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Sweden Cuts Deposit Rate To Negative .25%

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http://globaleconomicanalysis.blogspot.com/

"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, Sweeden's central bank cut the deposit rate to -0.25% effectively charging savers interest on deposited money."

Wow, crazy.

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looking forward to next weeks headline...."swedish banks collapse...everyone took their money own rather than help line the pockets of the thieving b**t**ds" :lol:

Edited by TheCountOfNowhere

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http://globaleconomicanalysis.blogspot.com/

"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, Sweeden's central bank cut the deposit rate to -0.25% effectively charging savers interest on deposited money."

Wow, crazy.

Wow, crazy?

Wow, what a load of horsesh*t!

Negative 0.25% my ar5e. It's positive 0.25% down from positive 0.50%, but hey, lets not let facts get in the way of a good story :rolleyes:

http://www.thelocal.se/20414/20090702/

In a move that surprised many analysts, Sweden’s central bank has slashed its benchmark interest rate from 0.5 to 0.25 percent.

In deciding to lower the rate once again, the Riksbank cited “very weak†economic activity abroad that has “hit Sweden hardâ€.

“Exports have fallen substantially and the situation on the labour market is continuing to deteriorate rapidly,†the bank said in a statement explaining the rate cut.

The Riksbank added that the economic downturn of 2009 has been “somewhat deeper†than what the bank had forecast back in April.

The bank’s decision to opt for further monetary policy expansion caught analysts unawares, with many believing that Sweden’s interest rate would remain unchanged.

“It’s surprising that the Riksbank did it again, especially when you considering the somewhat better figures that have come in,†said Henrik Mitelman, chief analyst with the SEB bank, to the TT news agency.

“The message to households and companies is that they can count on rates remaining more or less at zero for at least a year.â€

While the Riksbank acknowledged there were signs of economic improvement, it argued that a lower interest rate, combined with Sweden’s current fiscal policy, would accelerate the nascent recovery.

The bank forecast positive GDP growth by 2010, but expected Sweden’s labour market to lag, with employment not likely to grow until 2011.

Edited by BROF

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But people are lazy with their money and will wait to see what happens.

This is just dipping a toe in the water. Shift the decimal point to the right, and then we'll enjoy a collapse in deposits.

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looking forward to next weeks headline...."swedish banks collapse...everyone took their money own rather than help line the pockets of the thieving b**t**ds" :lol:

If they try this shit in the UK, that's ******ing it!

MoneyMattress%20iStock_000001554884Small.jpg

Edited by MOP

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Wow, crazy?

Wow, what a load of horsesh*t!

Negative 0.25% my ****. It's positive 0.25% down from positive 0.50%, but hey, facts get in the way of a good story huh!

You missed this part of the report (final paragraph - that's where the good stuff always hides):

The deposit rate is at the same time cut to -0.25 per cent and the lending rate to 0.75 per cent.

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Wow, what a load of horsesh*t!

Negative 0.25% my ar5e. It's positive 0.25% down from positive 0.50%, but hey, lets not let facts get in the way of a good story :rolleyes:

http://www.thelocal.se/20414/20090702/

Actually you're wrong BROF. The OPs link shows that repo rate is +0.25%, the deposit rate -0.25%, and is backed up by a further link to the what appears to be the Swedish central bank website confirming this.

Now I don't know what a repo rate nor a deposit rate is. However the OP's claim that the deposit rate is -0.25% is correct.

Edited by Selling up

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Actually you're wrong BROF. The OPs link shows that repo rate is +0.25%, the deposit rate -0.25%, and is backed up by a further link to the what appears to be the Swedish central bank website confirming this.

Now I don't know what a repo rate nor a deposit rate is. However it seems the OP has his facts correct.

ok. fair enough. apologies for not noticing the difference

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To be fair I got the info from Mish's site. I imagine it is correct therefore.

it is. apologies for being so sharp.

http://globaleconomicanalysis.blogspot.com/

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.

anyone care to shed some light on the implications of this?

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top rate taxpayers in sweden pay almost 60%... i wonder if savers will be able to deduct the losses they make as a result of holding their money in savings accounts from their total tax liability?

Edited by the flying pig

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Is this retail deposits or commercial, if so they are saying to the banks to stop holding cash and get it out there.

commercial i assume

top rate taxpayers in sweden pay almost 60%... i wonder if savers will be able to deduct the losses they make as a result of holding their money in savings accounts from their total tax liability?

yes, i think this is the case.

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The Riksbank's deposit rate isn't a retail rate. It's a rate that's on offer to any bank which has a reserves surplus and wishes to deposit those reserves at the central bank. Similarly those banks which have a reserves shortfall can borrow from the central bank at the lending rate.

