such individual savings volatile.
- adventured 11y ago
  How does this punish people that are holding their savings in property instead of a bank account though? Low interest rate policies rather massively encourage placing your cash into property. Which also explains why Sweden has such an extremely bad household income to debt ratio, with among the most over-leveraged households of any nation.
  - Mithaldu 11y ago
    Investing in property gets the money moving on the market, which is also a positive outcome.
    - adventured 11y ago
      Hoarding cash increases purchasing power for everyone else looking to spend, also a positive outcome. Is it a positive outcome if property prices inflate so much due to this, that it pushes Sweden's households into such extreme levels of debt that the economy barely grows and debt service levels become untenable? Sweden is at that point right now. Eg: http://www.bloomberg.com/news/articles/2015-06-29/swedish-politicians-face-tricky-choice-on-hefty-household-debt http://www.bloomberg.com/news/articles/2015-06-29/swedish-po... http://www.cnbc.com/2014/11/09/sweden-grapples-with-massive-household-debt-as-rates-hit-zero.html http://www.cnbc.com/2014/11/09/sweden-grapples-with-massive-... http://blogs.wsj.com/economics/2015/06/03/riksbank-sees-increased-risks-to-swedish-financial-system/ http://blogs.wsj.com/economics/2015/06/03/riksbank-sees-incr...
      - Mithaldu 11y ago
        I don't know, that level of complexity is beyond what i can usefully comment on. Maybe the decision makers in sweden think the benefits outweigh the downsides?
- cissou 11y ago
  This is completely inaccurate. Savings account in the US have one of the lowest interest rates in the world, sitting at 0.06% right now [0]. If anything, US citizens are rewarded for NOT keeping their money in the bank, investing it anywhere else (but at a higher risk). Complete opposite of what's happening in Europe. [0] https://www.fdic.gov/regulations/resources/rates/#one https://www.fdic.gov/regulations/resources/rates/#one
  - Mithaldu 11y ago
    Keep in mind that the article talks about negative interest rates.
    - cissou 11y ago
      The article explicitly says that negative rates are not being passed on to the banks' customers right now, and then goes on to speculate that it will in the future. Deflation means that 1 unit of currency will be worth more tomorrow than it is today, hence it is explicitly rewarding keeping money instead of investing it.
      - Mithaldu 11y ago
        > not being passed on to the banks' customers right now So who is paying them now? And once they get passed on, the scenario will look like what i described, no? I also do not understand why you bring up deflation.
  - deleted 11y ago
    [deleted]
thaumasiotes 11y ago
> If someone puts 1,000 units of currency into a bank, why should they ever not be able to retrieve that 1,000 units at any reasonable point in the future? Obviously, to stop people from running the bank. You can say it's a bad idea, but it's not like the reasoning is mysterious.
MichaelGG 11y ago
>If someone puts 1,000 units of currency into a bank, why should they ever not be able to retrieve that 1,000 units at any reasonable point in the future? Why should a bank offer service for free? Yes, they might make money doing stuff with your money, but that shouldn't be a mandatory requirement for a bank.
- alkonaut 11y ago
  > Why should a bank offer service for free? It should be noted that the markets have been doing very well throughout this period, so it's not a matter of "stagflation", at least not yet. As long as the expected return for investing my money is something way higher than zero, I expect to be able to lend them my money without paying for it. And as long as a bank can invest their customers money at good returns, they will want to attract money from customers.
- mstade 11y ago
  I'd agree with you, if savings accounts were in fact savings accounts. But they are in fact lending accounts, where you lend money to the bank, so they can make more. In this scenario, why shouldn't the bank provide a kickback in the form of interest? If given a choice, I'd rather pay money for stronger guarantees on the safe keeping of my money, and guarantees that my money isn't being used for anything but safe keeping. I could put cash in a vault, I suppose, but I don't want cash. I'm perfectly fine with my money being all digital, I just want it kept safe and away from criminals regardless of whether they wear masks or three piece suits.

