

Sweden Cuts Deposit Rate to Negative 0.25% - gasull
http://globaleconomicanalysis.blogspot.com/2009/07/sweden-cuts-deposit-rate-to-negative-25.html

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Yrlec
The negative rate only applies for banks which store their money overnight at
the Swedish Central bank (Riksbanken). The interest rate at peoples' bank
accounts is stil positive. They do this to force the banks to lend the money
they lend from the Riksbank, and not just keep it (to reduce the bank's
liquidity risk).

It's stil very low though. Too low if you ask me, solving an economic crisis
through inflation is just the same thing as forcing everyone to lower their
salaries, but people don't understand that so it's easier to get away with it.

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pj
The same thing will happen in the United States. It's only a matter of time.
It has been talked about plenty of times. It's interesting to see Sweden is
actually being a leader in the financial markets.

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anigbrowl
I agree. I look forward to seeing how this is reported in the _Economist_
which for several years insisted as a matter of fact that negative interest
rates were impossible (I suspect this represented the view of one particularly
dogmatic editor).

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Confusion
Much depends on the exact phrasing. Offering negative interest rates on
consumer accounts is ludicrous to the point of rendering it impossible. For a
national bank, nah, not so much.

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johnwatson11218
Actually I remember a few years ago reading an article that said that the
Federal Reserve was studying the feasibility of embedding RFID tags into paper
currency. Doing so would allow the banks to know how long a particular note
had been out of the banking system and stuffed in a mattress. Then a penalty
could be assessed when the note was redeposited. The article said that such a
system could allow banks to pay negative interest rates but still be less of a
penalty than the penalty for hording cash. As I recall the article said that a
$100 bill would be worth about $10 less every month that it was kept out of
the banking system – just as an example of how it could work.

This is a different article that talks about the same idea in Japan
[http://business.timesonline.co.uk/tol/business/economics/art...](http://business.timesonline.co.uk/tol/business/economics/article6531299.ece)

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brown
This is a really interesting follow up to a great Atlantic article I saw a
couple weeks ago:

<http://www.theatlantic.com/doc/200907/ideas-tax>

The general concept is that the only thing that should be taxed is behavior we
don't want, which is unproductive assets. We should encourage people to work,
so income tax is bad. We should encourage commerce, so sales tax is bad. We
should encourage people to accumulate wealth, so basic property tax is bad.
BUT, we should discourage unproductive assets, so we should tax them.

A negative deposit rate is essentially a tax on unproductive assets. Maybe
this is the way of the future.

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johnnybgoode
> unproductive assets

You mean savings? As in, we should discourage the key to long-term prosperity?

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Eliezer
You're confusing savings (holding debts that someone else supposedly must pay,
in this case, central bank debt) with investment.

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johnnybgoode
No, I'm not. Savings precede investment.

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wlievens
Yeah, you save up a good chunk of money before even starting to think about
buying a house (through a mortgage).

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forinti
I guess now is a good time to be a burglar, as people will be stuffing money
into their mattresses.

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tomjen
Not really, as inflation is properly damaging more than this negative
interest.

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systems
to fight inflation you raise interest rates, so that citizens spend less and
save more.

by cutting interesting rates they are encouraging spending, and increasing
inflation!

they can of course just move their saving elsewhere (another country) where
rates are better! Which is what I would do, at least in the short term!

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jacquesm
yes, like Iceland. Oh, wait...

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tybris
Sweden's lost decade?

