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

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

#71

Post by detritus » Sat, Sep 21, 2019, 3:05 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…

> 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'll be.

As someone who moved to London far too long ago and has expected some miraculous drop in house prices every time the economy catches a sniffle - stop waiting. It'll never happen. I mean, it may do, but to all practical degrees, house prices will creep upwards forever.

There's no 'right time' to get on the ladder, other than when you can actually afford.

Now all I hope is that I get out of London before I get too bitter about not having simply bit the bullet a decade or so ago.

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

#72

Post by pmontra » Sat, Sep 21, 2019, 3:06 PM UTC

Aren't negative interest rates equivalent to inflation? Both lower the value of savings.

2% inflation and 1% interest rate on savings is the same as 0% inflation and -1% interest rate.

Even getting a -1% mortgage creates inflation, because who sells houses can ask somewhat higher prices and buyers will be able to pay them.

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

#73

Post by WillPostForFood » Sat, Sep 21, 2019, 3:07 PM UTC

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…

> people have to spend decades paying back loans and being vulnerable to a drop in house prices

So what if your housing price drops? If you are in for the long term, just ride it out. The risk in a long term loan isn't fluctuating prices, it is income stability. People don't lose homes because their home value drops, they lose them because they lose their jobs and can't afford to make payments.

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

#74

Post by tom_mellior » Sat, Sep 21, 2019, 3:09 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…

> Also deflation is the number 1 enemy of central banks and the economy in general.

I've always thought this was a weird claim, put this simply. Consumer electronics and computers have been deflationary for ever: You can always get a better TV, phone, or computer for less money if you are willing to wait for a year. Yet people can't stop buying them. Because they want them enough. Deflation should only hurt businesses producing stuff that customers aren't really interested in.

> businesses that can't go bankrupt (because you can't miss interest payments if there's no interest)

I would expect that on business loans you don't just pay interest, you are also expected to regularly pay back actual fractions of the principal. But I admit that I don't know how this works.

> The poor can't get significant credit so they are forced to finance the "stuff" that the rich own by renting it from them.

I've never understood this angle either. Buying stuff doesn't make stuff appear out of thin air. Buying stuff means buying stuff from the people who already have it, which for valuable things like housing is already the rich. The difference between buying an apartment and renting it is whether I give the rich person 30 years' worth of rent right now in a lump some or slowly over time. I don't see how I "win" against the rich person by giving them my money earlier.

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

#75

Post by JamisonM » Sat, Sep 21, 2019, 3:12 PM UTC

dev_dull wrote: post #60

JamisonM wrote: post #48

It strikes me that with an absurdly low debt-to-gdp ratio of 34% and negative interest rates maybe the Danish government should invest more money in their economy. Maybe leverage the market to build the enormous amount of green infrastructure they and the world needs, the returns don't need to be that high to pay off.

Denmark has high oil and gas reserves, which partly is why their debt-to-gdp is so low. Why would they benefit in green energy infrastructure?

Because they identified the transition to green energy (grøn omstilling) as a strategic national goal almost 40 years ago and the policy is very popular. They can benefit from export revenue or make the moral choice to leave their reserves in the ground.

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

#76

Post by oblio » Sat, Sep 21, 2019, 3:16 PM UTC

Yetanfou wrote: post #52

bboygravity wrote: post #23

Earlier quoted context omitted.

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.

Japan has close to zero immigration where Europe has a large migration from countries with a much higher birth rate. For Japan this implies that their population will shrink while staying ethnically homogeneous while the European population is likely to increase and diversify. Europe will see more ethno-religiously motivated conflict, Japan will suffer from having a decreasing work force which needs to take care of a…

Which neighboring country could mount a huge amphibious assault against a developed island nation with still 100+ million people?

The only threat is China and China's aging too...

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

#77

Post by annamargot » Sat, Sep 21, 2019, 3:17 PM UTC

In a world with crypto currencies, would a frugal Dane be wise to put their cash into a cryptocurrency?

I realize crypto is still seen as risky, however if it takes hold and overall market volatility stabilizes, how would easy access to borderless liquid digital assets affect the neg interest rate strategy?

Edit: remove mention of specific cryptocurrency in an attempt to shift focus to broader strategy.

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

#78

Post by tom_mellior » Sat, Sep 21, 2019, 3:25 PM UTC

alkonaut wrote: post #8

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…

Prices have been stagnant for some time now, and tighter restrictions on new loans hopefully reduces the number of people that would be under water if prices dropped 15 or 25%. It would have a pretty bad effect on the economy as a whole though. I’d manage, but would stop spending for years.

> I’d manage, but would stop spending for years.

If what happened, exactly? If you already "own" a home and are paying back a loan on it, a price drop of other housing units would not affect you in any way unless you felt that you needed to sell right at that moment. Would your payments rise from falling housing prices? Or your income decrease?

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

#79

Post by levthedev » Sat, Sep 21, 2019, 3:45 PM UTC

annamargot wrote: post #77

In a world with crypto currencies, would a frugal Dane be wise to put their cash into a cryptocurrency? I realize crypto is still seen as risky, however if it takes hold and overall market volatility stabilizes, how would easy access to borderless liquid digital assets affect the neg interest rate strategy? Edit: remove mention of specific cryptocurrency in an attempt to shift focus to broader strategy.

What is the advantage to buying Tether with Krones instead of just converting them to USD? I think people jump to crypto as a solution when oftentimes the financial markets have already had the same solution for hundreds of years (in this case, foreign exchange).

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

#80

Post by levthedev » Sat, Sep 21, 2019, 3:47 PM UTC

benj111 wrote: post #68

If I lower the interest rate it goes down, if I lower a negative rate it goes up? Either way, I was unsure which way rates had moved just from reading the title.

The interest rate on deposits was previously -0.6%, and now is -0.75%. Hope that clarifies if you were unsure.