Voodoo Banking with Negative Interest Rates – Episode 157

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Would you pay someone to let them use your money? Even that sentence is difficult to parse because the concept of paying to let someone else borrow and profit off your money is so absurd! And yet. Welcome to the world of negative interest rates and so called “voodoo” banking.

Today our host Patrick Donohoe sits down with guest Bryan McCloskey to talk about negative interest rates, what they are, why they exist, and the effect that they are having on the economy. Patrick and Bryan reference the research done by the Palm Beach Research Group and their recent newsletter elucidating the rise of negative interest rates around the globe. (see this excerpt!)

 It Begins: Negative interest rate “voodoo banking” is here for 850,000 depositors

The Guardian reports British bank NatWest will begin charging its patrons to hold cash in the bank. Said another way, negative interest rates are now affecting everyday bank customers…Over 850,000 depositors will soon pay their banks for their “savings” accounts…

[Negative interest rates are a perversion of normal lending practices. Some call it “voodoo banking.” Instead of earning interest on deposits and bonds, negative interest rates mean you pay to let others use your money.]

We’ve long tracked the spread of negative interest rates around the globe (see here, here, and here). Until now, regular bank depositors have avoided paying negative interest in most cases. It’s the banks themselves that have paid to keep funds on deposit at their country’s central bank.

But that’s all changing…

Reuters reports Switzerland’s largest bank, UBS, couldn’t rule out passing negative interest rate charges on to its regular clientele. And NL Times reports Dutch bank ABN AMRO will charge its business customers to hold their money at the bank by October 1.

Longtime Daily readers know these are all part of the global War on Cash…

Central banks have lowered rates into negative territory to try to stimulate their economies. They hoped folks would choose to spend or invest their money rather than pay negative interest rates on their deposits.

Tune it to hear Patrick and Bryan discuss this recent development and its implications for our money in detail.

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