The era of negative actual interest rates returns : Fri Jul 06, 2012 8:32 am  

I see Denmark's central bank reduced interest rates to minus 0.2% yesterday.

Things are starting to get tough.

Re: The era of negative actual interest rates returns : Fri Jul 06, 2012 11:08 am  

So let me get this straight, I DON'T borrow any money from them and they pay me interest ?

Is that how it works ?

Re: The era of negative actual interest rates returns : Fri Jul 06, 2012 11:29 am  

McLaren_Field wrote:

So let me get this straight, I DON'T borrow any money from them and they pay me interest ?

Is that how it works ?

You deposit money with them, and they effectively deduct bank charges from it so at the end of the year you have less than you started with.

If you leave it there long enough, you will end up with as much money to fund your retirement as the average pensioner.

Re: The era of negative actual interest rates returns : Fri Jul 06, 2012 11:39 am  

Ferocious Aardvark wrote:

You deposit money with them, and they effectively deduct bank charges from it so at the end of the year you have less than you started with.

If you leave it there long enough, you will end up with as much money to fund your retirement as the average pensioner.

Oh thats just like my NatWest pension fund these last ten years then ?

Re: The era of negative actual interest rates returns : Fri Jul 06, 2012 4:18 pm  

McLaren_Field wrote:

So let me get this straight, I DON'T borrow any money from them and they pay me interest ?

Is that how it works ?

Ah, that'll be why all these banks that I don't have an account with keep emailing me asking me to check my details.
They want to give me some interest on the money I haven't borrowed.

Did Dally say Denmark ... or Nigeria?

Re: The era of negative actual interest rates returns : Fri Jul 06, 2012 10:12 pm  

Denmark: http://www.nationalbanken.dk/DNUK/Press ... 216563.pdf

Denmark: http://www.nationalbanken.dk/DNUK/Press ... 216563.pdf

Re: The era of negative actual interest rates returns : Sat Jul 07, 2012 10:12 pm  

McLaren_Field wrote:

So let me get this straight, I DON'T borrow any money from them and they pay me interest ?

Is that how it works ?

Yes this happens, its not as uncommon as you think.

You are basically paying for the convenience of 'safety', ie they won't lose as much as your alternatives to investment will. In reality it just means you are getting a very low nominal rate of interest where expected inflation is higher, so you expect that inflation will have more than eroded the value of your interest so in real terms you get less than you started with.

The UK government issued a load of bonds a week or so back with negative real interest rate which means the bond holders are paying the UK government for the privilege of lending to them. Makes a bit of a mockery of the whole 'wanting to cut borrowing' agenda.

[DaveO]

Re: The era of negative actual interest rates returns : Tue Jul 10, 2012 9:38 am  

sally cinnamon wrote:

The UK government issued a load of bonds a week or so back with negative real interest rate which means the bond holders are paying the UK government for the privilege of lending to them. Makes a bit of a mockery of the whole 'wanting to cut borrowing' agenda.

I saw Germany had done this last week but had not realised we were able to do the same. If we can then we should take up as much of this money is available and use it to kick start the economy and to stop sacking people!

Re: The era of negative actual interest rates returns : Tue Jul 10, 2012 9:41 am  

DaveO wrote:

I saw Germany had done this last week but had not realised we were able to do the same. If we can then we should take up as much of this money is available and use it to kick start the economy and to stop sacking people!

Even France and Holland have negative rates for short term bonds.

Re: The era of negative actual interest rates returns : Tue Jul 10, 2012 8:35 pm  

Today we issued £900m of bonds due to be redeemed in 2050 at a real interest rate of 0.11%. Thats £900m borrowed over 38 years at 0.11% interest.