Denmark's Jyske Bank lowers its negative rates on deposits • Hacker News Board

Re: Denmark's Jyske Bank lowers its negative rates on deposits

#21

Post by throwaway1777 » Sat, Sep 21, 2019, 1:15 PM UTC

paulpauper wrote: post #12

sword_smith wrote: post #4

When people borrow money for a house, they only consider the monthly payments for the mortgage and not the absolute amount of money they are borrowing. This means that low interest rates are the main reason behind surging house prices and is why people have to spend decades paying back loans and being vulnerable to a drop in house prices. It creates too much debt in society and generally makes the economy more fragil…

>When people borrow money for a house, they only consider the monthly payments for the mortgage and not the absolute amount of money they are borrowing. That is how borrowing works. Otherwise the lender would not make a profit. >It creates too much debt in society and generally makes the economy more fragile than it has to be. and yet the post-2009 economic expansion is the longest ever, and this is in spite of all t…

Whether the period since 2008 has been a true expansion is arguable. On the surface level equity prices increased, yet there hasn’t been much if any inflation or wage growth and yields have gone down for most assets.

Re: Denmark's Jyske Bank lowers its negative rates on deposits

#22

Post by gridlockd » Sat, Sep 21, 2019, 1:16 PM UTC

Soon enough we may find out that too much is invested into the expectation that interest rates will go down indefinitely.

When inflation finally strikes, there will be no tools left to fight it. Getting deeply into debt and buying as many assets as you can would then be the right thing to do.

Obviously, this is not financial advice.

Re: Denmark's Jyske Bank lowers its negative rates on deposits

#23

Post by bboygravity » Sat, Sep 21, 2019, 1:16 PM UTC

samsonradu wrote: post #19

bboygravity wrote: post #17

Earlier quoted context omitted.

IMO this is the end game. Scenario 1: If interest rates go up significantly this would bankrupt entire nations such as Italy, France and Greece (again) + runaway deflation. Conclusion: interest rates cannot and will not go up. This would be political suicide. Also deflation is the number 1 enemy of central banks and the economy in general. Scenario 2: Lowering interest rates causes rich people, businesses and governm…

You kind of described Japan’s economy.

Japan's a known potential model of the future of the European economy as they're demographically about 15 years ahead of Europe.

Would make sense to some extend.

Re: Denmark's Jyske Bank lowers its negative rates on deposits

#24

Post by firebacon » Sat, Sep 21, 2019, 1:18 PM UTC

sword_smith wrote: post #15

viburnum wrote: post #7

Earlier quoted context omitted.

Could just build more houses, though.

Yes. But the high house prices feed through to higher land prices so the newly built houses will also be more expensive than they otherwise would have been.

In most places, except the obvious exceptions, the government can also create new land for construction.

Re: Denmark's Jyske Bank lowers its negative rates on deposits

#25

Post by esotericn » Sat, Sep 21, 2019, 1:20 PM UTC

parasight wrote: post #6

sword_smith wrote: post #4

When people borrow money for a house, they only consider the monthly payments for the mortgage and not the absolute amount of money they are borrowing. This means that low interest rates are the main reason behind surging house prices and is why people have to spend decades paying back loans and being vulnerable to a drop in house prices. It creates too much debt in society and generally makes the economy more fragil…

Honest question: how should people seeking to enter the market behave in such a situation?

I honestly don't know what the answer is.

I've resorted to moving way out. I'm probably going to buy a house somewhere I can work remote from.

I'm not paying 300K+ for a small home near a city with jobs, sorry, it's just not happening. Whether I can afford it or not is irrelevant, the value just isn't there other than as a proxy for "this now allows me to get higher paying jobs in the city and... continue the cycle?"

I think this is something that really needs to be addressed from a climate perspective as well.

It is cheaper, dramatically so, for me to live way out, buy a car, and use it for everything. I use an electric car, and I chuck a load of the savings into offsetting, and I'm pretty sure I'm negative.

But a far better model would be if people just stopped the rent seeking bullshit and let me build close to town.

Re: Denmark's Jyske Bank lowers its negative rates on deposits

#26

Post by nabla9 » Sat, Sep 21, 2019, 1:20 PM UTC

roenxi wrote: post #5

On the one hand this sounds eminently stupid. On the other hand, it means there is some sort of de-linking of money and time. Negative interest rates roughly imply that Denmark crowns have no ability to preserve wealth over time. If anyone gets paid in crowns they should attempt to spend them immediately and buy something durable. It is hard to see how this is an improvement over letting money hold value over time. N…

You get it it backwards. Denmark is facing deflation, not inflation.

