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Negative Interest Rates
Old Young or Young Old?
Posted: 26 February 2013 14:21:16(UTC)

Joined: 19/12/2011(UTC)
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Is this how desperate things are becoming?

Negative Interest Rates

The credit boom junkies are screwed and will not have money for years to “kick start” the consumer lead recovery, whatever happens to interest rates.

The small minority who live within their means and take pride it saving could be the power base for a consumer led recovery, if only we can actually generate a return from our savings. This is not going to help and could be the catalyst for increased civil tension, from the fed up, down trodden, sensible minority.
Clive B
Posted: 26 February 2013 14:32:54(UTC)

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Reads as though negative rates would apply to banks lodging their money with the BoE (central bank), in an attempt to stop them doing it but to lend money out instead.

Not sure how that affects the public. Personally, I don't have any interest bearing accounts with a bank.
Alan Selwood
Posted: 26 February 2013 16:04:45(UTC)

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Nobody has said anything so far in this thread about REAL interest rates rather than nominal interest rates. Whatever the average investor or saver thinks, it is actually better to have low interest rates but no inflation, rather than high inflation and high interest rates - if you get 10% gross interest (8% after tax, typically) but inflation is 9%, you are losing value by 1% p.a.
If you are getting 5% gross interest (say 4% net) but inflation is 3%, you are gaining ground by 1% p.a.
At the moment, we have low nominal interest rates but inflation exceeds these - the worst of all worlds?

We have been subject to negative real interest rates for several years. For as long as this applies, there is a strong incentive to move money out of cash accounts into other assets. There is no great damage in terms of lost interest in replacing cash deposits by ownership of non-interest bearing gold or silver bullion or coins, even after storage costs. For as long as we suffer negative real interest rates, gold and silver are likely to be attractive assets to hold, despite their rather high price volatility as measured by paper currency (which is currently undergoing quite a rapid slide in many countries, including the UK).
Alan Tonks
Posted: 26 February 2013 16:57:46(UTC)

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I really believe the Bank of England is stark staring mad, negative interest rates totally bonkers.
This is all about getting the stupid people out of trouble and putting the sensible people in trouble.
I can put it another way, this Government and the Bank of England only want people like themselves, thick and stupid.
5 users thanked Alan Tonks for this post.
Armand on 26/02/2013(UTC), Jimlad on 26/02/2013(UTC), Mike R on 26/02/2013(UTC), Guest on 26/02/2013(UTC), BILLFISH on 27/02/2013(UTC)
Posted: 26 February 2013 18:00:00(UTC)

Joined: 10/06/2010(UTC)
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The low interest rates do benefit the Exchequer by keeping interest on the accumulated deficit down and just about affordable. If interest rates rose then there would be no hope of a long term recovery unless we had rampant inflation or the UK defaulted (eg cutting public pensions by 25% like Ireland)
1 user thanked Jon for this post.
Clive B on 26/02/2013(UTC)
Posted: 26 February 2013 19:05:31(UTC)

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The Bank of England base rate is defined as the rate of interest it charges for secured overnight lending. So that means that you would be able to borrow money from them and have to pay less than you borrowed back the next day. So at a rate of -0.5% you could borrow £10 million from them overnight stuff it under your mattress and give them back £10 million less £136 the next day. So if you could borrow £10 million you could make £50,000 per year from it. Without having to do anything. Only problem is that the BOE don't lend to normal people.
Posted: 26 February 2013 21:06:01(UTC)

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Jon, a good idea, but then we would have a number of strikes, and MPs would never allow as they too would suffer. Mind you they have taken their pensions provision to the extreme, and need to cut back, or be cut back, radically.
Dennis .
Posted: 27 February 2013 10:34:49(UTC)

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If anyone is interested I am offering to pay a negative interest rate of 10% to anyone who sends me some money.
Alan Selwood
Posted: 27 February 2013 13:53:48(UTC)

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Don't listen to Dennis - he is not competitive!

I can provide that sort of deal for only -5% p.a.

And before several hundred readers of this forum start quoting that they will do it for -4.995%, -4.27% or whatever, I must confess that the real reason for quoting as I did was to show that someone will always look for a competitive advantage where they can. ("Can I offer a better deal and still make enough profit to make it worth my while?").

If I can get 5% p.a. for holding someone's money, and then use it before returning it, for example by putting it on overnight deposit at 1% p.a. net, my total return is 6% p.a. with insignificant risk (as long as I don't deposit more than £85,000 with each deposit-taker).

Alternatively, I could do what banks are currently doing, which is to pay 0.5% or less to depositors, then lend out their money as personal loans to those in need, who I am obviously helping by charging them only 19.9% APR ("a snip!" - even if 10% of borrowers default). In the meantime, the only other member of staff in my branch (to whom I pay the minimum wage when they moonlight for me as a cleaner in the evenings) changes currencies for customers at rates which mean that I keep around 10% of every transaction. (I'm not sure I shall be able to give up this source of income to work as an M.P., despite the salary, expenses and pension scheme, so I'll stick with the day job, taking a cut wherever I can, while proclaiming that my salary and bonuses are set competitively by my pal that I met in the pub, and I can assure the public that even though I keep him in beer, he is totally impartial in this matter).

Now tell me that the above is just surreal babble .......!
2 users thanked Alan Selwood for this post.
BILLFISH on 27/02/2013(UTC), BOB 2 on 28/02/2013(UTC)
Conrad Parker
Posted: 06 March 2013 08:46:45(UTC)

Joined: 06/03/2013(UTC)
Posts: 3

Interest rate is always a matter having a negative one seem many want and don't want.Me i always care how many is the interest rate when taking a loan and other money in bank.In Finland country there are lot of people who use to lend money in fact some of them are really having difficulties for managing their money that's why some of them use get help on some accounting firms at to have a nice financial management.
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