The only way that negative interest rates will work in the long run is if the government gets rid of cash. If that happens, you will have no choice but to put your funds into a bank, and you’ll suffer whatever fees and charges that the government allows.
Of course, the government will then have easy access to your entire life, but that’s a feature, not a bug.
It’s been this way for a long time, as soon as the interest rate on regular accounts dropped below the inflation rate, savers get penalized.
Buy blue-chip high yield dividend stocks, from solid Canadian companies.
Not necessarily banks, although putting some there is a good idea.
Think telecom/cable stocks, good cash flow, safe, generally well run companies, despite what one might think about your monthly bill.
Keeping any money in the bank at 1%, or stuffed in your mattress, is a fool’s game
Thrift is the enemy of the bankrupt, debt-ridden nation states led by progressives with no intention of addressing that ghost of Christmas past. What better way to discourage thrift than ZIRP and now NIRP, forcing investors into riskier assets, masking the reality of stasis with a mirage of growth. Watch for and or participate in the likely move of Gold to $5000/oz and Silver to $100/oz sometime over the next 5 years (which is not so much a gain as an exchange of fiat currency for historical currency). Given that servicing debt at market-based interest rates would collapse the welfare states as we know them, this nonsense can only practically end one way – inflation.
I’ve always maintained that money as we know it today, or currency, will become obsolete. My belief is that what we now know as money should be represented or backed by something that is tangible and universally of the same value. For example, a kilowatt can be converted to horsepower, heat energy, calories, lumens etc. One gallon of automotive gasoline is equal to 36.6 kilowatt hours of energy. That in turn can be converted to 40 HP hours (theoretical.) One barrel of crude oil (USA) is 42 gallons of crude. That puts out 1700 kilowatt hours, or 5.8 million BTU. Thus if we had a unit of currency that was equal to the energy content of one kilogram of a specific grade of crude oil, many variables would be eliminated. In turn, nuclear or other sources of energy can be measured the same way.
In the 80’s I listened to a late night AM radio program from the USA when I was farming at night. They often discussed this principle. Can’t recall the name of the show.
I another life I was half way to being an economics major but the idiots expected a capability in math. I simply don’t understand what is going on in Keynesian terms.
The US has tripled its money supply and suffered minimal inflation. Was the money supply increased to combat a 2/3 deflation. We seem to be getting way poorer with virtually no quality manufacturing jobs, just a surplus of low quality service jobs that foreigners do. Are we being lied to in the extreme in the hopes that a panic will not ensue. Everyone in charge is a serial liar and I do not trust them.
People concerned with negative interest rates should first pay off debt. Then they should look at the service charges they are paying. Finally, large sums can be rolled into GICs which pay a nominal interest rate and can be cashed after 30 days with no penalty.
I’m not really sure why people have large sums of money sitting in a savings account accruing negative interest anyway.
There are very few people around with no debt and lot’s of money in their savings account.
In our last budget banks were given the right to turn you savings into common stock . That’s here in Canada . I am sure a bank in a run will have extremely valuable stock . A portion of gold may be a good insurance . But what the hell , as we like to say here , “It’s probably nothing ! ”
Negative interest rates are the last effort by central banks to continue the attempt to revive GDP growth back to 3.5 to 4%. Actual growth is less than 2%. These numbers do not support the returns required by government and financial institutions to meet pensions and social benefits. IMHO the system is imploding. The majority of this situation have happened under progressive governments.
World demographics do not support ongoing growth in most modern countries. DanBC: you seem to be doing what I do but I hold no illusions that if the ‘crap’ hits the fan governments will take whatever is needed. Savings will disappear with the stroke of a pen. I am buying gold regularly.
Thomas Piketty reminded us in “Capital in the 21st Century” that 1-2% GDP growth is the 300 year normal.
I can’t wait to renegotiate my mortgage so the bank will pay me instead of the other way around.
DaveK, here is solid support for your argument. If people hold cash, negative interest rates don’t work very well, despite the deflationary environment, particularly in currencies. OTOH their use in an inflationary environment signals economic ruination.
