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The article doesn't spell it out, although it should be obvious, "negative interest rates" means "charging you to hold your own money".
by watmough 12y ago
The article doesn't spell it out, although it should be obvious, "negative interest rates" means "charging you to hold your own money".
- nine_k 12y agoCharging to hold your own money makes all the sense if an institution actually holds your money. E.g. you pay a certain amount to store a brick of gold in a safe. The problem is that current banks are not banks in the 18th century sense, that is, not institutions that just hold your money safe, ready to return it on your demand. Instead, they invest this money, giving it to other people in the form of loans. This is the problem with "fractional reserve banking" and "bank runs": the banks don't have your money, they've given it to other people for some interest. For some time, this scheme worked relatively nicely, and you could get some interest accruing on your savings account. But obviously the system is not very stable: if a major investment crisis happens, your savings may be lost (what savings? they were investments!). Not all people are quite comfortable with this, but we have little choice.