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> the government is essentially saying "pay us for keeping your money". Yes, but the real message here is "we'd rather you spend your money than save it, so we

> the government is essentially saying "pay us for keeping your money". Yes, but the real message here is "we'd rather you spend your money than save it, so we're going to charge you money to keep it with us" The whole point of a negative interest rate is to try and drive up spending/investment. If it costs money for banks to keep their deposits in the central bank, then there's (theoretically) more incentive for the banks to loan the money to someone. It's meant to be a means of economic stimulus, and the government isn't the one setting the negative interest rate, that would be the central bank (in Europe's case, the ECB).

seanmcdirmid 9y ago
Right. Anyways, money can't be saved for free because production can't be saved for free. If you have long term savings needs, you have to invest with some risk because you'll need extra production enabled by that investment in the future. The same would still be true if you kept gold under your mattress.
- Spooky23 9y ago
  That's only true in the modern era where banks get unlimited dollars for free from the central bank. More typically in modern history, banks can deliver decent rates of return by capitalizing loans with deposits. Risk gets reduced by FDIC or other insurance. As recently as 2006, savings accounts with zero risk for >80% of the US population paid 4-5% interest.
  - euyyn 9y ago
    > As recently as 2006, savings accounts with zero risk for >80% of the US population paid 4-5% interest. I was gonna ask how was that "zero risk" possible, but I'm thinking the answer is "it wasn't actually possible as we all found out the following years."
    - cesarb 9y ago
      Domestic government bonds of stable countries are usually treated as "zero risk", even though they still have a small risk. A savings account with "zero risk" would be one that has as much risk as a "zero risk" bond, usually by both being backed by these bonds, and having a government-backed insurance scheme (if the bank fails, the account holders are still paid). (It might help if you think of risk as a scale, and the "zero" as an arbitrary point in that scale. It's useful to set the "zero" to "the lowest risk you can actually get", even though there might be something with an even lower risk.)
      - euyyn 9y ago
        So US bonds were yielding 4-5% back then?
    - Spooky23 9y ago
      Not at all. The problems we found out later were with banks packaging loans into more complex securities of and selling them to third parties. You have "zero risk" with bank deposits because FDIC insures deposits up $250k (today, $100k previously) with the full faith and credit of the US Treasury.
      - euyyn 9y ago
        How does that insurance work, though: If the bank promises to pay its clients some obscene interest, and goes belly up, will FDIC pay that? Or is it "the US Treasury will pay you up to the amount you initially deposited"?
  - seanmcdirmid 9y ago
    > That's only true in the modern era where banks get unlimited dollars for free from the central bank. That has always been true. Look, you can't save grain to eat in your old age unless you build a freaking grain silo, and even then the grain rots. Money is just little pieces of paper with value attached, they don't actually have value in itself (the same is true for gold). Whatever happened in the past, e.g. savings account with higher interest rates, was more related to the demand for capital rather than in the intrinsic property of the money itself.
TomMarius 9y ago
No and yes, I was talking about governmental bonds. The real effect is that people who don't have enough money, knowledge or guts to invest have extremely low or even negative interests on their money even though they used to have good returns ten years ago. Social engineering at its best.
- simias 9y ago
  I'm not much of an economist but I think most investors know full well that they have a negative interest rate. I think it's still attractive because it's safe since the governments are unlikely to default (so you'll lose the interest but probably not anything else). Like stuffing the mattress with gold ingots, except more convenient. I could be wrong though, but that's the only way negative interests make sense to me.
  - TomMarius 9y ago
    I'm not talking about "investors", the ones getting screwed are ordinary people, young families and so on. They uses to get nice 5-8% p.a. return on the money they had in their bank account, nowadays not only they don't get any return, but also have to pay for having money in the bank account, which used to be free. That's what socialism and market manipulation does, screws ordinary people.

seanmcdirmid 9y ago

Right. Anyways, money can't be saved for free because production can't be saved for free. If you have long term savings needs, you have to invest with some risk because you'll need extra production enabled by that investment in the future. The same would still be true if you kept gold under your mattress.

Spooky23 9y ago
That's only true in the modern era where banks get unlimited dollars for free from the central bank. More typically in modern history, banks can deliver decent rates of return by capitalizing loans with deposits. Risk gets reduced by FDIC or other insurance. As recently as 2006, savings accounts with zero risk for >80% of the US population paid 4-5% interest.
- euyyn 9y ago
  > As recently as 2006, savings accounts with zero risk for >80% of the US population paid 4-5% interest. I was gonna ask how was that "zero risk" possible, but I'm thinking the answer is "it wasn't actually possible as we all found out the following years."
  - cesarb 9y ago
    Domestic government bonds of stable countries are usually treated as "zero risk", even though they still have a small risk. A savings account with "zero risk" would be one that has as much risk as a "zero risk" bond, usually by both being backed by these bonds, and having a government-backed insurance scheme (if the bank fails, the account holders are still paid). (It might help if you think of risk as a scale, and the "zero" as an arbitrary point in that scale. It's useful to set the "zero" to "the lowest risk you can actually get", even though there might be something with an even lower risk.)
    - euyyn 9y ago
      So US bonds were yielding 4-5% back then?
  - Spooky23 9y ago
    Not at all. The problems we found out later were with banks packaging loans into more complex securities of and selling them to third parties. You have "zero risk" with bank deposits because FDIC insures deposits up $250k (today, $100k previously) with the full faith and credit of the US Treasury.
    - euyyn 9y ago
      How does that insurance work, though: If the bank promises to pay its clients some obscene interest, and goes belly up, will FDIC pay that? Or is it "the US Treasury will pay you up to the amount you initially deposited"?
- seanmcdirmid 9y ago
  > That's only true in the modern era where banks get unlimited dollars for free from the central bank. That has always been true. Look, you can't save grain to eat in your old age unless you build a freaking grain silo, and even then the grain rots. Money is just little pieces of paper with value attached, they don't actually have value in itself (the same is true for gold). Whatever happened in the past, e.g. savings account with higher interest rates, was more related to the demand for capital rather than in the intrinsic property of the money itself.

TomMarius 9y ago

No and yes, I was talking about governmental bonds. The real effect is that people who don't have enough money, knowledge or guts to invest have extremely low or even negative interests on their money even though they used to have good returns ten years ago. Social engineering at its best.

simias 9y ago
I'm not much of an economist but I think most investors know full well that they have a negative interest rate. I think it's still attractive because it's safe since the governments are unlikely to default (so you'll lose the interest but probably not anything else). Like stuffing the mattress with gold ingots, except more convenient. I could be wrong though, but that's the only way negative interests make sense to me.
- TomMarius 9y ago
  I'm not talking about "investors", the ones getting screwed are ordinary people, young families and so on. They uses to get nice 5-8% p.a. return on the money they had in their bank account, nowadays not only they don't get any return, but also have to pay for having money in the bank account, which used to be free. That's what socialism and market manipulation does, screws ordinary people.