Everybody loses, but at least your deflating dollars aren’t deflated further by unilateral bank moves, which statists like Justin have already mentioned to cover their reckless out of control spending of taxpayers dollars:
“We’ve seen bank runs happening recently in countries like Cyprus where an insolvent banking system on the verge of financial meltdown has forced the banks to shut their doors, declaring one or several ‘bank holidays’, effectively banning depositors from withdrawing their funds. It ain’t pretty when pensioners living on a fixed income can’t get cash to buy food and other necessities.”
In the end, some of the largest depositors had to take a ‘hair cut’ in Greece, forgoing more than 47% of any savings exceeding EUR 100,000, in total loosing some EUR 4 billion. Most of these depositors where pension funds followed by private savers.”
There’s one way to prevent a bank run that is particularly effective, namely the abolitionist solution, i.e abolishing cash.” http://moneytalks.net/article-and-commentary/todays-best-money-making-ideas/personal-finance/16088-cashless-society-negative-interest-rates-and-hyperinflation-part-1.html
Money is a natural thing, not a government creation. I say invest in playing cards.
Yep. Money predates governments and banks. We can live in a state of anarchy and have no banks and we will still have money. What form it will take I don’t know. It will probably be gold, silver and copper like it has been since the beginning.
“like it has been since the beginning”
Before gold, silver, or copper, …cowry shells, salt, and even cattle were used as articles of exchange.
Do it properly: Goats, women and slaves.
Good advice. Look at Argentina to see how quickly things can go to ratshit and your accounts are frozen or confiscated. I’m debt free and carry a mix of savings, GICs and investments. My grandparents lived through the crash of ’29 and the great depression. I learned from them that a coffee can of coins buried in the backyard as part of one’s ‘portfolio’ is just being prudent. Regardless of what the global/national economy is doing, people will always need a means of exchange, so toonies will always have value even in a barter economy.
If you can afford to hang on to gold, it might pay off, but:
It costs you to keep gold, typically, but not always.
It doesn’t pay a dividend.
You can’t eat it…..
SO, its the old rule, buying some is fine, but stay diversified.
And I agree when the SHTF, gubermint will grab anything anywhere, potentially, but, as we saw in Cyprus and Greece, gubermint will take the easy way out first, and that’s to freeze bank accounts, and then only allow very limited withdrawals. Having ones assets several steps removed from easy government measures, is the first step we can all make.
Maple Leafs and Krugerrands in your pocket, admittedly, is pretty safe, so long as you don’t tell anybody.
One thing about gold, when you buy or sell it, the transaction doesn’t get reported to the government unless you are up into the $10k range. You are simply on your honor to report any taxable capital gains (or losses, as the case might be) when you file your return.
That’s for physical gold, not the paper stuff that may or may not really exist anyway.
Maple Leafs and Krugerrands in your pocket, admittedly, is pretty safe, so long as you don’t tell anybody.
So is placer gold, plus it doesn’t leave a paper trail and is easily divided for the amount you need.
i have small amount of gold but a nice amount of silver. i will be adding more smaller denominations of silver easier to do transactionswith for small items if required….but first i need acrage…get my seeds and garden….and lots of medical supplies and dental supplies.
The very best investment one can make for their future is to make good health their highest priority. You are what you eat. If you want to be healthy, then adopt the diet and lifestyle of your grandparents. Learn to cook for yourself, eat real food, not too much, mostly vegetables, and most importantly stay active. Good nutritious food is less expensive than “lots of medical supplies and dental supplies”.
as an old guy who has been retired for over 13 years I have been experiencing the effects of inflation every year. I am retired on my own dime and had what I considered sufficient cash to allow me to live comfortably into my nineties, death, or a nursing home. that cash loses about 6% of it’s purchasing power every year. government statistics are false and meaningless. I stopped investing after I took a bath in the last meltdown, I am too old to wait for a rebound. I have some silver but if the entire economic system collapses I wonder just what I would be able to buy. one could have all the silver and gold on the planet but if there is no food to buy or medical care to help you live a healthy life it is a useless commodity. I don’t know where we are heading but unless people stop expecting the government to support them we are going to go down the tubes at an increasingly rapid pace. an economy has to produce goods and not just services. we have to reduce our borrowing, not just the government but personal debt also must be reduced. Only a fool would continue driving future generations in debt to keep alive the socialist illusion.
