What does ‘negative interest rates’ mean and will the policy work?

Welcome to illuminati silver, we tell you
the truth about silver. Today is Sunday 13th March 2016 and we are
providing a brief summary as to what negative interest rates actually means.
Now before we go into the merits and demerits of negative rates, let’s just take a look
at who is adopting such a policy. Well a year and a half ago the ECB introduced negative
rates and on the 10th March this year lowered them further charging banks 0.4% to hold their
money ‘overnight’. In January the Bank of Japan adopted negative interest rates.
Sweden, Denmark, and Switzerland have deposit rates below zero too; and even the US Fed
Chair Janet Yellen has said that should there be a change in economic conditions, ‘negative
rates could be put on the table’. To show the magnitude of this policy, by February
2016, more than $7 trillion of government bonds worldwide offered yields below zero,
meaning that investors will actually get back less than that which they invested.
So what is the purpose of introducing negative rates?
Well, in theory, interest rates below zero should reduce borrowing costs for companies
and households, driving demand for loans. Also, it puts off people from saving money
and therefore, as they choose to spend it, the result is increasing economic activity,
and voila economic growth increases. In practice however, there’s a risk that
the policy might do more harm than good. If banks make more customers pay to hold their
money, cash may go under the mattress instead, removing from lenders a crucial source of
funding. So as in many cases, these negative rates have not been passed on to depositors
as the banks have chosen to absorb the cost of negative rates themselves. This squeezes
their profit margins (the difference between their lending and deposit rates), and might
make them even less willing to lend in the first place.
For some, Negative interest rates are seen as an act of desperation, a signal that traditional
policy options have proved ineffective and new limits need to be explored. Rates below
zero have never been used before in an economy as large as the Euro area. While it’s still
too early to tell if they will work, ECB President Mario Draghi said in January 2016 that there
are “no limits” on what he will do to meet his mandate and he used similar words
again recently. Interestingly, The Bank for International
Settlements warned in a March 2016 report of “great uncertainty” if rates stay negative
for a prolonged period. And if more and more Central Banks use negative rates as a stimulus
tool, there’s concern the policy might ultimately lead to a currency war of competitive devaluations.
Will this Negative Interest Rate policy work? It’s doubtful. At best it may prevent increasing
deflation; however, with average wages rising at or around 1% and those with savings worried
about the future job market we simply cannot see how this sudden ‘increase in spending’
is going to occur. It’s a worrying time for everyone and an experiment Is being carried
out which could in time have even more harmful consequences.
We hope you have found this video interesting and informative and if so, please give it
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and look at our Facebook page which is updated daily at www.facebook.com/illuminatisilver Disclaimer: Illuminati Silver owners come from a background
of Banking, International Wealth Management and Economics. Having now retired from these
worlds we are not qualified to give investment advice. Therefore, this and other productions
must not be deemed to be giving such advice and merely represent the personal views of
its owners.

33 thoughts on “What does ‘negative interest rates’ mean and will the policy work?

  1. The very idea that the banks will effectively be "charging you for the privilege of having them foolishly gamble away YOUR LIFE'S SAVINGS" is absolutely asinine at best, as "a method of curing the problem of global fiat debt fraud."

    It's like "shooting you in the knee caps is a good way to prevent you from getting shot by someone who wasn't as nice and caring about your welfare as they are."

    I just don't know any other way to explain it so that the wilfully ignorant masses will FINALLY clue in to what's happening right in front of their faces?!?


  2. Cash under the mattress is only a problem while we have physical cash. Once they get rid of the physical cash, they can drive the interest rates anywhere they want since it will have to be in some digital holdings. Just the idea of negative interest rates makes no sense to common sense. I will give you 9 dollars back in 2 months if you give me 10 dollars now.

  3. this will have the opposite effect and just cause more hoardings and even less growth. The fact that they are even trying this for the first time should tip the average person off as to just how precarious things are, and that will cause them to save even more. Not good at all.

  4. population may start to think, why buy this month when it will be cheaper in 6 months and it gives a big signal there is something wrong another reason for people not to spend!

  5. Are you going to finish your serise Gold and Silver price manipulation???? ….Nice work on your videos !!! You keep it real!!!

  6. short term solution to a long term problem that will make the long term problem worse. better start putting the cash in the piggy bank if i was in a country of concern on this matter. good video.

  7. Thank you Mr. Illuminati. I had an aaaha! moment while listening to this video. As you know gold is expected to continue its rally. it suddenly dawned on me that gold could be the hypothetical mattresses that people are putting money under. Bingo a thesis is born. like a light bulb turning on inside my head I now understand why gold is going up while we have a strong dollar.

  8. Negative rates are a sign that the dam is leaking. It's more impotence and failure from the deaf and blind who make policy. They wrecked the economy and then didn't fix what was wrecked. They're traitors.