Inflation in Denmark august 2019 - july 2019 was -0.39%. That is, the value of money is increasing.

Re: Denmark's Jyske Bank lowers its negative rates on deposits

#27

Post by [deleted] » Sat, Sep 21, 2019, 1:21 PM UTC

bboygravity wrote: post #17

sword_smith wrote: post #4

When people borrow money for a house, they only consider the monthly payments for the mortgage and not the absolute amount of money they are borrowing. This means that low interest rates are the main reason behind surging house prices and is why people have to spend decades paying back loans and being vulnerable to a drop in house prices. It creates too much debt in society and generally makes the economy more fragil…

IMO this is the end game. Scenario 1: If interest rates go up significantly this would bankrupt entire nations such as Italy, France and Greece (again) + runaway deflation. Conclusion: interest rates cannot and will not go up. This would be political suicide. Also deflation is the number 1 enemy of central banks and the economy in general. Scenario 2: Lowering interest rates causes rich people, businesses and governm…

[deleted]

Re: Denmark's Jyske Bank lowers its negative rates on deposits

#28

Post by toxik » Sat, Sep 21, 2019, 1:26 PM UTC

lawn wrote: post #3

> In August, Jyske became the first to offer a negative rate on a home loan, in effect paying customers 0.5% to borrow money for 10 years. Surely this can't end well? Here in Sweden the house prices are so high in cities it's almost impossible for young people to get a house, sometimes even an apartment. We've been waiting for the housing bubble to pop a while, but how long must we wait? The longer we do the worse it…

Call me cynical but I believe that this will not happen since the people in power are going to get hurt by such a correction. They will try their damned best to prevent it happening. The Swedish central bank (Riksbanken) has also stated as much, and the current policy is very much based on this.

Re: Denmark's Jyske Bank lowers its negative rates on deposits

#29

Post by gridlockd » Sat, Sep 21, 2019, 1:26 PM UTC

paulpauper wrote: post #12

sword_smith wrote: post #4

When people borrow money for a house, they only consider the monthly payments for the mortgage and not the absolute amount of money they are borrowing. This means that low interest rates are the main reason behind surging house prices and is why people have to spend decades paying back loans and being vulnerable to a drop in house prices. It creates too much debt in society and generally makes the economy more fragil…

>When people borrow money for a house, they only consider the monthly payments for the mortgage and not the absolute amount of money they are borrowing. That is how borrowing works. Otherwise the lender would not make a profit. >It creates too much debt in society and generally makes the economy more fragile than it has to be. and yet the post-2009 economic expansion is the longest ever, and this is in spite of all t…

> and yet the post-2009 economic expansion is the longest ever, and this is in spite of all the anxieties over tariffs and trade wards and the fed raising rates.

The economic expansion outside in the Eurozone is already over and that's despite interests rates going lower and lower. The Fed is done raising rates and it's exactly because the markets absolutely tanked in 2018 with the prospect of rising interest rates.

> There are tons of examples on Reddit of people in their 20s and 30s with homes and investments.

Why don't you look at a statistic instead of Reddit?

> Rather than a wealth transfer ,which suggests a zero sum game, more wealth is being created. Low rates makes it easier to get a mortgage and compound wealth by owning a home.

Rising prices do not equal an increase in wealth. If you pay double the price for the same home at a low interest rate, that's still a huge markup. If the prices fall, you will lose big time. The expectation is that prices can't fall because interest rates will not be allowed to rise. However, CPI inflation can still catch up to asset price inflation, it just hasn't happened yet.

Re: Denmark's Jyske Bank lowers its negative rates on deposits

#30

Post by roenxi » Sat, Sep 21, 2019, 1:27 PM UTC

nabla9 wrote: post #26

roenxi wrote: post #5

On the one hand this sounds eminently stupid. On the other hand, it means there is some sort of de-linking of money and time. Negative interest rates roughly imply that Denmark crowns have no ability to preserve wealth over time. If anyone gets paid in crowns they should attempt to spend them immediately and buy something durable. It is hard to see how this is an improvement over letting money hold value over time. N…

You get it it backwards. Denmark is facing deflation, not inflation. Inflation in Denmark august 2019 - july 2019 was -0.39%. That is, the value of money is increasing.

https://tradingeconomics.com/denmark/inflation-cpi says 0.5% inflation with steady increase in the money supply ( https://tradingeconomics.com/denmark/money-supply-m2 ). Do you have a better source?