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How long until banks start investing in vaults and just store millions of euros in hard cash to avoid negative interest rates? Is their any regulatory reason a
by rocqua 7y ago
How long until banks start investing in vaults and just store millions of euros in hard cash to avoid negative interest rates?
Is their any regulatory reason against doing this (lets ignore the cost of securing such cash against physical risks).
- 345218435 7y agothey actually do store printed money in vaults. but that costs money as well. now, remember when everybody was wondering why they axed the 500€ bill?
- rocqua 7y agoThat was much more about money laundering than control over monetary policy. Both come down to the same thing though, move away from cash into instruments that are under the government auspices.
- acd 7y agoGold and diamonds or owning forest.
- rocqua 7y agoGold is too volatile to replace central bank deposits. Diamonds are worthless, despite what deBeers wants you to think, and forests are an investment. If a bank has continual deposits at the ECB, and is paying money for the privilege, they might just decide to hold those euros in a vault. Once the vault becomes cheaper than the ECB, it should become a matter of time.
- AdrianB1 7y agoWhy do that? When most money are just bits in some computers why bother printing it? Go digital, you don't need paper, you save on physical storage.
- rocqua 7y agoBecause the only way for a European bank to have money as 'bits in some computers' is with the ECB. And the ECB gives you back less money than you gave them (negative interest). Banks can also place money with other banks, but that is lending to other banks. Besides, this only shifts the problem to another bank, who now has cash on hand that'll be stored in the ECB if they don't do something else with it. Besides that, banks can invest cash. But in a low-yield market where all stable investments give very low, or even negative, interest, that becomes less attractive.
- RobertoG 7y agoWhere are they going to get the cash? Cash is a very small percentage of all the existing money. Modern money is basically tree of connected electronic ledger. In the top of the tree is the central bank, lower there are the saving banks, lower all the firms and households.
- rocqua 7y agoAfaik they can just order cash from the ECB. Hence my question whether there is regulation that would block this.