  9. To think going 100% digital with currency to prevent funds from withdrawn is too simplistic. The uncertainty created by NIRP will cause people to be more cautious with their spending and with stock prices levitating so high physical precious metals will become very appealing. In recorded history I don't remember an instance where precious metals have gone to zero.

  10. I'm starting to think the push in various Western countries as of recent for a basic living income ("free" money) is essentially a back door for the cashless society. When even the dregs of society receive digital deposits to their government-guaranteed bank accounts, there will be little outcry or backlash from the public when physical cash is phased out.

    Only then does the noose truly tighten, and the major currency devaluations occur.

  11. Im thinking just what the comments suggest. at this point would a person still wait ? or try and start a plan to pick up on the dips still? a little alarmed just a we bit.

  12. Tacos talked about this a few weeks ago. I don't see any of this working /helping the average guy. lowering rates/ raising rates/ going negative rates/ doing more QE it's not helping. I don't see this leading job creation. I find all this bank theory too silly. we should have done FDR type of job creation where the government takes action such as creating peace time public works projects,& getting out of NAFTA & all those bad policies that have hurt the daily worker. I think globalization has been harmful to many nations what it promised has failed even china is failing even after we gave her all of our jobs.
    it's too insane of a system. America as an example is mostly based on service industry based econ, & I would venture to say England is in the same camp. what's the fed gonna do lend out cash loans so an american can buy a hot dog stand?

  13. Can someone please comment. I own few mining shares in SLW, GG and AUY. If there is a paper collapse in both gold and silver market. What will most probably happen to these shares? I believe gold derivatives like GLD and NUGT will tank. Will mining shares gone too?

  14. The way I see it this will just put bank margins under pressure, the costs of which will be passed onto mum n pops further decreasing appetite for credit. This could leave the backbone of the global financial system under pressure as investors sell of these equities. Whenever banks hit a bumpy road it's usually an ominous sign for the rest of the equities in given economies.

    There is no market anymore. Just interventions. The next market downturn and accompanying restructure will not be stopped by silly policies that only aim to delay what must inevitably occur. Got long the phizzy I say! Opportunity costs have never been lower!!!!!

  15. This is perverted and only comes from demented minds. So, if zero interest rates weren't working, how are negative rates going to work better? Whip your dying horse to death. That will get him to move faster.

  16. The powers that be started very slowly 10 years or more ago to make a cashless society…this is just one more step in my humble opinion….I'm sure they have plans for Silver and Gold also….

  17. There will be no redeeming economic outcomes to this policy (just look at what has happened in Japan). Investing in gold will therefore be very attractive in such an environment.

  18. Silver illuminati :-

    Only people in the banking sector and governments are honest. Anyone who thinks gold is better than M0 & M3 is a fraud.

    The world will be made better with government and banks.

    Don't worry, government and banks are the only ones that love you.

    Central bank's ideas will work out in the end, please don't buy gold, think of other things to do.

  19. Negative interest rates reflect the overall deflationary elements of the economy. The costs of goods and services are falling. Producing goods is becoming like printing money with the labour element becoming almost obsolete.

    Certain class groups of assets such as land will be a safe store of wealth as this cannot be easily reproduced.

  20. negative interest rates are a no confidence warning but the dollar will be the strongest currency in a sea of bad ones its built on a philosophy  ,I got more light from video . 33

  21. I have a question for you Illuminati Silver, how high do you think negative rates will go in Japan? 1% 3%? It would be really nice to get paid a hefty carry to short the yen in the future!

  22. I read recently that "the Donald", when asked about the debt, said he has been told the tipping point is $25 trillion (US debt).Based upon the current spending trajectory, we will breach that figure around 2020.Which, oddly enough, is around the same time frame that the Maestro said Gold will be "measurably" higher.

  23. If the powers that be really wish to move to negative rates, some other steps must be taken first. A few are already showing up here and there. The ability to withdraw any amount of cash from ones own bank account is one scary example that is becoming difficult. The main platform of their control will be the removal of all cash from circulation. What to do? Well, to me , part of the answer is  precious metals that you control along with other real things like rental properties etc. Each month I try to withdraw a good amount of cash, and yes sometimes the teller asks me what the money is for so I always have a little white lie ready.

  24. wow, you usually calm my anxieties as a counter balance to the big silver and gold channels. Interesting times indeed. I am speechless. Thank you as always for sharing and thumbs up.

  25. Why buy negative interest rate bonds when you can put your cash in saving account and get 1-1.5% interest for 1, 5, and 10 years, unless the govt makes it mandatory for big companies and banks to buy them.

  26. The concluding part was great ; with increasing job security uncertainties and decrease in interest rate whether the much needed consumer spendings will increase??

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