6 ms·

I would imagine this could lead to interesting changes in how people are taxed. IE taxes based on savings instead of income.

pharmakom 5y ago
Digital currency makes negative interest rates possible, which is either exciting or terrifying depending on your view.
- fab1an 5y ago
  I fear there is a curious feedback loop on the horizon, where stuff like this accelerates flight into decentralized crypto which then again accelerates further regulatory scrutinity, including bans.
- mywittyname 5y ago
  This is possible now, since there's a practical limit on how much business can be conducted in all cash. Even if every bank account in the country started charging an account fee to cover negative interest rates, people would continue to use banks because they are just so damn convenient.
  - sneak 5y ago
    Most US banks on the accounts of most US people (that is, the non-wealthy) likely charge more in fees each month right now than a negative interest rate would affect the balances. It's really only the wealthy who would be faced with this being any significant amount of money, and those people comprise a tiny minority of bank accounts.
    - occamrazor 5y ago
      Most banks in Switzerland have negative interest rates on large balances (over 100k or 500k CHF).
      - seunosewa 5y ago
        Wow. Why?
- betterunix2 5y ago
  Nothing makes negative interest rates impossible right now, in fact it is a reality in several countries. Obviously not something that is available to most borrowers, but government bonds with negative nominal rates do exist, and even US treasury debt has negative real rates (i.e. accounting for inflation) for shorter duration notes/bills. Obviously there is a limit to how negative the rates can become -- eventually the market will find other places to invest -- but that would be equally true with digital currencies.
  - david-gpu 5y ago
    CBDCs enable negative nominal interest rates on cash deposits, not just on bonds. What I don't understand is the consequences of that on private banks.
shadowgovt 5y ago
In a sense, inflation regulation is already taxing based on savings. When the value of the currency falls, everyone's savings is worth a little less (and the more one saves, the more one's relative wealth has diminished).
- thehappypm 5y ago
  Though this is intuitive it's not really true in a real sense because it's trivially easy to avoid this "tax". Any asset -- down to a humble CD -- will beat inflation. However, assets increasing in value also increases tax revenue due to capital gains!
  - mandelbrotwurst 5y ago
    1 year CD rates are currently about .65% in the US - well below inflation even if you’re talking Core CPI only.
    - thehappypm 5y ago
      Just looked and yeah, this is not a good moment for CDs (or high-yield savings accounts). I used to get over 1% from my Ally bank savings account. I suppose you can't beat inflation with CDs or savings accounts right now, though in a higher-interest environment you certainly could.
      - mandelbrotwurst 5y ago
        > in a higher-interest environment you certainly could Maybe, maybe not - it's possible for interest rates to be high and inflation to be even higher (stagflation).
- arcticbull 5y ago
  Inflation isn't a tax on savings because you're not supposed to be saving currency. You're supposed to be saving value by investing currency. That's how currency works: it retains value only for as long as necessary. Investments, on the other hand, retain value in the long run. No need to conflate the two. In fact it's a harmful narrative to try and conflate the two. This is a pretty fundamental misunderstanding of modern economics.

pharmakom 5y ago

Digital currency makes negative interest rates possible, which is either exciting or terrifying depending on your view.

fab1an 5y ago
I fear there is a curious feedback loop on the horizon, where stuff like this accelerates flight into decentralized crypto which then again accelerates further regulatory scrutinity, including bans.
mywittyname 5y ago
This is possible now, since there's a practical limit on how much business can be conducted in all cash. Even if every bank account in the country started charging an account fee to cover negative interest rates, people would continue to use banks because they are just so damn convenient.
- sneak 5y ago
  Most US banks on the accounts of most US people (that is, the non-wealthy) likely charge more in fees each month right now than a negative interest rate would affect the balances. It's really only the wealthy who would be faced with this being any significant amount of money, and those people comprise a tiny minority of bank accounts.
  - occamrazor 5y ago
    Most banks in Switzerland have negative interest rates on large balances (over 100k or 500k CHF).
    - seunosewa 5y ago
      Wow. Why?
betterunix2 5y ago
Nothing makes negative interest rates impossible right now, in fact it is a reality in several countries. Obviously not something that is available to most borrowers, but government bonds with negative nominal rates do exist, and even US treasury debt has negative real rates (i.e. accounting for inflation) for shorter duration notes/bills. Obviously there is a limit to how negative the rates can become -- eventually the market will find other places to invest -- but that would be equally true with digital currencies.
- david-gpu 5y ago
  CBDCs enable negative nominal interest rates on cash deposits, not just on bonds. What I don't understand is the consequences of that on private banks.

shadowgovt 5y ago

In a sense, inflation regulation is already taxing based on savings. When the value of the currency falls, everyone's savings is worth a little less (and the more one saves, the more one's relative wealth has diminished).

thehappypm 5y ago
Though this is intuitive it's not really true in a real sense because it's trivially easy to avoid this "tax". Any asset -- down to a humble CD -- will beat inflation. However, assets increasing in value also increases tax revenue due to capital gains!
- mandelbrotwurst 5y ago
  1 year CD rates are currently about .65% in the US - well below inflation even if you’re talking Core CPI only.
  - thehappypm 5y ago
    Just looked and yeah, this is not a good moment for CDs (or high-yield savings accounts). I used to get over 1% from my Ally bank savings account. I suppose you can't beat inflation with CDs or savings accounts right now, though in a higher-interest environment you certainly could.
    - mandelbrotwurst 5y ago
      > in a higher-interest environment you certainly could Maybe, maybe not - it's possible for interest rates to be high and inflation to be even higher (stagflation).
arcticbull 5y ago
Inflation isn't a tax on savings because you're not supposed to be saving currency. You're supposed to be saving value by investing currency. That's how currency works: it retains value only for as long as necessary. Investments, on the other hand, retain value in the long run. No need to conflate the two. In fact it's a harmful narrative to try and conflate the two. This is a pretty fundamental misunderstanding of modern economics.