What happens when governments fiddle with the economy

Further to TAFKAS’ earlier post this morning, here is an interesting story:

A Danish bank is offering mortgages at a 0.5% negative interest rate — meaning it is basically paying people to borrow money

No.  That’s not a typo:

Jyske Bank, Denmark’s third-largest bank, said this week that customers would now be able to take out a 10-year fixed-rate mortgage with an interest rate of -0.5%.

To put the -0.5% rate in simple terms: If you bought a house for $US1 million and paid off your mortgage in full in 10 years, you would pay the bank back only $US995,000.

Slap on (perhaps) a 2.5% bank margin meaning that Jyske Bank is getting its funds at perhaps -3%.

No saver in their right mind would deposit funds in a bank for -3%; they would rather keep their money under their bed.  One can only imagine from where Jyske Bank is sourcing its funds from.

Perhaps Denmark has technocrats managing their monetary and fiscal policies.

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16 Responses to What happens when governments fiddle with the economy

  1. Bruce of Newcastle

    You can’t keep money under your bed when cash is no longer in use.
    Hence the recent interest in abolishing cash.
    It’s no wonder the US$100 bill is so popular internationally.

    $100 bill surpasses $1 bill in circulation for first time in U.S. history (31 July)

    July 31 (UPI) — For the first time in U.S. history, $100 bills surpassed $1 bills in circulation volume, according to an International Money Fund report.

    The report states that the $100 bill officially overtook the $1 bill in circulation in 2017 and the number of $100 bills in circulation has doubled since the onset of the global financial crisis more than a decade ago, according to Federal Reserve data.

    How weird that the GFC was when ‘bailing in’ was first employed, and when interest rates started to go negative. “Safe as a bank” is not as safe as a mattress when governments steal depositors dosh to bail out the bank.

  2. Tim Neilson

    Paying people to get heavily into debt – what could possibly go wrong?

  3. Ƶĩppʯ (ȊꞪꞨV)

    demographics has nothing to do with the economy….

  4. Delta

    Hence the recent interest in abolishing cash. You’re right Bruce: Exposure draft legislation for an economy-wide cash payment limit of $10,000.

    Which then results in customers with bank accounts exposed to bailing out (really bailing in) the banks for negative interest rates. At some point, customers would be required forced to pay the banks for keeping their money, ak a bail in. And on that topic, the CEC has a view on the matter. Is it valid?

  5. It’s no wonder the US$100 bill is so popular internationally.

    It may be popular, but when a government removes cash as legal tender those $100 bills become worthless.

  6. Pyrmonter

    If the supply of funds is plentiful, and demand low, why would you not expect to see negative interest rates?

  7. Dr Fred Lenin

    Buy shares in Chinese companies? RareTulip bulbs? Put your money in a Chinese bank?
    Oh Hell they have really stuffed everything up havent they. ?

  8. Dr Fred Lenin

    If governments abolish cash how are politicians and public servants going to be paid bribes ? How are political gangs ( parties ) going to get donations ( bribes) from lobbyists? ,whats ggoing to happen to the mafia? How will the black economy work without cash ? . Those are the huge industries that will be affected by this move ,cant see them tolerating it ,taking the feed out of the trough will be lifechanginng and extremely unpopular ,politicians could lose their careers through this move . We cant have that , Centrelink full of mendicant politicians .

  9. Tim Neilson

    If governments abolish cash how are politicians and public servants going to be paid bribes ? How are political gangs ( parties ) going to get donations ( bribes) from lobbyists? ,

    Highly paid “consultancies” Dr Fred.

    Just imagine, purely hypothetically, that a political family in a foreign country had a huge “foundation”. A hypothetical Australian Prime Minister might in theory make massive donations of Australian taxpayers’ money to that “foundation” and then after leaving politics get appointed to a position with the foundation which was very well paid but which had no discernible duties.

  10. Pyrmonter

    @ Tim – You’ve overlooked defo settlements: concluded in full sight of the public

  11. Dr Fred Lenin

    Tim point taken but cash is hard to trace ,bribery by other means is traceabl and attracts ATO attention ,the Tealeaf giliard /clinton crimefoundation lurk wont work for every criminal pollie or publc servant . Jealous will be rife in the elite gang .

  12. Perth Trader

    In a cashless society precious metals will become even more precious .

  13. Depends on how the Government plays with it, a virtuoso?
    The unanswerable question of economics is what should be run by governments, and what shouldn’t. Some say that the government’s only role is to protect people’s property and freedom, providing the space for voluntary transactions between countless individuals to happen. Others say that’s not enough; when we say ‘the market’, we really just mean society, and society is full of inequalities and injustices (racism, sexism, xenophobia) that won’t be corrected without some sort of top-down policy intervention.

    There’s no right answer; each of us has got to work out what we think based on our own values and experiences.

  14. Entropy

    The Barnaby Bank is lending up to $5 million to a special class of businesses* first two years’ interest and repayment free.

    * northern Australian primary producers

  15. John A

    Pyrmonter #3129314, posted on August 12, 2019, at 11:58 am

    If the supply of funds is plentiful, and demand low, why would you not expect to see negative interest rates?

    They come from the same place that brought us the idea of quantitative easing to boost demand in order to fix the deficiency represented by a sagging economy.

    That is, based on the terrifying assumption that it is the government’s job to solve “the problem of recessions.”

    Invented by an Englishman with a tripartite name…

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