WTF!? – ECB Considering Negative Deposit Rates

Bloomberg is reporting that the ECB is considering negative deposit rates to get banks lending & to stave off deflation.

The key reasons quoted being

1. Get Banks Lending

2. Stop deflation

The world’s banking elite has officially gone completely mental.

Let me explain.

Banks/the ECB/Bloomberg for some unknown reason think that if you deter people from putting money in the bank the banks will be more likely to lend money

Lend money they don’t have because they have deterred people from depositing money

Where exactly do the banks/ECB/Bloomberg think banks are going to get their money???

Moving to the second reason

Negative deposit rates to stave off deflation.

I have written extensively on why deflation is essential to the development of the human race here and here.

Show me someone who wants inflation and I will show you someone who has lent a ton of money to a party that cannot pay back the principle or service the debt and who wants said party to inflict pain on the population in general in order to get that debt serviced.

And that, in a nutshell, is why the central bankers and mainstream media have gone completely bat sh**.

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4 thoughts on “WTF!? – ECB Considering Negative Deposit Rates

  1. And as a footnote, if banks don’t have any money on deposit and if the only money banks have to lend comes from loans which are being repaid where is the inflation they want going to come from?

    There is only one place that I can see.

    Governments getting even further into debt.

    Unless of course the ECB is lying and they want deflation in which case deterring bank deposits is a good thing.

    But their biggest customer, government, will be forced to default if there is deflation.

    They don’t want this, so they have to indebt governments more which means higher taxes for everyone.

    There is pain coming, the question is will the pain build solid foundations for the future, ie deflation and government defaults or will the pain be complete slavery through total taxation?

  2. John,
    Aren’t the ECB referring to actually reducing the amount the EU’s banks receive when they deposit their excess liquidity (often borrowed from the ECB itself in the first place) at the ECB?
    I think this is what they are talking about rather than charging individual depositors for keeping money with the commercial banks.
    I have noted this ambiguity in article headlines several times recently but on further reading gathered that the commercial banks are to be encouraged to lend to the real economy rather than squirrel liquidity away at the ECB. That’s the theory anyway.
    By the way i’m a recent subscriber and I enjoy your stuff.

    1. Hello Nick. You are quite right. I could not find anything in writing from Bloomberg or any video about what they were talking about on the TV yesterday but I did find this from November http://www.bloomberg.com/news/2013-11-20/ecb-said-to-consider-mini-deposit-rate-cut-if-more-easing-needed.html.

      It never occurred to me that banks would be depositing money with the ECB at what looks to be 0% when they can be putting the money in European government debt which is also back stopped by the ECB. http://www.ecb.europa.eu/stats/monetary/rates/html/index.en.html

      And surely if lending to people and businesses was what they believed was profitable they would be doing it already. Is a 0.1% change negative really going to be the difference between lending the money or putting it with the ECB? And if banks are satisfied with a 0% return now which is guaranteed by the ECB, why would they not move to the next best ECB backed investment which is European government debt as I mentioned above.

      However all the central bank interest rates are connected so you can imagine the interest Joe Public gets is also going to be affected.

      And in addition to this I see a concerted effort to turn people off depositing money in banks, an example from today http://www.zerohedge.com/news/2014-02-12/europe-considers-wholesale-savings-confiscation-enforced-redistribution

      In summary your point raises a big question.
      Why would banks be parking money at the ECB at 0% when there are other ECB backed investments that have a much higher return.

      And do they believe a 0.1% change is really going to have any effect. And I do mean any effect.

      1. John,

        Amazing and deeply concerning.

        So lets see, after the crisis, at the expense of the broader economy, europe’s TBTF banks were saved but to what purpose?
        They can’t/ wont lend.
        Ironically at some point continued low growth rates will probably finish them off anyway.
        Unless, as per the American banks, their new business model is to morph into vast hedge funds.

        Lets not pretend that any important initiatives in the US or EU since 2008 were about the broad economy rather than being all about the banks. ZIRP, QE and the catastrophe in Greece show that this policy of saving the banks at the expense of the rest of us continues.

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