The only way that negative interest rates will work in the long run is if the government gets rid of cash. If that happens, you will have no choice but to put your funds into a bank, and you’ll suffer whatever fees and charges that the government allows.
Of course, the government will then have easy access to your entire life, but that’s a feature, not a bug.
It’s been this way for a long time, as soon as the interest rate on regular accounts dropped below the inflation rate, savers get penalized.
Buy blue-chip high yield dividend stocks, from solid Canadian companies.
Not necessarily banks, although putting some there is a good idea.
Think telecom/cable stocks, good cash flow, safe, generally well run companies, despite what one might think about your monthly bill.
Keeping any money in the bank at 1%, or stuffed in your mattress, is a fool’s game
Thrift is the enemy of the bankrupt, debt-ridden nation states led by progressives with no intention of addressing that ghost of Christmas past. What better way to discourage thrift than ZIRP and now NIRP, forcing investors into riskier assets, masking the reality of stasis with a mirage of growth. Watch for and or participate in the likely move of Gold to $5000/oz and Silver to $100/oz sometime over the next 5 years (which is not so much a gain as an exchange of fiat currency for historical currency). Given that servicing debt at market-based interest rates would collapse the welfare states as we know them, this nonsense can only practically end one way – inflation.
I’ve always maintained that money as we know it today, or currency, will become obsolete. My belief is that what we now know as money should be represented or backed by something that is tangible and universally of the same value. For example, a kilowatt can be converted to horsepower, heat energy, calories, lumens etc. One gallon of automotive gasoline is equal to 36.6 kilowatt hours of energy. That in turn can be converted to 40 HP hours (theoretical.) One barrel of crude oil (USA) is 42 gallons of crude. That puts out 1700 kilowatt hours, or 5.8 million BTU. Thus if we had a unit of currency that was equal to the energy content of one kilogram of a specific grade of crude oil, many variables would be eliminated. In turn, nuclear or other sources of energy can be measured the same way.
In the 80’s I listened to a late night AM radio program from the USA when I was farming at night. They often discussed this principle. Can’t recall the name of the show.
I another life I was half way to being an economics major but the idiots expected a capability in math. I simply don’t understand what is going on in Keynesian terms.
The US has tripled its money supply and suffered minimal inflation. Was the money supply increased to combat a 2/3 deflation. We seem to be getting way poorer with virtually no quality manufacturing jobs, just a surplus of low quality service jobs that foreigners do. Are we being lied to in the extreme in the hopes that a panic will not ensue. Everyone in charge is a serial liar and I do not trust them.
People concerned with negative interest rates should first pay off debt. Then they should look at the service charges they are paying. Finally, large sums can be rolled into GICs which pay a nominal interest rate and can be cashed after 30 days with no penalty.
I’m not really sure why people have large sums of money sitting in a savings account accruing negative interest anyway.
There are very few people around with no debt and lot’s of money in their savings account.
In our last budget banks were given the right to turn you savings into common stock . That’s here in Canada . I am sure a bank in a run will have extremely valuable stock . A portion of gold may be a good insurance . But what the hell , as we like to say here , “It’s probably nothing ! ”
Negative interest rates are the last effort by central banks to continue the attempt to revive GDP growth back to 3.5 to 4%. Actual growth is less than 2%. These numbers do not support the returns required by government and financial institutions to meet pensions and social benefits. IMHO the system is imploding. The majority of this situation have happened under progressive governments.
World demographics do not support ongoing growth in most modern countries. DanBC: you seem to be doing what I do but I hold no illusions that if the ‘crap’ hits the fan governments will take whatever is needed. Savings will disappear with the stroke of a pen. I am buying gold regularly.
Thomas Piketty reminded us in “Capital in the 21st Century” that 1-2% GDP growth is the 300 year normal.
I can’t wait to renegotiate my mortgage so the bank will pay me instead of the other way around.
DaveK, here is solid support for your argument. If people hold cash, negative interest rates don’t work very well, despite the deflationary environment, particularly in currencies. OTOH their use in an inflationary environment signals economic ruination.
