Negative Intertest Rates Are Here

[LongBlade]

J.P. Morgan Chase & Co. is preparing to charge large institutional customers for some deposits, citing new rules that make holding money for the clients too costly, according to a memo reviewed by The Wall Street Journal and people familiar with the plan.

The largest U.S. bank by assets is aiming to reduce the affected deposits by billions of dollars, with a focus on bringing the number down this year, these people said. The move is the latest in a series of steps large global banks have been discussing in recent months to discourage certain deposits due to new regulations and low interest rates.

source: https://secure.marketwatch.com/story/jp-morgan-to-start-charging-big-clients-fees-on-some-deposits-2015-02-24

[airboy]

This has been happening abroad (Japan especially) for years.  It came to Europe a while back.  Now it is in the USA.

The Central Banks are both punishing savers and preventing even more massive government deficits via positive real interest rates.

[Bison]

Some how this is going to screw me over.

[LongBlade]

Some how this is going to screw me over.

It suggests bad news. The crystal ball, however, isn't clear on which one yet.

Negative interest rates mean you are penalized for saving. In other words, you're being encouraged to spend. Problem there is that it's unnatural - the market isn't going that direction. Can the government intervention turn things around so people spend more? Who knows?

*IF* the policy succeeds and we start spending like Star in a strip club then what? It's possible to spend too much. With all the printing of excess money going on - on a global basis...every country is doing it - then we get too much money.

In other words, we either descend into a deflationary spiral - otherwise known as a depression - or we spend too much and get major inflation.

Of course the worst of all worlds is possible. The late 1970s proved that stagflation could actually happen.

The bottom line is that the financial future is not rosy.

[Bison]

So....I am screwed.  I need a shower now.

[GDS_Starfury]

for the record, I havent spent a dime in a strip club in about 6 years.

[Airborne Rifles]

Been paying with nickels, eh?

[mirth]

And he wonders why strippers drive cars into his house.  ::)

[jomni]

It's for big clients. This is due to some regulator imposed liquidity  measure (LCR).  Unless you're one of them, the regular joe will still earn interest since it is the preferred type of deposit in LCR and banks will fight for your money.

Also rates are headed up.

[JasonPratt]

Also, the negative interest rates won't affect things like the federal treasury pinging money into existence, nor the much more active reserve deposit lending codes of banks.

Will negative interest rates encourage large holders to spend the money they have? Certainly. Will spending money they have, result in banks inventing more money in the pool? Not in the least, unless they spend money beyond their operational budget and so need to borrow capital; and even then that doesn't add money to the pool unless banks invent the capital rather than loaning out existent capital.

[Barthheart]