Economics Questions

Re: Negative rates or why I'm confused about interest.

Smiling Dave — Fri, 05 Aug 2011 20:33:30 GMT

http://www.economicpolicyjournal.com/2011/08/is-bny-mellon-bank-really-charging.html

Re: Negative rates or why I'm confused about interest.

DD5 — Fri, 05 Aug 2011 19:20:11 GMT

Marky Mark:

Who would pay money to hold it at the bank? If it is being devalued AND costs money to deposit, no one would use them. It'd be a crack up.

That is basically the whole point of what is called the "irregular deposit" whether it is for wheat, coffee beans, or gold, or whatever, deposited for the main purpose of safe keeping. It is only the emergence of fractional reserve banking that has introduced ambiguity into the meaning of "deposit", specifically for a deposit of money (bank deposit).

Re: Negative rates or why I'm confused about interest.

Marky Mark — Fri, 05 Aug 2011 16:19:27 GMT

Who would pay money to hold it at the bank? If it is being devalued AND costs money to deposit, no one would use them. It'd be a crack up.

Re: Negative rates or why I'm confused about interest.

DD5 — Fri, 05 Aug 2011 14:05:30 GMT

Norgath:
Meaning that depositors are being charged to hold money. Is this a negative rate of interest?

No. When banks charge depositors, this "negative interest rate" is no real interest rate but a warehouse fee the depositors are willing to pay in order to keep their money safe in the bank and continue to receive all the associated services,e.g. check books, debit card, bank statements, etc.......

Re: Negative rates or why I'm confused about interest.

John James — Fri, 05 Aug 2011 13:22:56 GMT

Have a copy of the article by chance?

Negative rates or why I'm confused about interest.

Norgath — Fri, 05 Aug 2011 05:29:12 GMT

I recently read an article about the Bank of New York charging large depositors a .13% interest on their deposits. Meaning that depositors are being charged to hold money. Is this a negative rate of interest? I'm only 17 so my knowledge of economics is still small but are there any writings that deal with negative rates and what they mean? I'm taking a gander that it means that the bank is unwilling to hold on to money as they see it being less valuable in the future? And that this negative rate will steer investments away? Making people save their money in places other than banks and to steer clear of fed notes for savings and hold on to something harder like silver or gold? I would love some clarification.

Thank you.

Link: http://www.cnbc.com/id/44019510