These two rates create a symmetric corridor around the key policy rate (which in Sweden is the repo rate). Under normal conditions (and today is anything but normal) most banks won't use these facilities because they can do better by loaning/borrowing in the interbank market.

I'm not sure how big a deal this is. It depends on the level of excess reserves in the system, and if that excess is very high then I can imagine the law of unintended consequences coming in to play.

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top rate taxpayers in sweden pay almost 60%... i wonder if savers will be able to deduct the losses they make as a result of holding their money in savings accounts from their total tax liability?

As against 55% in the UK, rising to 65% next year (with a 75% band at £100k).

At least swedes get serious services and infrastructure for their high taxes.

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http://www.forbes.com/feeds/afx/2009/07/02/afx6611590.html

FRANKFURT, July 2 (Reuters) - Commercial banks' overnight deposits at the European Central Bank rose to a new 5-1/2 month high, data showed on Thursday, as banks hoarded much of last week's near-half trillion euro injection of ECB 12-month funds.

Banks deposited 257.071 billion euros ($362.6 billion) overnight at the ECB on July 1, the highest since mid-January, and above the 252.067 billion reported on Wednesday.

Article Controls

They also borrowed 277 million from the ECB's overnight window, down from 443 million euros previously.

Banks are flush with cash at the moment after the ECB poured 442 billion euros in 12-month funds into money markets last week. Outstanding liquidity operations are now at 835 billion .

Anyone got a graph of overnight deposit totals when all the banks feared each other.

Edit:

Had to make my own from http://www.ecb.int/stats/monetary/res/html/index.en.html

depeur.gif

Can't get used to losing you no matter what I try to do. Gonna live my whole life through; loving you.

Cos no one else can take your place; guess that I am just hopeless case.

Can't Get Used To Losing You , Andy Williams

Edited by Tom Peters

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Maybe preparation for a Latvian devalution?

'Is Latvia the new Argentina?':

http://www.voxeu.org/index.php?q=node/3683

The Swedish Riksbank, by arguing that the spillover on Swedish banks would be the same regardless of whether the devaluation is internal or nominal, is recognising the latter as a real possibility,...

[...snip...]

... [Latvia] shares the losses with Sweden -- a fitting epilogue to a crisis that was in part rooted in reckless lending by foreign banks.

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it is. apologies for being so sharp.

http://globaleconomicanalysis.blogspot.com/

anyone care to shed some light on the implications of this?

Isn't this most worrying?

As Mish states, it seems we have to hope for a currency collapse in Sweden which by itself would trigger a worlwide crisis of unknown proportions; Sweden is no Iceland. I have a nagging feeling this is actually what the Swedes are hoping for, as part of the ongoing worlwide currency wars we are currently witnessing.

The alternative is that Sweden survives this test and then other, bigger CBs follow suit. This could quite realistically result in a most devastating flight to assets and destruction of wealth through currency debasement. We ain't seen nothing yet on that front.

Damn. I'm hoping there will be more feedback and analysis on this.

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As against 55% in the UK, rising to 65% next year (with a 75% band at £100k).

At least swedes get serious services and infrastructure for their high taxes.

+1

My cousin lives there. I visited him last year and his wife informed me on the systems they have in place - she works for the UK equivalent DSS there.

A country that actually values people and isn't run like this slave shop we call GB.

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Isn't this most worrying?

As Mish states, it seems we have to hope for a currency collapse in Sweden which by itself would trigger a worlwide crisis of unknown proportions; Sweden is no Iceland. I have a nagging feeling this is actually what the Swedes are hoping for, as part of the ongoing worlwide currency wars we are currently witnessing.

The alternative is that Sweden survives this test and then other, bigger CBs follow suit. This could quite realistically result in a most devastating flight to assets and destruction of wealth through currency debasement. We ain't seen nothing yet on that front.

Damn. I'm hoping there will be more feedback and analysis on this.

I'm having trouble getting my head round this also.

So commercial deposit rates are negative 0.25% i,e for banks depositing cash in the central bank.

What is the effect, if any, on retail deposits accounts?

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Oh for goodness sake chaps.

Firstly, I'm not sure the OP is about personal accounts. But as the thread now is about that, I'll add the following:

Whilst I don't agree with near ZIRP policies, there is little real world difference between +.25% and -.25% on deposits.

The fact is, we accept rubbish interest rates on deposit accounts because although the bank gets to use our money, we actually put a real economic value on the belief that our money is safer in the bank than under the mattress (not to mention more convenient). I think it is quite possible that burglaries are about to rise, so perhaps we are willing to pay a bit more for perceived security. In a near ZIRP environment, it is not unreasonable for the cost of safe storage to rise above the investment potential of one's bank deposits.

In the real world, zero percent is not a sharp peak with cliffs on either side, but just another nominal point on a line.

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