An economic experiment in Sweden: no place to hide money from negative interest

[josephpalazzo]

Sweden is shaping up to be the first country to plunge its citizens into a fascinating â€" and terrifying â€" economic experiment: negative interest rates in a cashless society.
...

If banks charge customers negative rates of interest in a cashless society, those customers are not able to withdraw their money as cash to shield it, under their putative mattresses. Consumers’ only choice in such a scenario is to spend it or let the bank take it. (The theory is that by forcing people to spend cash rather than save it, you can spur economic growth.)
...


So two trends are converging on Sweden at the same time:

   
• Sweden is using less and less cash.
• Sweden is a negative interest rate environment.

And that means many Swedes have no way to “hide” their money. So Sweden may become the first country where its citizens may have to accept negative interest rates (probably in the form of higher bank charges or fees) or be forced to spend their money in order to “save” it from those rates.

http://business.financialpost.com/business-insider/people-in-sweden-are-hiding-cash-in-their-microwaves-because-of-a-fascinating-and-terrifying-economic-experiment

[Baruch]

Why did you post about my post in another section?  And you didn't attribute my initiative to me ... you quoted the article only.

[SGOS]

I've thought about negative interest before.  It was in the context of the government lowering interest rates (and taxes) to spur growth.  You can apply this Keynesian economic theory to seemingly positive ends, but politicians don't quite get there.  They seem to forget that the theory calls for raising interest rates when times are good.  It seems to me that they like the part about lowering interest rates to spur growth, but want to spur growth so badly that they prefer low interest rates over high.

This sounds kind of good, except what happens when interest rates get to zero?  I started thinking about this when we came out of the Clinton era and times were going great guns; We had an excess of money in the treasury, and stocks and real state were going nuts.  I was watching George Bush as he was just about to get elected and there was a news clip of him and his economic team sitting around having some kind of economic summit, and Bush said, the first thing we have to do is lower interest rates to get the economy going again.  Of course, he was in way over his head and had not a clue, as was his underlying nature in national and international affairs (he even said it with a lack of conviction like he was just following the direction of some GOP advisor).

When interest rates go to zero, and you need a big stick to spur the economy, you've kind of already shot your wad, and nothing is left in your arsenal to ward off recession.. except to go to negative interest rates.  At that point in my ruminations, I was unable to anticipate what negative interest rates would do.  The idea was beyond me.  It sounds like nothing more than a weird experiment with possibly dire consequences.  I'm happy the Swedes are doing it, not us.  Perhaps this is the economics of the future.  We shall see.  I hope it doesn't end up in a global economic doomsday.  I'm not ready for that yet.

[Atheon]

Can I take out a negative interest rate mortgage?

[stromboli]

Can I take out a negative interest rate mortgage?

I've thought about negative interest before.  It was in the context of the government lowering interest rates (and taxes) to spur growth.  You can apply this Keynesian economic theory to seemingly positive ends, but politicians don't quite get there.  They seem to forget that the theory calls for raising interest rates when times are good.  It seems to me that they like the part about lowering interest rates to spur growth, but want to spur growth so badly that they prefer low interest rates over high.

This sounds kind of good, except what happens when interest rates get to zero?  I started thinking about this when we came out of the Clinton era and times were going great guns; We had an excess of money in the treasury, and stocks and real state were going nuts.  I was watching George Bush as he was just about to get elected and there was a news clip of him and his economic team sitting around having some kind of economic summit, and Bush said, the first thing we have to do is lower interest rates to get the economy going again.  Of course, he was in way over his head and had not a clue, as was his underlying nature in national and international affairs (he even said it with a lack of conviction like he was just following the direction of some GOP advisor).

When interest rates go to zero, and you need a big stick to spur the economy, you've kind of already shot your wad, and nothing is left in your arsenal to ward off recession.. except to go to negative interest rates.  At that point in my ruminations, I was unable to anticipate what negative interest rates would do.  The idea was beyond me.  It sounds like nothing more than a weird experiment with possibly dire consequences.  I'm happy the Swedes are doing it, not us.  Perhaps this is the economics of the future.  We shall see.  I hope it doesn't end up in a global economic doomsday.  I'm not ready for that yet.

Same old, same old; the economy's better than it was eight years ago and the Repubs are now talking about how they are going to, uh, restart the economy. Same shit, years later.

[josephpalazzo]

Can I take out a negative interest rate mortgage?

Nope. They'll charge you on your savings account and on your mortgage - a win on both counts, not for you tho'. Tough luck.

[josephpalazzo]

When interest rates go to zero, and you need a big stick to spur the economy, you've kind of already shot your wad, and nothing is left in your arsenal to ward off recession.. except to go to negative interest rates.

Other than lowering interest rates, there are other tools the government can use to spur the economy, namely: (1) expansionary fiscal policy budget deficit, (2) cut taxes, and (3) printing more money - what government do now is increase the money supply through quantitative easing (QE), which has the same effect as printing more money.

[Baruch]

It would seem they will try all of the above ... as political fashion dictates.

https://www.youtube.com/watch?v=WI1i5yhwOz8

Look familiar?  We are going thru a slow motion version now.