Everybody loses, but at least your deflating dollars aren’t deflated further by unilateral bank moves, which statists like Justin have already mentioned to cover their reckless out of control spending of taxpayers dollars:
“We’ve seen bank runs happening recently in countries like Cyprus where an insolvent banking system on the verge of financial meltdown has forced the banks to shut their doors, declaring one or several ‘bank holidays’, effectively banning depositors from withdrawing their funds. It ain’t pretty when pensioners living on a fixed income can’t get cash to buy food and other necessities.”
In the end, some of the largest depositors had to take a ‘hair cut’ in Greece, forgoing more than 47% of any savings exceeding EUR 100,000, in total loosing some EUR 4 billion. Most of these depositors where pension funds followed by private savers.”
There’s one way to prevent a bank run that is particularly effective, namely the abolitionist solution, i.e abolishing cash.”
http://moneytalks.net/article-and-commentary/todays-best-money-making-ideas/personal-finance/16088-cashless-society-negative-interest-rates-and-hyperinflation-part-1.html
Money is a natural thing, not a government creation. I say invest in playing cards.
Yep. Money predates governments and banks. We can live in a state of anarchy and have no banks and we will still have money. What form it will take I don’t know. It will probably be gold, silver and copper like it has been since the beginning.
“like it has been since the beginning”
Before gold, silver, or copper, …cowry shells, salt, and even cattle were used as articles of exchange.
Do it properly: Goats, women and slaves.
Good advice. Look at Argentina to see how quickly things can go to ratshit and your accounts are frozen or confiscated. I’m debt free and carry a mix of savings, GICs and investments. My grandparents lived through the crash of ’29 and the great depression. I learned from them that a coffee can of coins buried in the backyard as part of one’s ‘portfolio’ is just being prudent. Regardless of what the global/national economy is doing, people will always need a means of exchange, so toonies will always have value even in a barter economy.
If you can afford to hang on to gold, it might pay off, but:
It costs you to keep gold, typically, but not always.
It doesn’t pay a dividend.
You can’t eat it…..
SO, its the old rule, buying some is fine, but stay diversified.
And I agree when the SHTF, gubermint will grab anything anywhere, potentially, but, as we saw in Cyprus and Greece, gubermint will take the easy way out first, and that’s to freeze bank accounts, and then only allow very limited withdrawals. Having ones assets several steps removed from easy government measures, is the first step we can all make.
Maple Leafs and Krugerrands in your pocket, admittedly, is pretty safe, so long as you don’t tell anybody.
One thing about gold, when you buy or sell it, the transaction doesn’t get reported to the government unless you are up into the $10k range. You are simply on your honor to report any taxable capital gains (or losses, as the case might be) when you file your return.
That’s for physical gold, not the paper stuff that may or may not really exist anyway.
Maple Leafs and Krugerrands in your pocket, admittedly, is pretty safe, so long as you don’t tell anybody.
So is placer gold, plus it doesn’t leave a paper trail and is easily divided for the amount you need.
i have small amount of gold but a nice amount of silver. i will be adding more smaller denominations of silver easier to do transactionswith for small items if required….but first i need acrage…get my seeds and garden….and lots of medical supplies and dental supplies.
The very best investment one can make for their future is to make good health their highest priority. You are what you eat. If you want to be healthy, then adopt the diet and lifestyle of your grandparents. Learn to cook for yourself, eat real food, not too much, mostly vegetables, and most importantly stay active. Good nutritious food is less expensive than “lots of medical supplies and dental supplies”.
as an old guy who has been retired for over 13 years I have been experiencing the effects of inflation every year. I am retired on my own dime and had what I considered sufficient cash to allow me to live comfortably into my nineties, death, or a nursing home. that cash loses about 6% of it’s purchasing power every year. government statistics are false and meaningless. I stopped investing after I took a bath in the last meltdown, I am too old to wait for a rebound. I have some silver but if the entire economic system collapses I wonder just what I would be able to buy. one could have all the silver and gold on the planet but if there is no food to buy or medical care to help you live a healthy life it is a useless commodity. I don’t know where we are heading but unless people stop expecting the government to support them we are going to go down the tubes at an increasingly rapid pace. an economy has to produce goods and not just services. we have to reduce our borrowing, not just the government but personal debt also must be reduced. Only a fool would continue driving future generations in debt to keep alive the socialist illusion.