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UK banks given six months to prepare for negative interest rates

theguardian.com

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Re: UK banks given six months to prepare for negative interest rates

#71

Post by GekkePrutser »

orange_joe wrote: post #23
unyttigfjelltol wrote: post #17

If chartered banks charge for ... holding cash ... don't people next create a new industry of unchartered financial institutions to hold money without charging so much? Like, safe deposit? Or insurance? This seems like an ivory tower exercise that has not yet met the messy realities of the world.

My understanding is that Dutch banks already have negative interest rates. They charge a negative interest to large account holders (over 1M euros) and a minimal positive rate for less wealthy clients. In reality I suspect that few end up in the 1M+ category since you can spread your money and keep the rest invested in the stock market or T-Bills if you really want security.

It's above 250.000 now..

I don't have that much but mind you, even at a slight positive rate (like 0.1%) you're already losing money every year due to inflation!

It's really ridiculous.. My confidence in the banking system is super low. I feel like they're just screwing us with the ECB's blessing (who initiated the low interests).

Re: UK banks given six months to prepare for negative interest rates

#72

Post by mnw21cam »

andrepd wrote: post #55
onion2k wrote: post #42

Earlier quoted context omitted.

At the current rate of vaccinations, 1.5m a week, with people needing 2 shots (750,000 people a week), it'll take approximately a year to get to 90% of the adult population vaccinated with 2 shots: 50m adults * 0.9 / 750,000 = 60 weeks (I've knocked off 8 weeks because vaccinations have already started). The idea that people will be back out spending again in the summer is ... ambitious.

You do not need 90% of the population vaccinated in order to live life again. As soon as you've protected the high-risk demographic and all that's left are the under 50s or under 40s for whom the CFR is 0.3% or 0.1%, you can pretty much go back to normal. The zero-risk mentality is silly.

I disagree.

If the R0 number is somewhere around 3 (and I think this is perhaps a rather conservative estimate), then you should expect the R number to approach near R0 again if we lift all the lockdown restrictions. If R is around 3 with nobody vaccinated, then the virus will grow if fewer than 2 in 3 people have antibodies (something like 90%+ of those who are vaccinated and an unknown proportion of those who have had the disease). If we declare the high risk demographic safe because they have all been vaccinated, and therefore we can go back to licking each others' eyeballs, then you would expect the entire population to become infected in a matter of a few months.

0.3% of the entire population is more people than have died in the UK so far from the virus.

But more importantly, a much greater proportion of people will require medical help, and then survive, when infected. If you allow the virus to run rampant, then you will end up with the health service overwhelmed with people who need help. Those poor health service workers need a break. If we overwhelmed them, then we might discover just what proportion of infected people die without medical intervention.

To stop the virus growing in the population, we need at least 2 in 3 people to have antibodies. In order for that to happen, we need to have about 75% of people vaccinated, in order to account for the small proportion of people who won't develop effective antibodies after vaccination. We can only lift all the restrictions once that has happened. That is the point at which the herd immunity prevents the virus from growing, and protects the unvaccinated.

Re: UK banks given six months to prepare for negative interest rates

#73

Post by notahacker »

mrsuprawsm wrote: post #47
notahacker wrote: post #31

Earlier quoted context omitted.

The bank isn't going to pay anyone interest to take out a loan, still less a loan for MAXINT. It still has to cover repayment defaults and make a profit. But changing the base rate from 0.1% to -0.5% incentivises the banking system to loan to consumers and businesses at lower rates

You say that, but this is already happening in some places: https://www.theguardian.com/money/2019/aug/13/danish-bank-la...

Interesting, but as there are other charges involved the negative interest rate is a marketing ploy. The examples given on Jyske bank's website involve repaying more than disbursed https://www.jyskebank.dk/bolig/nyheder/realkredit-med-negati...

Re: UK banks given six months to prepare for negative interest rates

#74

Post by mcv »

websites222 wrote: post #26
1experience wrote: post #15

Can anyone counter my impression that we are witnessing in the Western world the exact same course of events that happened in Japan in the 1990s? (low growth, high debt, ageing population, low interest rates, rising of average P/E ratios). Am I wrong to expect that corporate valuations in Europe and the U.S. will not appreciate in the coming decades as they have in past decades? Edit: Yes, the U.S. and Europe are ind…

Europe yes. US, no. The US is in an amazing position in terms of demography and growth. Aging population, but not immigrant averse like Japan and not an island. The US borders a rising economy with perfect demographics for growth (Mexico). The US is the least involved country in global trade. The US is increasingly disinterested in being the world police, so that capability can be deployed to protect economic interes…

Why Europe yes but US no? Europe is also not immigrant-averse and not an island. It doesn't border on Mexico, but it does border on many other countries.

