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> I really hope this trend dies off, a cash-less society is a terrible idea. I fully understand that my opinion is both unintuitive and deeply disliked by many

> I really hope this trend dies off, a cash-less society is a terrible idea. I fully understand that my opinion is both unintuitive and deeply disliked by many if not most people, so I can only ask you to spend some time thinking if you really have thought this through. Anyway, I believe there are realistic scenarios where it is good for the economy and society to have negative interest rates imposed by central banks. Cash is one of the things that prohibits this, thus we need to get rid of cash. At the same time we definitely need privacy respecting payment methods. Thus we would likely need to develop some kind of physical tokens/coins/notes/whatever whose value is time dependent. Biggest problem here is that the amount of people who simultaneously understand the need of negative rates and privacy respecting payment systems seems to be for all practical purposes pretty close to zero, so I am not holding my breath here.

pb82 7y ago
I'm skeptic. Forcing people to buy crap they don't need by denying them ways to store cash will probably increase some numbers in some spreadsheets. But is it really a net positive for society? Or are there other reasons that I didn't consider like more people seeking investment options like the stock market?
- 74ls00 7y ago
  From the long term view, it seems reasonable to assume that the high economic growth rates of the 20th century are not going to be something we’ll see again anytime soon. An environmentally-sustainable economic outlook for the future is likely to see long period of close to 0% growth, and more frequent periods of negative growth. Environmentally-sustainable economics seems like a net positive for society, and at this point, an almost necessity.
- beefield 7y ago
  Well, not "forcing"[1] people buying crap today makes the people creating the crap jobless and yes, that has a real cost for society. first because the jobless do not create value and second because someone needs to pay their unemployment benefits. [1] Nobody is forcing you to do anything. You can voluntarily choose to lend your money to the bank if you agree with the interest rate. If you do not, you are free to do as you please with your money. Find someone who is willing to pay better interest rates (typically more risky)[2], buy crap, or even buy bitcoin or gold. [2] Interesting question is, why society should guarantee you a return[3] on your investments if you do not yourself find a counterparty that is willing to pay you high enough return that you are happy with? Smells awfully lot like socialism to me. [3] And why this guaranteed return needs to be exactly 0%? Why not 5%?
  - SuoDuanDao 7y ago
    If it's legal to own bitcoin or gold, what good does eliminating cash do?
    - beefield 7y ago
      Central banks do not guarantee purchasing power of gold or bitcoin. (A note, The questions I made above are not meant to be snarky. Those are the kind of questions I struggled literally for months when I tried to get my head around negative rates and whether they make sense or not.)
      - SuoDuanDao 7y ago
        How do they guarantee the purchasing power of legal tender? Serious question, I thought the health of the economy and the need to pay taxes was all that did that.
raxxorrax 7y ago
If the mechanism of a negative interest rate requires stripping people of cash, I doubt it can deliver what it promises. I am no economist and those might be more used to negative interest rate if they include inflation, but on the other hand it is just another tool for central banks to perhaps stimulate the economy. In my personal opinion, these monetary policies have not been all too impressive. But no, I certainly wouldn't give up cash for a central bank to have some tool with questionable efficiency. If we are talking about wealth distribution, we should talk about limiting inheritances or something like that. Otherwise I would assume that bankers are more interested in pumping money in the economy. I would stuff my cash into my mattress if interest rates become too low. That would probably have the effect of increasing them again if enough people do so. We have a problem with private losses being put on the tab of tax payers. You would need to solve that problem too aside from the lacking privacy of digital cash to make me think about it. Some economists are also critical about these policies, so it isn't really clear, if negative rate will help in the first place. That some are afraid of deflation might have something to do with debt, couldn't that just be the case?
SuoDuanDao 7y ago
>I believe there are realistic scenarios where it is good for the economy and society to have negative interest rates imposed by central banks. Could you articulate one of those scenarios and why negative interest rates would be the best solution?
- beefield 7y ago
  Okay, I try. TL;DR: When even at zero rates, aggregate demand is less than aggregate supply. Then a small disclaimer. I am not an economist by trade, so whatever I write below is my thinking, not learned from a book. Thus no sources available, and take everything with a grain of salt anyway... If you look at the (macro)economy in the short term from the central bank point of view, there are basically a handful of interesting concepts here. first one is (real) aggregate supply, i.e. how much crap and services economy can produce. In the short term, central bank can not do much about this. (so if you want to draw this, we have a horizontal line above x-axis on a chart where interest rate is x axis and production/demand on the y axis). Second one is aggregate (real) demand, i.e. how much people are willing to buy crap and services given the current interest rates. This is something central bank can affect. With a small trick. they can move the demand to the future or from the future by adjusting the interest rate. If interest rates get higher, people take less loans to buy crap and save more. The opposite when interest rates go lower. (thus, in our drawing, we have a downward sloping line for demand. Draw it so that it crosses the supply on the left of Y-axis for this exercise).Third one is inflation, which I will come back a tiny bit later. So, now we have a nice (kind of) supply and demand chart. And we see that if we limit the interest rate to zero, we will have oversupply in the economy. That translates to things like unemployment, lower profits for the corporates etc. So we really would like to get the interest rate to the point where supply and demand are equal. But what about the inflation? One solution would be to have 5% inflation so that zero interest rates would mean -5% interest rates and all would be good again, right? Yep, kind of. If you look again a the chart, where we could find more inflation is where the demand is higher than supply. But that area is even further to the left. To induce inflation, central bank should push the rates even lower than the equilibrium state. and that's why our economies have been between rock and a hard place so long. If we had had an inflation target of 5% in the first place, our life would be much easier. But now we are stuck. And central banks do not have that many options. They can do their best to push the yield curve down to ease as much as possible, but also that has limits. So we are banging against the zero floor and only thing central bank can do is wait for cashless economy or long term economic growth that will increase the aggregate demand. But that is, of course, hampered by lack of demand. Shitty place to be in, today's central bank.
askesum 7y ago
Negative interest rates is needed to secure that rate of amortization does not exceed rate of new loans, in other words to secure the money supply.I think it highlites the need for changing the way our money supply works.
Shivetya 7y ago
Well that scenario is only the tip of the iceberg, negative rates are effectively an on demand tax and one you may not have recourse against. I am sure some very well off could employ money shifting processes to keep their money out of the category and it may become a service that banks offer "for a fee" to anyone. Which in turn would end up having the government just change the regulations preventing it or charging for it. the real threat is the trail created which no government is going to allow you to vacate. just the possibility of a prior acquaintance or business transaction running afoul of the can give some the means to penalize you for past legal deeds in some countries. let alone put you under the scope for having performed now illegal activities, after all why would the want to suspect you aren't predisposed to do it again? finally it really can be used to put a damper on people just leaving high tax areas because they can just electronically debit you for the act.
mrec 7y ago
I'm all for privacy-respecting payment methods, and I'm familiar with the paradox of thrift, but I'm not at all convinced that negative interest rates are a net social benefit. The experience of the past 10+ years has been that ultra-loose monetary policy is far more about bidding up the prices of existing assets than encouraging productive investment. So it disproportionately benefits the old and rich, who own assets, at the expense of the young and poor, who hope to acquire them. I also don't see that there's much difference between nominal negative rates on the one hand and ZIRP plus inflation on the other, which is what pretty much all the big central banks are doing already and which cash doesn't protect against at all. They both punish saving at a time when the ratio of retired to working people is increasing and the latter's ability to support the former is looking shaky. There's a separate argument to be had about financial repression [1], but it's a bit more contentious and I don't think you need to accept the badness of that to be against negative interest rates. [1] https://en.wikipedia.org/wiki/Financial_repression https://en.wikipedia.org/wiki/Financial_repression

