[leokennis]

I'm very far from an economist. But in school I learned banks loan out "your money" to companies, for which they receive interest, which they also use to pay you interest.

So when loaning money requires 0% of interest payments, and saving money pays out 0% of interest...that seems wrong?

[flamble]

Actually, usually, when a bank gives out a loan, it simply writes two matching entries in its ledger. One is an amount of money which it owes the borrower (immediately) which manifests itself as credit in the borrower's account: a liability for the bank. The other is the amount of money which the borrower owes it (over the length of the loan, plus interest), which is an asset for the bank. It's not actually taking deposits and lending them out: the loan itself creates money that previously did not exist; loans create deposits rather than vice-versa. In modern economies with fractional reserve banking, almost all of the money in circulation is debt created in this way. In England as of 2013, it was 97% (source below). The bank is prevented from doing this infinitely by a combination of market forces and the monetary policy of the central bank, primarily the interest rate on central bank reserves held by the commercial banks.

If you're interested in how this whole mind-bending system works, the Bank of England has a very well-written explanation:

https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...

[miahi]

It's not wrong when the interest for saving money is actually negative. This happens in Denmark

> In Denmark, negative deposit rates are no longer an exotic phenomenon reserved for the largest corporations. Panel B of Figure 3 shows that in February 2020, three quarters of non-financial corporates' deposits were subject to negative interest. The percentage is even higher for non-bank financial firms

https://voxeu.org/article/negative-interest-rates-danish-exp...

[zaptheimpaler]

It means there is much more money than profitable investments for it in the world. i.e the balance of power is shifting towards people who can build things.

[TeMPOraL]

Any amount of belief I had that I understand any of this has evaporated when I learned that negative interest rates are not only a thing, but also a thing we may all enjoy soon enough, and that they're apparently a good thing.

[logicchains]

>apparently a good thing.

For a very loose sense of apparent. It's heavily debated, and there's no empirical evidence of greater growth in countries with negative rates, in fact countries with negative rates are generally experiencing lower rates of growth than they were with high rates, although it's hard to disentangle correlation and causation here.

[yoshyosh]

Any additional reading on this that you can link/refer to that gave you that realization?

[Melting_Harps]

> Any amount of belief I had that I understand any of this has evaporated when I learned that negative interest rates are not only a thing, but also a thing we may all enjoy soon enough, and that they're apparently a good thing.

As someone mentioned before, their is far more to be discussed on the matter, but be under no illusion: 0 to negative % interest rates are a disaster waiting to happen.

When savers are punished for their otherwise prudent behaviour for a rainy day, mainly because central banks are increasing the monetary supply to offset the lack of activity in M1 and M2 figures that are supposed to denote a healthy economy but do so in headlong manner, they are forcing people to spend money they don't have which in turn increases consumption rates (yet another critical metric in their calculus) and will create the all too common situation in which they cannot afford to not to spend it as it loses value (purchasing power) the longer you hold it in fiat: for context this is also why most cannot afford to have one unexpected expense and it ruins them financially as people as well as companies are looking for more riskier ways to hedger the depreciation to offset the lack of interest rates.

And this applies to business and banks, as well as the citizenry.

All of the EU technocrats are just doing the same thing the US Fedesral reserve has has been doing but from a less vantaged position since they do not have World reserve currency status, and despite their large geographical (in and outside of the Schengen Zone) EU pact footprint are still very reliant on Chinese imports and requires them to play the 'depreciate your currency' game of Russian Roulette to remain competitive in the export market and keep up with the machinations with the Yuan, USD, Yen, and now even the CHF!

So to suffice it to say, no your feeling of bewilderment is not wrong, but your faith in these technocrat's fiscal policy requires far more scrutiny than you've given it because actually this is a disaster waiting to happen--they've already inflated the housing Market in N. America in some place to levels above where they were in 2007 before the crisis as a result of cheap money and lower interest rates. I think most people understand this in a latent manner but cannot understand why it is as the lack the understanding much less the time and resolve to look into it.

The US stock market is at all time highs in the middle of a Global pandemic, recession and more and more people are out of work. None of this makes any sense, and Corporations get more bail out money especially in relation to the citizenry so its very perplexing, but it has to be said that Central banks can only do this because so much of the World is entirely ignorant on financial and fiscal matters, and in my opinion is purposely done and neglected in most formal education (and I include University as I've sat in lower division econ classes and had to walk out due to the absurdity) unless you're a masochist that is willing to put yourself through the immense pain of trying to understand it.

But once you get to the Naked short selling, Re-hypothecation part and then compare it how much unfunded liabilities exists much of it as debt on blance sheets in the derivatives markets (yet another bizarro World situation) all over the World you start to realize that its the most evil, disastrous casino level ponzi scheme imaginable that has so many dire consequences for everyone except those created it as they ALWAYS come out on top in the end.

In short: the fiat monetary system has been in a zombie state for over 100 years now and requires constant machinations (negative % rates are just one) to keep it propped to give it the illusion it 'works' which opens the door for banksters and other unscrupulous actors to game the system in their favour for immense short term gain to the detriment of the rest of us in these ever more severe boom and bust cycles.

We should at least have the option to opt-out. I'm so much less worried about the future because of Bitcoin than I was even in 2007 as we were starting to head into the 2008 crisis where my anxiety levels were through the roof for years and which messed up my emotional, mental and physical health pretty badly to be honest.

[Cthulhu_]

That's the basic economic theory I grew up with as well, and it explains why both savings account and mortgage interest rates are so low.

But then you look deeper, and it turns out that the banks can spend and play with your money ten times over. They can earn money off of your debts as well, packaging thousands of mortgages into a neat package and playing with it on the stock market. I have no clue how it all works, but basically 90% if not more of all money is virtual play money for the financial institutions. Crypto is 100% play money.

[throwaway-8c93]

> banks loan out "your money" to companies

When the bank lends you money, it usually doesn't go from its deposits. Usually, there's an offsetting loan the bank takes from other banks, at the inter-bank lending rate (e.g. Euribor). Then the bank lends you the money at, say Euribor + 1%, pocketing the difference. The funds for inter-bank lending come either by offsetting loans from the central bank, or from consumer deposits, both of which can be re-lended many times due to fractional reserve banking.

[riffraff]

banks have fees that they charge on top of the base rate, so they still earn money.

But anyway, the way negative/zero interest rates work is: if you can get money lent to you at X, you can lend it to someone else at X+1.

Currently, some entities can get money with negative/zero interest rates, and so can re-lend it at zero and still make a profit.