Thursday, July 2, 2009

Could we see negative IR in the UK?

Sweden Cuts Deposit Rate to NEGATIVE .25%

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.

Posted by quiet guy @ 11:19 PM (1743 views)
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16 thoughts on “Could we see negative IR in the UK?

  • 6 banks have failed so far today in the USA.

    Forgive the off-topicness.

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  • After 10 years of nationalised banking Sweden has come up with negative rate in order to make people go out and buy: eventually gold because Sweden will come with another idea soon: Spend your Swedish krona within a month or the kronas will have expired.

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  • Today, Riksbank, Sweeden’s central bank cut the deposit rate to -0.25% effectively charging savers interest on deposited money

    Why would any bank say, “We don’t want your money”?

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  • Today, Riksbank, Sweeden’s central bank cut the deposit rate to -0.25% effectively charging savers interest on deposited money

    Why would a bank say “We don’t want your money”?

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  • little professor says:

    The central bank doesn’t want your money – it wants you to spend it to stimulate the economy

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  • “it wants you to spend it to stimulate the economy”

    That might work if your money is deposited in a central bank.

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  • gone-to-colombia says:

    A kind of legal theft

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  • “A kind of legal theft”

    Yeah, a bit like taxes really.

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  • gone-to-colombia says:

    Yes, but a new departure in the art of removing cash from the innocent to pay for the witless and culpable behaviour of the guilty.
    Attempted in other circumstances and there would be riots in the streets.

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  • “removing cash from the innocent to pay for the witless and culpable behaviour of the guilty”

    Do you mean…

    “removing cash from the plebeians to pay for the witless and culpable behaviour of the financiers”?

    Confusing, isn’t it?

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  • @mander
    The idea of your bank notes expiring at the end of the month was proposed by Silvio Gesell and put into operation successfully in Worgl
    and Swanenkirchen in the Austrian Tyrol in the 30’s.Reputable economist Irving Fisher backed the idea in the US where voluntary associations issued “Stamp scrip” as it was called.Not as daft as it looks: it does n’t increase the quantity of money,just speeds up the velocity of existing money.Mind you Gesell believed you should also nationalise all land values otherwise his” freed money” would just put up land values and property prices.Keynes who was bowled over by Gesell’s monetary reforms could n’t see any point in Gesell’s ideas about land which he described as of secondary interest and derived from Henry George.

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  • refusetobuy says:

    This stops Sweden’s banks depositing money at the central bank, so they have to put it elsewhere, like into the economy.
    Normal people are unaffected.

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  • I will give any swedish investor %0.20 if they invest their money in my bank “bank of mark”

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  • Theemperorhasnoclothes says:

    mark …

    careful now! … is your “bank of mark” keeping the money in Krona or in £ sterling?

    If the latter you could be paying them back more tha %0.2 !!

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  • Total rubish; Mish is stirring.

    Sweden’s central bank’s bank repo rate is at 0.25%, not -0.25%.

    The real rate is most likely negative due to inflation, but that is a mute point, since a negative real rate will certainly encourage investment, which is what the real economy needs in a recession ( another way is by state spending as seen elsewhere ) – it’s no good everyone hoarding all their cash, therefore when this starts happening there needs to be incentive to invest, which in turn should create jobs ( “should”, since this also depends upon other things such as regulatory or tax arbitrage, which may distort the market and encourage inefficient allocation of capital, which may not create jobs. )

    Oh and if anywhere has any clue about cleaning up after a banking crisis it is Sweden!

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