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It's worth pointing out that never in all of world history has such a large percentage of sovereign debt yielded a nominally negative rate. Where this ends is

by aazaa 5y ago

It's worth pointing out that never in all of world history has such a large percentage of sovereign debt yielded a nominally negative rate. Where this ends is anybody's guess. But when the situation finally does resolve itself, it seems reasonable to expect economic and social dislocation both qualitatively and quantitatively beyond anything ever seen before. The incremental manner in which the GFC continues to play out has numbed most people to the danger they are in.

deleted 5y ago
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eru 5y ago
Nah, the situation isn't that new. Yes, negative nominal interest rates are fairly new. But we had negative real interest rates on sovereign debt every now and then. Especially during the Great Inflation.
germinalphrase 5y ago
Our entire political systems is hyperbolic and actively seeks to undermine trust in institutions that could push back against the political system’s interests. Even if the danger were eminent, the average person on the street 1) probably couldn’t understand the threat and 2) wouldn’t have a single idea about how to mitigate their personal exposure to that threat (if it were even possible for them to do so).
IkmoIkmo 5y ago
If you look at it in terms of purchasing power rather than on a nominal level, we've been there many times. Honestly some commenters in the Netherlands were surprised over the past six months that people suddenly took action when their savings account went from 0% to -0.1% interest, but were entirely passive when their 0% interest account was exposed to 2% inflation for years, which has a much larger impact on purchasing power and was essentially subjecting people to negative annual returns on their purchasing power (i.e., the metric that matters).
- csomar 5y ago
  I think people are not that smart but also not that stupid. People are used to small amount of inflation (in Western countries) and thus already planned ahead for it. It works differently in countries with high-inflation, people take notice when prices are increasing fast. My guess is that people expected bank accounts to work as something they have, that is secure and untouchable. It's not that it can't happen (a bank can go bankrupt and the CB refuses to cover the customers) but people who haven't gone through it, believe it can never happen. Their balance being reduced tipped them off that something is not quite alright. What I'm trying to say is that people are more concerned about the bank dipping into their accounts (regardless of the amount) rather than them losing some Purchasing Power.

by aazaa 5y ago

deleted 5y ago

[deleted]

eru 5y ago

Nah, the situation isn't that new. Yes, negative nominal interest rates are fairly new. But we had negative real interest rates on sovereign debt every now and then. Especially during the Great Inflation.

germinalphrase 5y ago

Our entire political systems is hyperbolic and actively seeks to undermine trust in institutions that could push back against the political system’s interests. Even if the danger were eminent, the average person on the street 1) probably couldn’t understand the threat and 2) wouldn’t have a single idea about how to mitigate their personal exposure to that threat (if it were even possible for them to do so).

IkmoIkmo 5y ago

If you look at it in terms of purchasing power rather than on a nominal level, we've been there many times. Honestly some commenters in the Netherlands were surprised over the past six months that people suddenly took action when their savings account went from 0% to -0.1% interest, but were entirely passive when their 0% interest account was exposed to 2% inflation for years, which has a much larger impact on purchasing power and was essentially subjecting people to negative annual returns on their purchasing power (i.e., the metric that matters).

csomar 5y ago
I think people are not that smart but also not that stupid. People are used to small amount of inflation (in Western countries) and thus already planned ahead for it. It works differently in countries with high-inflation, people take notice when prices are increasing fast. My guess is that people expected bank accounts to work as something they have, that is secure and untouchable. It's not that it can't happen (a bank can go bankrupt and the CB refuses to cover the customers) but people who haven't gone through it, believe it can never happen. Their balance being reduced tipped them off that something is not quite alright. What I'm trying to say is that people are more concerned about the bank dipping into their accounts (regardless of the amount) rather than them losing some Purchasing Power.