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This Is How Credit Suisse Informs Clients Their Cash Is No Longer Welcome
Back in June, the Danish Central Bank set a New Normal precedent by being the first bank to impose NIRP, after it lowered its deposit rates to a negative 0.20% for everyone, in other words anyone wishing to keep cash with the bank would have to pay 20 bps for the privilege. NIRP just moved south to Switzerland, only this time not with a central bank decree: after all the SNB is already engaged in capital controls via the 1.20 EURCHF peg. After all it would seem unsportmanlike if the central bank would admit it needs more currency warfare to halt the influx of CHF into its system, as it would also imply that not only is the Eurozone not fixed, but the exodus of EUR-denominated accounts is relentless, and only the BIS is the marginal buyer of the currency. Instead, Swiss megabank, Credit Suisse, whose assets are orders of magnitude greater than Swiss GDP, in what will be a precedent copied by all other Swiss banks, just imposed negative credit rates on cash clearing balances after December 10 as per the message sent to clients below. In other words, "your CHF-denominated cash is no longer welcome at Credit Suisse, please convert it into that joke of a currency EUR post haste, K thx bye."
From the bank:
DUE TO CURRENT MARKET SITUATION AND AFTER CLOSELY MONITORING THE SITUATION OVER THE COURSE OF THIS YEAR, WE HAVE DECIDED TO START APPLYING NEGATIVE CREDIT RATES ON CASH CLEARING ACCOUNTS ABOVE A CERTAIN THRESHOLD, AS OF 10 DECEMBER 2012.
CURRENCIES INVOLVED, THRESHOLD AND RATES WILL BE COMMUNICATED ON AN INDIVIDUAL BASIS TO CONCERNED CUSTOMERS DURING THE NEXT 5 BUSINESS DAYS.
WE INVITE OUR CUSTOMERS TO KEEP CASH BALANCES AS LOW AS POSSIBLE TO AVOID NEGATIVE CREDIT CHARGES.
That's all fine and great but we are confused about one thing: what "current market situation"? Isn't Europe all sorts of fixed now that US-based hedge funds made a killing by holding Greek debt for 4 months?
Guess not.
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Current market situation=we are screwed.
Nothing is fixed.
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Can someone explain to me how the Swiss think this will work out well?
Negative CHF rates won't push people into EUR -- it will push people into CHF cash, which doesn't have any maintainance cost or a negative rate. This is why negative rates (in theory) don't work.
And if the Swiss move out of account balances into cash, that destroys M1 by the fractional multiplier -- which is deflationary.
And that would suggest that the CHF would actually move higher.
Somehow, I doubt that the Swiss bankers can't think 3 moves ahead, so someone tell me where this is going....
If you have €500 million stuffed away in a Swiss bank like G-Pap's mother, is she going over there to pull that amount out in cash? I hope so...please let me know the place/date/time and I'll relieve her of all that heavy weight. But it's unlikely. She'll do [whatever] electronically.
Perhaps not the entire amount, but keep in mind that her money is already Euro-denominated, so not really affected, right?
But your point -- can you really go to cash -- is well taken. I'd just remind you that they do print CHF1000 notes, and lots of them. The vast majority of CHF M1 is in CHF1000.
And my point is that the SNB says its fighting the rising value of the CHF and trying to cap appreciation -- but at the margin, a shift from negative-interest-rate deposits to zero-interest cash is deflationary, so exactly the opposite of the stated policy.
I like this Tylars humour the best....A+
Yeah, but ZH motto is kind of outdated and with the arrival of NIRP it should read: On a long enough timeline the survival rate for everyone drops to negative.
It's not SNB policy, it's CS policy.
Look at it from the perspective of CS management- if they have a fuckton of "cash" parked at SNB at 0%, and then they get ready to call it quits for the day one afternoon and the SNB announces that the overnight rate is now going to be -25bps, then the forced rapid response is destabilizing to CS (and the SNB).
I think the larger question is - Is CS merely being prudent, or to what extent is this rollout being coordinated with the SNB?
I don't bank with CS, but I am sure they have a bunch of other "products" to offer their customers (assuming that specific customer is one that the bank is actually interested in keeping)...
This should be good for gold pre December 10th...
Look at it this way. Last year the debt ceiling was a trillion dollars less in the US. The Swiss had not gone NIRP yet. Japan was not on QE9 yet. The US was not on QEinfinity with QE4 coming yet. Gold hit $1,925.
We have had all this happen since then and gold is $200 less/oz and struggling. That make sense to anyone?
Considering the right flank of the gold carry trade just friggin imploded, I'd say the CBs are hitting the panic button on gold today. Buy it.
That makes no sense, which is why it happened.
Get with the program, bitchez.
manipulation of the price through shorting of paper gold....
current market condition = "its time for us to really profit on the death of the eurozone"
shut up and take my money!
http://soshable.com/wp-content/uploads/2012/09/shut-up-and-take-my-money...
Popcorn!
We don't need bank clearing houses anymore.
In its widest sense clearing involves the management of post-trading, pre-settlement credit exposures, to ensure that trades are settled in accordance with market rules, even if a buyer or seller should become insolvent prior to settlement.
There are no rules and everyone is insolvent.
under your mattress will at least get you 0.00%. at least the banks will still be earning their 30% interest on CCs and 6% on auto loans while giving you that negative interest. and still The Bernanak wonders why there is still a huge amount of money pouring out of equities and into cash even with his wealth destruction via inflation..
What I can't believe is that theres still retail cash in stocks left to flow out.
The actual level of the threshold will be critical- TBTF vs SME vs Joe Sixpack
So I guess the economic model we learned in school of a bank loaning out money that people deposit in it is finally dead?
Banks loan money????
They used to as part of the old normal. God I am old.
You mean the "economic myth" we learned in school. I hope that one dies.
You should have a word with whoever taught you that. Banks haven't worked like that for, what, a good 200 years now?
Gold carry trade says ..."WHAAAAT?!"
Too funny! Fiat now doesn't pay interest and has "storage costs" - just like gold!
Since every dictator, etc gets their billions for free, they still don't mind losing a half percent for the secrecy, as long as they are not outed. That's my take.
Long mattresses.
Bank robbers Of America now charges $5 USD to cash their own bank checks.
so, with money demanding safe have status, and willing to pay 'storage fees', when will it be cheaper to take the paper and put into an actual storage unit?
lets see... a 10' x 10' x 15' unit at x$'s a month....
Sounds like Best. Storage Wars. Ever. They open up a storage unit that has not had its rent paid in 6 months, and they see pallets of cash wrapped in shipping wrap.
Make sure you get allocated cash storage! Don't trust the unallocated paper-paper!
The Bank of Tupperware is looking better everyday, open 24/7, accepts PM's and all currencies, no reporting requrements, no risk of nationalisation, and self-serve.
how about the risk of theft? or fire?