pb82 7y ago

I'm skeptic. Forcing people to buy crap they don't need by denying them ways to store cash will probably increase some numbers in some spreadsheets. But is it really a net positive for society? Or are there other reasons that I didn't consider like more people seeking investment options like the stock market?

74ls00 7y ago
From the long term view, it seems reasonable to assume that the high economic growth rates of the 20th century are not going to be something we’ll see again anytime soon. An environmentally-sustainable economic outlook for the future is likely to see long period of close to 0% growth, and more frequent periods of negative growth. Environmentally-sustainable economics seems like a net positive for society, and at this point, an almost necessity.
beefield 7y ago
Well, not "forcing"[1] people buying crap today makes the people creating the crap jobless and yes, that has a real cost for society. first because the jobless do not create value and second because someone needs to pay their unemployment benefits. [1] Nobody is forcing you to do anything. You can voluntarily choose to lend your money to the bank if you agree with the interest rate. If you do not, you are free to do as you please with your money. Find someone who is willing to pay better interest rates (typically more risky)[2], buy crap, or even buy bitcoin or gold. [2] Interesting question is, why society should guarantee you a return[3] on your investments if you do not yourself find a counterparty that is willing to pay you high enough return that you are happy with? Smells awfully lot like socialism to me. [3] And why this guaranteed return needs to be exactly 0%? Why not 5%?
- SuoDuanDao 7y ago
  If it's legal to own bitcoin or gold, what good does eliminating cash do?
  - beefield 7y ago
    Central banks do not guarantee purchasing power of gold or bitcoin. (A note, The questions I made above are not meant to be snarky. Those are the kind of questions I struggled literally for months when I tried to get my head around negative rates and whether they make sense or not.)
    - SuoDuanDao 7y ago
      How do they guarantee the purchasing power of legal tender? Serious question, I thought the health of the economy and the need to pay taxes was all that did that.

