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It's an incentive for the bank to have as little money as possible. The banks will do everything to get rid of cash, which, in theory, should devalue the curren

It's an incentive for the bank to have as little money as possible. The banks will do everything to get rid of cash, which, in theory, should devalue the currency. Bottom line: negative rates are all about devaluing the currency against other currencies in the world so that the exports become cheaper.

lasermike026 11y ago
I wonder what it would do to commodity prices?
- ihsw 11y ago
  Commodity prices have already crashed through the floor, seeing them crash further may actually start freaking people out. Frankly I think we need to stimulate the demand side of things -- give people free money, and don't let the banks screw it up like the subprime mortgage crisis.
  - dragonwriter 11y ago
    > Frankly I think we need to stimulate the demand side of things That's a fiscal policy choice that would take action by Congress, and doesn't seem likely with the Congress we have. OTOH, if people get to care enough about it, well, it is an election year, so in principal that could change.
morgante 11y ago
> The banks will do everything to get rid of cash, which, in theory, should devalue the currency. Not necessarily. Far more likely is to encourage investments or holding cash-equivalents (bonds). Most banks are not going to engage in currency speculation merely because of a negative interest rate. > Bottom line: negative rates are all about devaluing the currency against other currencies in the world so that the exports become cheaper. No. That is not the goal of negative rates. The goal of negative rates is to encourage investment and spending, not to devalue the currency. The government has much more direct means for devaluing the currency if that's the goal.
marcosdumay 11y ago
Eh, well, it's either inflationary or deflationary... Depends on how people react. Taking your money out of the banking system (as paper into a box) is extremely deflationary. In most places you'll take around 10 times more money from circulation than what you put on the box, but the US keeps this multiplier much higher.

lasermike026 11y ago

I wonder what it would do to commodity prices?

ihsw 11y ago
Commodity prices have already crashed through the floor, seeing them crash further may actually start freaking people out. Frankly I think we need to stimulate the demand side of things -- give people free money, and don't let the banks screw it up like the subprime mortgage crisis.
- dragonwriter 11y ago
  > Frankly I think we need to stimulate the demand side of things That's a fiscal policy choice that would take action by Congress, and doesn't seem likely with the Congress we have. OTOH, if people get to care enough about it, well, it is an election year, so in principal that could change.

morgante 11y ago

> The banks will do everything to get rid of cash, which, in theory, should devalue the currency. Not necessarily. Far more likely is to encourage investments or holding cash-equivalents (bonds). Most banks are not going to engage in currency speculation merely because of a negative interest rate. > Bottom line: negative rates are all about devaluing the currency against other currencies in the world so that the exports become cheaper. No. That is not the goal of negative rates. The goal of negative rates is to encourage investment and spending, not to devalue the currency. The government has much more direct means for devaluing the currency if that's the goal.

marcosdumay 11y ago

Eh, well, it's either inflationary or deflationary... Depends on how people react. Taking your money out of the banking system (as paper into a box) is extremely deflationary. In most places you'll take around 10 times more money from circulation than what you put on the box, but the US keeps this multiplier much higher.