German banks are hoarding so many euros they need more vaults • Hacker News Board

Re: German banks are hoarding so many euros they need more vaults

#71

Post by muthas » Mon, Feb 03, 2020, 5:40 PM UTC

OscarCunningham wrote: post #43

Can someone explain to me why central banks find it so hard to create inflation? It seems to me that the difficult direction should be convincing people that your currency is worth something. Making your currency lose value should be easy, shouldn't it? If Google wanted to tank their share price they would have no problems.

I heard an interesting podcast a little while back that conjectured the typical way to get inflation going (so-called "helicopter money" to the spending population) is far and away the least predictable way to do things. Specifically, the speaker argued that compared to large banks and investing entities, people might do things like pay off debt or save the cash for a rainy day... neither of which are inflationary.

That isn't to say that handing out wads of cash wouldn't eventually lead to inflation, but that the systemic lag and second-/third-order effects might make the process so unpredictable that by the time inflation begins to tick up, the central bank would have no way to provide effective control.

Re: German banks are hoarding so many euros they need more vaults

#72

Post by notahacker » Mon, Feb 03, 2020, 5:40 PM UTC

OscarCunningham wrote: post #43

Can someone explain to me why central banks find it so hard to create inflation? It seems to me that the difficult direction should be convincing people that your currency is worth something. Making your currency lose value should be easy, shouldn't it? If Google wanted to tank their share price they would have no problems.

It's not difficult to create inflation, if that's your objective, though it's not quite as simple as increasing the money supply by a fixed percentage and is obviously politically difficult.

It's much more difficult to create economic growth by persuading banks to lend more.

Re: German banks are hoarding so many euros they need more vaults

#73

Post by yorwba » Mon, Feb 03, 2020, 5:40 PM UTC

Despegar wrote: post #26

aazaa wrote: post #23

Earlier quoted context omitted.

> ... when the German Saver is who would benefit if they decided tomorrow to run deficits for the next 10 years. The German Saver knows better than most that inflation destroys savings. Inflation benefits debtors by allowing them to pay back their loans in depreciated currency. Germany isn't exactly a nation of debtors, although most of Europe is. This is a looming political issue that's only just beginning.

>The German Saver knows better than most that inflation destroys savings. Yeah this is not the outcome Germany or the EU needs to worry about. It's experiencing Japanese deflation for 20 years. >This is a looming political issue that's only just beginning. Yes there's been plenty of hard money cranks that have said this for 10 years since the Great Financial Crisis in the US. Zero Hedge, gold bugs, hedge fund manager…

> It's experiencing Japanese deflation for 20 years.

GDP per capita (PPP) in Japan has more than doubled over the past 30 years. https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locat...

Slow growth is only a problem if you rely on investing to generate your income. Otherwise, even no growth at all is fine.

Re: German banks are hoarding so many euros they need more vaults

#74

Post by Analemma_ » Mon, Feb 03, 2020, 5:40 PM UTC

OscarCunningham wrote: post #43

Can someone explain to me why central banks find it so hard to create inflation? It seems to me that the difficult direction should be convincing people that your currency is worth something. Making your currency lose value should be easy, shouldn't it? If Google wanted to tank their share price they would have no problems.

Inflation isn't just about money supply (no matter what certain people on the internet tell you), it's about money velocity. If the central bank prints a hundred billion dollars but it immediately gets stashed in vaults or under people's beds or in international tax havens, it might as well not exist and there's no inflation. The "pushing rope" metaphor for inability to create inflation is a good one.

Re: German banks are hoarding so many euros they need more vaults

#75

Post by goodcanadian » Mon, Feb 03, 2020, 5:40 PM UTC

rwmj wrote: post #44

njarboe wrote: post #2

This problem has probably been exacerbated by the fact the the $500 euro note has not been issued since 27 April 2019[1]. I wonder if making storing euros in cash 2.5 times harder (500 versus 200 euro notes) was part of the reason the 500 euro was retired. [Edit] The legal storing of cash. The stated reason was the criminal use of cash. [1] https://en.wikipedia.org/wiki/500_euro_note

If this was an actual problem, couldn't the ECB issue (eg) €1 million bearer bonds to the banks that have to store cash (these notes wouldn't need to go into general circulation). In fact, why don't they do that?

