Europe's banks want to store billions in cash to fight back against negative interest


#1

Originally published at: http://boingboing.net/2016/08/17/europes-banks-want-to-store.html


#2

I was thinking of a remake of Goldfinger, but where Auric is backed by ISIS rather than the Chinese.


#3

There’s just too much money sitting around. It’s not currency any more if it isn’t in circulation, right? That value is essentially gone from the economy - but it’s a potential force that further distorts the economy.

Governments should be running up their debts now while money is cheap. There’s so much infrastructure that we need to replace, and it would pay off immediately.

Austerity programs are strangling people, business, and countries. Stop it.


#4

Like someone rebooted the Parable of the Talents for modern audiences craving global economic shenanigans.


#5

Next step: governments start taxes large caches of fallow cash.
Next next step: it becomes profitable for banks to just set piles of cash on fire rather than let the tax man come in and count it.

This line of policy is essentially trying to game the behavior of independent actors, so their best interest is always what you want them to do anyway. The trouble is, if what you want them to do is sufficiently far from good sense – like heavy spending in a down economy – eventually those actors will find some other way that the policy did not anticipate.

Rewarding actors for doing what you want them to do is very effective when that was already something they were happy to do anyway. Punishing actors for doing what you don’t want them to do is not usually as effective, because there will be alternatives.

There are already bodies that are supposed to take healthy measures for society even when it’s not healthy for that body in the short term: governments. Trying to incentivize other bodies to do the job is probably going to go badly in a real crisis.


#6

It’s still currency – or rather, it will be again at some point in the future when it’s profitable to throw it back into circulation. (So at least the banks think the current government, accepting the current currency will still be around at some point “after it’s all over”.)

Fundamentally, a bank is no different from the average person in this situation: the government gives them stimulus money and tax breaks in an effort to jump-start the economy, and instead they say, “thank goodness, a little more to stash away until the economy gets better”. Both the bank and the average person will conclude the stimulus is too little to create a sea-change, and their original strategy – to ride out the worst of it and hold onto their cash until conditions improve and it’s worth something again – doesn’t change at all. You can’t just dump cash into the system and hope it changes: people will still hoard it in hopes of better times, and now the currency is a little de-valued.

The only effective stimulus is to keep large pieces of the economy from disappearing, not by getting people to try and swim against the tide and start new businesses in troubled times. And that means having the most stable entity around – the government – insuring, bailing out, or otherwise absorbing the debt of marginal companies. At that point, the government can use monetary policy to re-stabilize the currency. The currency won’t be worth as much – because the economy really did take a hit – but at least everyone is still in business with a chance to re-build.


#7

I guess that would make it the economical equivalent of a farad, right?

Someone with competent knowledge of E&M (and, ideally, also economics) chime in here, I’m just doggy-paddling.


#8

Or issues new currency; better trade that back in by next week. Nominal handling charge.

Or just starts printing money.


#9

The Parable of the Talents … The Tragedy of the Commons … whatever it takes.


#10

History repeats itself.

There was an anecdote from Japan’s lost decade, where rates went similarly negative in an attempt to boost consumer spending in the face of deflation. The area that saw the biggest sales increase- safes.


#11

How has the real world of my adulthood superceded most of the fiction I consumed in childhood?

It’s lower in space adventure, granted, but this is one unrealistic era we occupy!


#12

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