raxxorrax 7y ago

If the mechanism of a negative interest rate requires stripping people of cash, I doubt it can deliver what it promises. I am no economist and those might be more used to negative interest rate if they include inflation, but on the other hand it is just another tool for central banks to perhaps stimulate the economy. In my personal opinion, these monetary policies have not been all too impressive. But no, I certainly wouldn't give up cash for a central bank to have some tool with questionable efficiency. If we are talking about wealth distribution, we should talk about limiting inheritances or something like that. Otherwise I would assume that bankers are more interested in pumping money in the economy. I would stuff my cash into my mattress if interest rates become too low. That would probably have the effect of increasing them again if enough people do so. We have a problem with private losses being put on the tab of tax payers. You would need to solve that problem too aside from the lacking privacy of digital cash to make me think about it. Some economists are also critical about these policies, so it isn't really clear, if negative rate will help in the first place. That some are afraid of deflation might have something to do with debt, couldn't that just be the case?

SuoDuanDao 7y ago

>I believe there are realistic scenarios where it is good for the economy and society to have negative interest rates imposed by central banks. Could you articulate one of those scenarios and why negative interest rates would be the best solution?

beefield 7y ago
Okay, I try. TL;DR: When even at zero rates, aggregate demand is less than aggregate supply. Then a small disclaimer. I am not an economist by trade, so whatever I write below is my thinking, not learned from a book. Thus no sources available, and take everything with a grain of salt anyway... If you look at the (macro)economy in the short term from the central bank point of view, there are basically a handful of interesting concepts here. first one is (real) aggregate supply, i.e. how much crap and services economy can produce. In the short term, central bank can not do much about this. (so if you want to draw this, we have a horizontal line above x-axis on a chart where interest rate is x axis and production/demand on the y axis). Second one is aggregate (real) demand, i.e. how much people are willing to buy crap and services given the current interest rates. This is something central bank can affect. With a small trick. they can move the demand to the future or from the future by adjusting the interest rate. If interest rates get higher, people take less loans to buy crap and save more. The opposite when interest rates go lower. (thus, in our drawing, we have a downward sloping line for demand. Draw it so that it crosses the supply on the left of Y-axis for this exercise).Third one is inflation, which I will come back a tiny bit later. So, now we have a nice (kind of) supply and demand chart. And we see that if we limit the interest rate to zero, we will have oversupply in the economy. That translates to things like unemployment, lower profits for the corporates etc. So we really would like to get the interest rate to the point where supply and demand are equal. But what about the inflation? One solution would be to have 5% inflation so that zero interest rates would mean -5% interest rates and all would be good again, right? Yep, kind of. If you look again a the chart, where we could find more inflation is where the demand is higher than supply. But that area is even further to the left. To induce inflation, central bank should push the rates even lower than the equilibrium state. and that's why our economies have been between rock and a hard place so long. If we had had an inflation target of 5% in the first place, our life would be much easier. But now we are stuck. And central banks do not have that many options. They can do their best to push the yield curve down to ease as much as possible, but also that has limits. So we are banging against the zero floor and only thing central bank can do is wait for cashless economy or long term economic growth that will increase the aggregate demand. But that is, of course, hampered by lack of demand. Shitty place to be in, today's central bank.

askesum 7y ago

Negative interest rates is needed to secure that rate of amortization does not exceed rate of new loans, in other words to secure the money supply.I think it highlites the need for changing the way our money supply works.

Shivetya 7y ago

Well that scenario is only the tip of the iceberg, negative rates are effectively an on demand tax and one you may not have recourse against. I am sure some very well off could employ money shifting processes to keep their money out of the category and it may become a service that banks offer "for a fee" to anyone. Which in turn would end up having the government just change the regulations preventing it or charging for it. the real threat is the trail created which no government is going to allow you to vacate. just the possibility of a prior acquaintance or business transaction running afoul of the can give some the means to penalize you for past legal deeds in some countries. let alone put you under the scope for having performed now illegal activities, after all why would the want to suspect you aren't predisposed to do it again? finally it really can be used to put a damper on people just leaving high tax areas because they can just electronically debit you for the act.

mrec 7y ago

I'm all for privacy-respecting payment methods, and I'm familiar with the paradox of thrift, but I'm not at all convinced that negative interest rates are a net social benefit. The experience of the past 10+ years has been that ultra-loose monetary policy is far more about bidding up the prices of existing assets than encouraging productive investment. So it disproportionately benefits the old and rich, who own assets, at the expense of the young and poor, who hope to acquire them. I also don't see that there's much difference between nominal negative rates on the one hand and ZIRP plus inflation on the other, which is what pretty much all the big central banks are doing already and which cash doesn't protect against at all. They both punish saving at a time when the ratio of retired to working people is increasing and the latter's ability to support the former is looking shaky. There's a separate argument to be had about financial repression [1], but it's a bit more contentious and I don't think you need to accept the badness of that to be against negative interest rates. [1] https://en.wikipedia.org/wiki/Financial_repression https://en.wikipedia.org/wiki/Financial_repression