The short answer is that they don't want to make it easy for banks to hold cash; they want the banks to loan the money out (ideally) or deposit it with the European Central Bank where they will have to pay for the privilege in the form of negative interest rates (which is what the banks are trying to avoid by holding the cash).

Re: German banks are hoarding so many euros they need more vaults

#76

Post by dontbenebby » Mon, Feb 03, 2020, 5:41 PM UTC

OscarCunningham wrote: post #43

Can someone explain to me why central banks find it so hard to create inflation? It seems to me that the difficult direction should be convincing people that your currency is worth something. Making your currency lose value should be easy, shouldn't it? If Google wanted to tank their share price they would have no problems.

Well in Germany's case they believe the economic conditions (inflation) were a cause of Hitler's rise to power, and are understandably extremely skittish about triggering similar conditions

https://en.wikipedia.org/wiki/Hyperinflation#Germany_(Weimar...

Re: German banks are hoarding so many euros they need more vaults

#77

Post by growlist » Mon, Feb 03, 2020, 5:41 PM UTC

Despegar wrote: post #59

bilekas wrote: post #35

Earlier quoted context omitted.

I really hate this idea that everyone needs to just constantly be spending. It's useful but there is nothing wrong with having a slow stable fincal conscious ecconomy.

And I really hate the moralizing as if the national economy needs to be run like a household budget.

I think the moralizing is useful if it means future generations aren't going to pay the price for today's profligacy.

Re: German banks are hoarding so many euros they need more vaults

#78

Post by mrsun » Mon, Feb 03, 2020, 5:42 PM UTC

brokensegue wrote: post #37

mrsun wrote: post #17

Earlier quoted context omitted.

banks don't care but the cash owners do. If you have 10.000 euros in cash and buy gold (in order to save space in the vault) the transaction will be registered. The government gets all details (name, date, amount etc). Instead if you put the 10.000 euros directly in the vault nothing will be tracked.

you seem confused, did you read the article? I don't know about German laws but if you deposit $10k in a US bank you are definitely tracked and not anonymous. Also, no "cash owner" would buy gold to save vault space. The incentives don't make sense.

One of the main points is mentioned in the article:

> Germans were already well known for their love of physical money and data privacy.

I think the most important point here is privacy. If you deposit $10k into a bank account, of course you are tracked. But if you put the $10k into a bank vault you are not tracked.

> Also, no "cash owner" would buy gold to save vault space.

Saving vault space is only one of the reasons. Gold is more stable than cash.

Re: German banks are hoarding so many euros they need more vaults

#79

Post by muthas » Mon, Feb 03, 2020, 5:43 PM UTC

mullen wrote: post #56

OscarCunningham wrote: post #43

Can someone explain to me why central banks find it so hard to create inflation? It seems to me that the difficult direction should be convincing people that your currency is worth something. Making your currency lose value should be easy, shouldn't it? If Google wanted to tank their share price they would have no problems.

Inflation can spiral out of control and be very difficult to control if it does. It's a tiger that you don't want to let out of the cage.

I don't know if I'd agree its something you can't make useful, but trying to use inflation as a means of macroeconomic policy - rather than an indicator of the success/health of the overall economy - seems utterly dangerous.

Re: German banks are hoarding so many euros they need more vaults

#80

Post by jotm » Mon, Feb 03, 2020, 5:43 PM UTC

Why in the world does Germany not have a decent VC/investment industry? Seems like some companies and people are loaded with cash but they'd rather keep it in a bank than risk it on a new startup. You're not going to get many innovative startups doing that...