ECB (European Central Bank) cuts rates to BELOW zero

[Sturtles]

Banks and women are the same, if they show you zero or negative interest rate, it means they do not want your liquid assets deposited in them.

Nice analogy, and I understand the latter... But why would the banks not want money? How can they give loans if they have no money?

 

A negative interest rate bank can cease operating due to the enormous outflow of money, and everyone would want their money out ASAP to put in minimum bonds and whatnots. Like CPF and Temasek, they do not have all their assets in liquid state..

 

I say, it just looks like accelerated bank run to me, forcing traditional banks to close and encouraging speculative ones, as savings are now pumped into funds that provides middleman commissions and more risky returns at low percentage rates

[Throttle2]

Nice analogy, and I understand the latter... But why would the banks not want money? How can they give loans if they have no money?

 

A negative interest rate bank can cease operating due to the enormous outflow of money, and everyone would want their money out ASAP to put in minimum bonds and whatnots. Like CPF and Temasek, they do not have all their assets in liquid state..

 

I say, it just looks like accelerated bank run to me, forcing traditional banks to close and encouraging speculative ones, as savings are now pumped into funds that provides middleman commissions and more risky returns at low percentage rates

I think you guys all understood it wrong.

 

Negative rates here means that the central bank no longer pays the commercial banks anything for holding cash with it. In fact, it charges. In other words, this is to spur lending and debt creation. Scary if it goes on for too long, once one thinks about it.

 

However, commercial banks still pay an interest to depositors who keep their money with them.

 

There isnt a bank run of any sorts here lah.

 

Hope that clarifies what this negative interest rates is all about.

[Wt_know]

means commercial banks have to "anyhow" lend ... push money out and making a lot of cheap money for so call businesses to expand or do business ... cheap credit is like oil to fire

Edited June 8, 2014 by Wt_know

[Joseph22]

I thought this is normal in oversea bank??? Heard of this in my schooling years Leh.

[Windwaver]

Can tell me what would the impact be.

 

Still clueless

 

Money always flow in different directions depending now what is doing well.

 

When interest rates are high, people want to put money in banks; This is the opposite.

[Jamesc]

I thought this is normal in oversea bank??? Heard of this in my schooling years Leh.

 

Really? Which oversea bank?

 

I would like to take a loan from this bank and get paid interest on my loan.

 

 

Money always flow in different directions depending now what is doing well.

 

When interest rates are high, people want to put money in banks; This is the opposite.

 

Yes money always flow in different directions.

 

Except in my direction.

 

[Windwaver]

 

Really? Which oversea bank?

 

I would like to take a loan from this bank and get paid interest on my loan.

 

 

Yes money always flow in different directions.

 

Except in my direction.

 

 

lol, as long as it's enough for basic life to go on, there's no need for more money.

[Jajoba123]

will the european bank stocks goes up, seems like lending business will go up?