Swiss central banker talking about negative interest rates - it's that bad out there

EU is run by bond holders. The EU tanked many of their member's economies with harsh austerity measures in order to protect the idiot bond holders who freely tossed money into government debt. Now, they still need to prop up the bond markets because the economic recovery has been at best flat in most countries and non-existent in others. The EU should have skipped austerity and forced bond holders to take a full loss after the crash.

I feel I should clear some things up around here.

1) The ECB instituted negative interest rates months ago. Denmark did it a few years ago.

2) The EU is not the same thing as the euro area. The ECB is the central bank for the 18 countries of the euro area. The 10 countries that are in the EU but not the euro area have their own central banks.

3) Switzerland is in neither the EU nor the euro area. It has it's own central bank.

I will also add that the experience of negative interest rates in Europe has been really minor. Inflation has continued to fall.

And if I recall correctly, Switzerland has had to peg its currency against the euro. So they do not have control over their monetary policy.

krispy kremlin wrote:

...I've said for a while that US depositors have been facing near negative effective rates considering fees and paltry interest for years but an explicit negative rate would be ridiculous.

Aren't you the guy recently complaining on these Boards about the Fed's balance sheet and the implicit runaway inflation that's just around the corner? Yet your immediate concerns are now focused on implicit negative interest rates. Have you considered that your understanding of economics may not be quite sound?

gasser wrote:

krispy kremlin wrote:

...I've said for a while that US depositors have been facing near negative effective rates considering fees and paltry interest for years but an explicit negative rate would be ridiculous.

Aren't you the guy recently complaining on these Boards about the Fed's balance sheet and the implicit runaway inflation that's just around the corner? Yet your immediate concerns are now focused on implicit negative interest rates. Have you considered that your understanding of economics may not be quite sound?

You're thinking about someone else. Most of my concerns are about ridiculous monetary policy that push incentives and subsequent decisions out of alignment with prudent, robust economic society. Negative interest would explicit CRUSH savers more than the past decade of near zero-interest rates. We are suppose to save - why are central bankers hell-bent on dis incentivizing this behaviour?

TCB wrote:

I will also add that the experience of negative interest rates in Europe has been really minor. Inflation has continued to fall.

And if I recall correctly, Switzerland has had to peg its currency against the euro. So they do not have control over their monetary policy.

Switzerland's exonomy is doinf fine.

Itvoluntarily pegged the CHF against the Euro when it got sick of the constant strengthening of the Chf. It went from 1.60 to the euro to virtually 1:1.

The ECB wasnt happy.

Otherwise, you are pretty much spot on.

krispy kremlin wrote:

gasser wrote:

Aren't you the guy recently complaining on these Boards about the Fed's balance sheet and the implicit runaway inflation that's just around the corner? Yet your immediate concerns are now focused on implicit negative interest rates. Have you considered that your understanding of economics may not be quite sound?

You're thinking about someone else. Most of my concerns are about ridiculous monetary policy that push incentives and subsequent decisions out of alignment with prudent, robust economic society. Negative interest would explicit CRUSH savers more than the past decade of near zero-interest rates. We are suppose to save - why are central bankers hell-bent on dis incentivizing this behaviour?

You as a retail customer are indeed supposed to save.

The banks and corporations, on the other hand, are supposed to invest in something other than gov't notes/central bank deposit accounts. The negative rates are just a means to encourage such investment.

I'm not sure why you think that this is "out of alignment with prudent, robust economic society." It is pretty standard stuff from any Macro 101 class.

If rates are negative, then the risk of losing capital via lending must be huge.

There has previously been negative interest rates for retail bank customers in Switzerland.

Switzerland has no minimum wage, free markets, and some of the lowest taxes amongst OECD countries. When will the USA and the rest of Europe catch up?

TCB wrote:

I feel I should clear some things up around here.

1) The ECB instituted negative interest rates months ago. Denmark did it a few years ago.

2) The EU is not the same thing as the euro area. The ECB is the central bank for the 18 countries of the euro area. The 10 countries that are in the EU but not the euro area have their own central banks.

3) Switzerland is in neither the EU nor the euro area. It has it's own central bank.

I will also add that the experience of negative interest rates in Europe has been really minor. Inflation has continued to fall.

And if I recall correctly, Switzerland has had to peg its currency against the euro. So they do not have control over their monetary policy.

+1

krispy kremlin wrote:

According to the wsj. It would apply to bank's deposits but who's to say it won't trickle down to retail depositors? I've said for a while that US depositors have been facing near negative effective rates considering fees and paltry interest for years but an explicit negative rate would be ridiculous.

Good thing the US is in better shape than the EU and we'd never consider negative rates, right?

fyi, the swiss have had negative rates before. wake up.