Hacker Read

lotsofpulp · 2016-02-19 18:38:50

Not in the case of negative interest rates.

geenew | karma 790 | avg karma 2.94 · | 2021-03-26 21:56:43+00:00

Interest rates can be negative.

YokoZar | karma 2693 | avg karma 3.44 · | 2013-07-23 10:39:25+00:00

That cannot explain a negative interest rate.

pessimizer | karma 33733 | avg karma 2.47 · | 2016-04-02 23:44:51+00:00

Negative interest rates.

pjc50 | karma 93685 | avg karma 3.72 · | 2020-12-27 14:34:28+00:00

Negative interest rates?

sukilot | karma 2382 | avg karma 1.24 · | 2015-02-05 20:35:19

Not if the interest rate is low.

pessimizer | karma 33733 | avg karma 2.47 · | 2012-04-18 16:19:34+00:00

Currently, that interest rate is negative.

epanchin | karma 1119 | avg karma 3.39 · | 2020-02-03 17:37:21+00:00

Wouldn’t that undermine the point of negative rates?

Better to just charge interest on cash stored at banks.

reply

chriswwweb | karma 324 | avg karma 3.56 · | 2019-09-12 08:51:27+00:00

Not if you have negative interest rates. I heard on the radio that some European banks want to introduce this.

tlb | karma 20302 | avg karma 5.48 · | 2019-10-06 19:37:46+00:00

When interest rates are negative, there is no other option than to fund current obligations from equity. You can't do it from interest, because there isn't any.

ChuckNorris89 | karma 16669 | avg karma 3.34 · | 2021-01-31 12:18:31

Not if the interest is lower than inflation.

12xo | karma 442 | avg karma 1.96 · | 2020-01-17 17:18:35+00:00

If you also mean negative interest, than yes. Otherwise, the rate of interest is meaningless if the debt cannot be collected.

whimsicalism | karma 14467 | avg karma 2.11 · | 2024-04-20 02:21:25

It does not, in an ideal economic scenario, discourage borrowing - it just means nominal interest rates might be negative.

reducesuffering | karma 4144 | avg karma 1.4 · | 2021-03-27 07:27:21+00:00

Any reasoning you want to give on this? Negative nominal interest rates already exist in European countries as a counterexample.

yellowstuff | karma 1249 | avg karma 3.73 · | 2017-08-23 19:37:17

The argument against negative interest rates was that people could simply store cash in a vault and get a 0% return, rather than lend it for a negative return. In practice very slightly negative rates seem to work out because storing large amounts of cash in a vault is hard. However, it's probably still right to assume that if interest rates are meaningfully negative for a while everyone will switch to storing cash.

URSpider94 | karma 5891 | avg karma 3.25 · | 2021-03-25 02:07:00+00:00

Help me explain where my unfounded assumption is. If the interest rate is negative, that explicitly means that money in the future is worth more than money today. That's the definition of a negative interest rate.

cheez | karma 3766 | avg karma 1.47 · | 2015-09-19 04:33:45+00:00

What does it even mean to have a negative interest rate?

watmough | karma 2259 | avg karma 2.07 · | 2015-04-24 12:37:37+00:00

The article doesn't spell it out, although it should be obvious, "negative interest rates" means "charging you to hold your own money".

Confusion | karma 7759 | avg karma 2.9 · | 2009-07-05 10:49:03

Much depends on the exact phrasing. Offering negative interest rates on consumer accounts is ludicrous to the point of rendering it impossible. For a national bank, nah, not so much.

solotronics | karma 1955 | avg karma 1.76 · | 2019-07-28 16:47:27

I still don't fully understand negative interest rates. So banks then have a negative penalty for holding cash?