This article talks about how Deutsche Skatbank plans to
apply a negative interest rates to some deposits in Germany. However, this only
applies to balances of over €500,000 ($625,000) in instant-access accounts, of
which there cannot be very many. Surprisingly, it is not the first time that German
banks have applied negative interest rates. This means some banks require
businesses to pay to make deposits in banks. For the first time, personal
accounts have received such treatment. Presumably the bank hopes to nudge
savers into other longer-term, less liquid or higher-return investments, which
it can make some money by selling.
The European Central Bank has been hoping to encourage
banks to lend by charging them a negative interest rate on the excess deposits
they stash with it. However, being slightly skeptical, the Germans have accused
the ECB of postponing an inevitable reckoning for past mistakes with its
interest-rate policy. Relations between the ECB and the Bundesbank, Germany’s
traditionally hawkish central bank, are not so well now.
The ECB's intention is to encourage savers to switch to riskier assets, spurring productive investment, which does not really seem to be working. Germans have responded to low rates by saving less. Private investment has plunged in recent years, mirroring the German state's own under-investment. This has increasingly been recognized by the Germans as a national problem.
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ReplyDeleteI also read this article. I think that the most interesting part of the situation is that while this would essentially be the most ideal time for Germans purchase investments, they refuse to do so. Consumer confidence has obviously been hindered in the German market. I believe this can be related to Keynes' "Animal Spirits".
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