I don't see why Europe would suffer a much different fate from the US.

I think the main thing holding the EU back is their love for austerity. They could do a lot more to invest in their economy.

Re: UK banks given six months to prepare for negative interest rates

#76

Post by unicornfinder »

frockington1 wrote: post #50
GordonS wrote: post #46

Earlier quoted context omitted.

> not immigrant averse like Japan and not an island As the past 4 years have demonstrated, there is a very large segment of the US population is very much against immigration, and would happily turn the country into an "island" by building walls around the land borders.

Compared to other nations, the US has the least restrictive immigration laws. The US also benefits by bordering Canada with some of the most restrictive immigration laws. If you want to go where there is growth, there's no other option

Surely you jest? The UK, Canada, Australia are all far easier to immigrate into as a skilled worker.

Re: UK banks given six months to prepare for negative interest rates

#77

Post by emptysongglass »

sschueller wrote: post #45
unyttigfjelltol wrote: post #17

If chartered banks charge for ... holding cash ... don't people next create a new industry of unchartered financial institutions to hold money without charging so much? Like, safe deposit? Or insurance? This seems like an ivory tower exercise that has not yet met the messy realities of the world.

Switzerland and Denmark already have negative interest rates higher than Japan [1]. In Switzerland is will start to affect you if you have more than ~250k in the bank. [1] https://en.wikipedia.org/wiki/List_of_countries_by_central_b...

And that's why my money's in crypto and not a Danish bank.

Re: UK banks given six months to prepare for negative interest rates

#78

Post by tjs8rj »

websites222 wrote: post #49
GordonS wrote: post #46

Earlier quoted context omitted.

> not immigrant averse like Japan and not an island As the past 4 years have demonstrated, there is a very large segment of the US population is very much against immigration, and would happily turn the country into an "island" by building walls around the land borders.

The last four years can’t really be compared to the last 2000 of Japan’s. Immigration is already ingrained in American culture. The aging boomers will die and be replaced by the most ethnically diverse generation in American history.

It's disingenuous to cast immigration concerns like an "aging boomer thing". The vast majority of Americans are fine with vetted, legal immigration. According to Pew, nearly 80% worry about illegal immigration "At least a little" to "A great deal". Furthermore there are real concerns, costs, and benefits to be weighed with immigration of all kind (legal and not), and dismissing them is just naive.

To list a few different people find concerning: depressing wages of domestic population, rapid cultural change of domestic population, brain drain from foreign population, strain on tax / social systems, ineffective vetting allowing cross-border contraband and criminal activity, and so on.

All of these are valid and deserve scrutiny and investigation. Obviously there are many beneficial aspects to immigration, and nearly all examples of very successful civilizations in history were at a crossroads of many cultures. Just wanted to make it clear that the immigration debate won't "die with boomers", and it shouldn't, because it is an important discussion to have.

Re: UK banks given six months to prepare for negative interest rates

#79

Post by onion2k »

andrepd wrote: post #55
onion2k wrote: post #42

Earlier quoted context omitted.

At the current rate of vaccinations, 1.5m a week, with people needing 2 shots (750,000 people a week), it'll take approximately a year to get to 90% of the adult population vaccinated with 2 shots: 50m adults * 0.9 / 750,000 = 60 weeks (I've knocked off 8 weeks because vaccinations have already started). The idea that people will be back out spending again in the summer is ... ambitious.

You do not need 90% of the population vaccinated in order to live life again. As soon as you've protected the high-risk demographic and all that's left are the under 50s or under 40s for whom the CFR is 0.3% or 0.1%, you can pretty much go back to normal. The zero-risk mentality is silly.

90% vaccinated isn't zero risk. People will still get the virus. 90% is the upper bound on the level necessary to stop the viral spread increasing again (70% to 90% according to literally every source I've ever seen). You can choose to accept the lower bound instead if you want to, but using the upper bound instead just makes me a bit more cautious rather than 'silly'.

Re: UK banks given six months to prepare for negative interest rates

#80

Post by Analemma_ »

mrsuprawsm wrote: post #47
notahacker wrote: post #31

Earlier quoted context omitted.

The bank isn't going to pay anyone interest to take out a loan, still less a loan for MAXINT. It still has to cover repayment defaults and make a profit. But changing the base rate from 0.1% to -0.5% incentivises the banking system to loan to consumers and businesses at lower rates

You say that, but this is already happening in some places: https://www.theguardian.com/money/2019/aug/13/danish-bank-la...

There was an HN discussion about this where several Danes mentioned that these loans still come with assorted fees and taxes which effectively amount to a low, but still positive, interest rate.
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