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Negative Interest Rates And What Would You Do With Your Stash?

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http://uk.biz.yahoo.com/12082009/325/bank-...s-reserves.html

Mervyn King has not ruled out negative interest rates. We've had a year of contemptuous attitudes towards savers. Apparently we're buggering up the economy by keeping any money in the bank. Doing our patriotic duty we should, if possible, spend it on property. If not, it's better p***ed all up the wall in the wider economy than in our bank accounts.

I'm looking for a better solution than a safe (though haven't ruled it out entirely), please put forward your suggestions.

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Guest DissipatedYouthIsValuable
http://uk.biz.yahoo.com/12082009/325/bank-...s-reserves.html

Mervyn King has not ruled out negative interest rates. We've had a year of contemptuous attitudes towards savers. Apparently we're buggering up the economy by keeping any money in the bank. Doing our patriotic duty we should, if possible, spend it on property. If not, it's better p***ed all up the wall in the wider economy than in our bank accounts.

I'm looking for a better solution than a safe (though haven't ruled it out entirely), please put forward your suggestions.

Interest rates have been negative for a long time.

Do you mean they're planning to ditch the facade and make them nominally negative too?

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imagine the pages of posts of the small amount of people on BoE trackers+.25%....look, they are paying ME to have mortgage.

Hell.

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Interest rates have been negative for a long time.

Do you mean they're planning to ditch the facade and make them nominally negative too?

banks would still be offering 3% they need the cash!

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"However, money supply figures have been slow to respond and policymakers are concerned that banks may simply be parking the extra money with the central bank rather than lending it on to households and businesses."

now, maybe I am cynical, but I am sure if I rang my bank today, they could tell me EXACTLY what funds I had parked with them...not MAY HAVE

and this article is NOT about negative interest rates, its about money from banks on deposit at the BoE. they would try to encourage them to lend it out....I think they will put it into the stock market, indeed, I beleive they already have, what with their high frequency trading making so much, why would they not?

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http://uk.biz.yahoo.com/12082009/325/bank-...s-reserves.html

Mervyn King has not ruled out negative interest rates. We've had a year of contemptuous attitudes towards savers. Apparently we're buggering up the economy by keeping any money in the bank. Doing our patriotic duty we should, if possible, spend it on property. If not, it's better p***ed all up the wall in the wider economy than in our bank accounts.

I'm looking for a better solution than a safe (though haven't ruled it out entirely), please put forward your suggestions.

I would suggest a broad spread of investment grade corporate and sovereign bonds in $, Eur and £, some inflation linked

You might be able to eke out 5% on that lot if done via ETFs by having more in corporate bonds and less in sovereigns/index linked

Mind you, Vanguard's aggregate global bond fund (which is mainly sovereigns) only pays 3.5% after charges...

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Guest Daddy Bear
There are three methods for eliminating the zero lower bound on nominal interest rates

They are:

(1) abolishing currency (which would also be a useful crime-fighting measure)

(2) paying negative interest on currency by taxing currency

(3) decoupling the numéraire from the currency/medium of exchange/means of payment and introducing an exchange rate between the numéraire and the currency which can be set to achieve a forward discount (expected depreciation) of the currency vis-a-vis the numéraire when the nominal interest rate in terms of the numéraire is set at a negative level for monetary policy purposes.

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http://uk.biz.yahoo.com/12082009/325/bank-...s-reserves.html

Mervyn King has not ruled out negative interest rates. We've had a year of contemptuous attitudes towards savers. Apparently we're buggering up the economy by keeping any money in the bank. Doing our patriotic duty we should, if possible, spend it on property. If not, it's better p***ed all up the wall in the wider economy than in our bank accounts.

I'm looking for a better solution than a safe (though haven't ruled it out entirely), please put forward your suggestions.

This is all about the reserves held by the banks with the Bank of England. Merv pointed out that the Banks have no choice about the amount of those reserves but can decide in what assets those reserves are held. The point about negative interest rates is that the BoE could announce that there will be a negative interest rate on cash reserves held with the BoE. This should hopefully persuade banks to convert that cash into other assets thereby putting that cash into the wider system. This does not mean that Bank Rate is going to go negative.

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This is all about the reserves held by the banks with the Bank of England. Merv pointed out that the Banks have no choice about the amount of those reserves but can decide in what assets those reserves are held. The point about negative interest rates is that the BoE could announce that there will be a negative interest rate on cash reserves held with the BoE. This should hopefully persuade banks to convert that cash into other assets thereby putting that cash into the wider system. This does not mean that Bank Rate is going to go negative.

Nice in theory, but the banks may decide to take the cut rather than lose it all.

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It would be comical! The old idea of money making more money would be out the window. In nominal terms you simply make money by owing money - the more you owe, the more you earn. The system would be raped by people borrowing absurd numbers, pocketing the interest and running.

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I would borrow 100 billion on live off the interest that I payed for having taken the loan.

If the bank would not lend, I would lend to myself at base rate. If you have a company have it lend you a billion which you pay back each month. This would allow you transfer all the cash to yourself without paying any corporation tax.

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Best Instant Access Accounts at the moment are Alliance and Leicester 3.15% and Coventry BS 3.30%. Far cry from last October Alliance and Leicester 6.6% and Tescos 6.5%. :( Brown is truly an Oil Tanker of epic proportions.

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