Mithaldu 11y ago

Keep in mind that Sweden, like many european countries, has much stronger social policies than the USA. In the USA, due to the anemic social care programs for people in dire straits (long-term unemployed, sick, young, old), it is necessary for people to individually save up money to guarantee safety in emergencies. To that end, saving in banks is rewarded with interest rates. In more social countries though such emergency savings are spread across the entire population in big pots. People saving their money in bank accounts are effectively keeping it out of those pots, and from society at large, which society punishes by making such individual savings volatile.

adventured 11y ago
How does this punish people that are holding their savings in property instead of a bank account though? Low interest rate policies rather massively encourage placing your cash into property. Which also explains why Sweden has such an extremely bad household income to debt ratio, with among the most over-leveraged households of any nation.
- Mithaldu 11y ago
  Investing in property gets the money moving on the market, which is also a positive outcome.
  - adventured 11y ago
    Hoarding cash increases purchasing power for everyone else looking to spend, also a positive outcome. Is it a positive outcome if property prices inflate so much due to this, that it pushes Sweden's households into such extreme levels of debt that the economy barely grows and debt service levels become untenable? Sweden is at that point right now. Eg: http://www.bloomberg.com/news/articles/2015-06-29/swedish-politicians-face-tricky-choice-on-hefty-household-debt http://www.bloomberg.com/news/articles/2015-06-29/swedish-po... http://www.cnbc.com/2014/11/09/sweden-grapples-with-massive-household-debt-as-rates-hit-zero.html http://www.cnbc.com/2014/11/09/sweden-grapples-with-massive-... http://blogs.wsj.com/economics/2015/06/03/riksbank-sees-increased-risks-to-swedish-financial-system/ http://blogs.wsj.com/economics/2015/06/03/riksbank-sees-incr...
    - Mithaldu 11y ago
      I don't know, that level of complexity is beyond what i can usefully comment on. Maybe the decision makers in sweden think the benefits outweigh the downsides?
cissou 11y ago
This is completely inaccurate. Savings account in the US have one of the lowest interest rates in the world, sitting at 0.06% right now [0]. If anything, US citizens are rewarded for NOT keeping their money in the bank, investing it anywhere else (but at a higher risk). Complete opposite of what's happening in Europe. [0] https://www.fdic.gov/regulations/resources/rates/#one https://www.fdic.gov/regulations/resources/rates/#one
- Mithaldu 11y ago
  Keep in mind that the article talks about negative interest rates.
  - cissou 11y ago
    The article explicitly says that negative rates are not being passed on to the banks' customers right now, and then goes on to speculate that it will in the future. Deflation means that 1 unit of currency will be worth more tomorrow than it is today, hence it is explicitly rewarding keeping money instead of investing it.
    - Mithaldu 11y ago
      > not being passed on to the banks' customers right now So who is paying them now? And once they get passed on, the scenario will look like what i described, no? I also do not understand why you bring up deflation.
- deleted 11y ago
  [deleted]

thaumasiotes 11y ago

> If someone puts 1,000 units of currency into a bank, why should they ever not be able to retrieve that 1,000 units at any reasonable point in the future? Obviously, to stop people from running the bank. You can say it's a bad idea, but it's not like the reasoning is mysterious.

MichaelGG 11y ago

>If someone puts 1,000 units of currency into a bank, why should they ever not be able to retrieve that 1,000 units at any reasonable point in the future? Why should a bank offer service for free? Yes, they might make money doing stuff with your money, but that shouldn't be a mandatory requirement for a bank.

alkonaut 11y ago
> Why should a bank offer service for free? It should be noted that the markets have been doing very well throughout this period, so it's not a matter of "stagflation", at least not yet. As long as the expected return for investing my money is something way higher than zero, I expect to be able to lend them my money without paying for it. And as long as a bank can invest their customers money at good returns, they will want to attract money from customers.
mstade 11y ago
I'd agree with you, if savings accounts were in fact savings accounts. But they are in fact lending accounts, where you lend money to the bank, so they can make more. In this scenario, why shouldn't the bank provide a kickback in the form of interest? If given a choice, I'd rather pay money for stronger guarantees on the safe keeping of my money, and guarantees that my money isn't being used for anything but safe keeping. I could put cash in a vault, I suppose, but I don't want cash. I'm perfectly fine with my money being all digital, I just want it kept safe and away from criminals regardless of whether they wear masks or three piece suits.