Punish Savers
It’s getting totally ridiculous now.
There has been a lot of ludicrous recommendations recently to combat deflation by making deposit rates negative. I did not think any central bank would be dumb enough to try it. I thought wrong.
Today, Riksbank, Sweden’s central bank cut the deposit rate to -0.25% effectively charging savers interest on deposited money.
—
Punishing Savers
The global economy is in a mess because of the lack of savings not because of an excess of it. People spent money they did not have, pushing asset prices to ridiculous levels. Banks, in belief that asset prices would keep rising exponentially, increased leverage. Now consumers everywhere are retrenching in the wake of the collapse, a much needed phenomenon.
In light of the above, punishing savers with negative deposit rates is the height of stupidity.
It would be fitting if there was an immediate run on deposits. And if that happens what will Sweden do? Halt deposits? Sweden risks (and deserves) a currency collapse and bank runs for this insane effort. Look for capital flight in Sweden.
We should all be rooting for the demise of Sweden lest Bernanke or some other Central Bank clowns try the same thing. The risk is that Sweden does not immediately suffer for this stupidity and that Bernanke tries to do the same thing.
One thing is certain. This is eventually going to blow sky high. Let’s hope it does before Bernanke gets the same brilliant idea.
3 Comments »
RSS feed for comments on this post.
Leave a comment
Line and paragraph breaks automatic, e-mail address never displayed, HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>
I can’t see leaving my money in the bank. Of course, if their system is run like the social security and welfare system here, it could be a problem–you have to have auto deposit for most government programs these days. That means that those using it would have to go get their money out every month (or however often they are paid.) There are likely numerous employers these days that can’t handle anything but direct deposit as well.
No matter the hassles I’d be there to get my money out. No point in giving away another percentage for…the luxury of NOTHING in return.
I think credit cards are going to end up with fewer uses as well. Stores don’t want to pay the 3 percent or so. People have been getting ripped off with high interest rates for years. They couldn’t afford it then and they can’t afford it now. It’s quite possible we’ll be seeing discounts for using cash show up again. As it is, it’s harder to get credit cards these day. The industry is cutting off various body parts and leaving them by the wayside.
Comment by Maria — 7/3/2009 @ 10:43 am
Gold Gold Gold! Can’t get away w/ negative interest rates on it, and it is easily portable and exchangeable to stable currencies, like the Real. I find this simply ludicrous that a central bank would actually go negative on their interest rates. Ridiculously ludicrous. And I’m appalled by the thought that any central bank is that naive and childish to think that a negative interest rate is viable, tangible, or desirable.
Comment by Andrew — 7/4/2009 @ 1:16 am
Gold is fine, but a little hard to use to buy groceries. It also tends to flux in value so as an everyday currency it does have limitations.
that said. yeah. Negative interest rates is stunningly stupid.
Comment by Maria — 7/4/2009 @ 9:46 am