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ECB Cuts Deposit Rate To Negative For The First Time Ever

Tyler Durden's picture




 

Congratulations Europe: you now get to pay your insolvent bank to keep your deposits for you. Today's cuts summarized and largely as expected:

  • Main Refinancing Rate cut by 10 bps to 0.15%
  • Marginal lending facility cut by 35 bps to 0.40%
  • Deposit facility rate cut by 10 bps to -0.10%. As in negative. As in deposits are now charged a fee.

And the ECB leave with the cryptic: "Further monetary policy measures to enhance the functioning of the monetary policy transmission mechanism will be communicated in a press release to be published at 3.30 p.m. CET today."

The full announcement:

At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:

  • The interest rate on the main refinancing operations of the Eurosystem will be decreased by 10 basis points to 0.15%, starting from the operation to be settled on 11 June 2014.
  • The interest rate on the marginal lending facility will be decreased by 35 basis points to 0.40%, with effect from 11 June 2014.
  • The interest rate on the deposit facility will be decreased by 10 basis points to -0.10%, with effect from 11 June 2014. A separate press release to be published at 3.30 p.m. CET today will provide details on the implementation of the negative deposit facility rate.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today. Further monetary policy measures to enhance the functioning of the monetary policy transmission mechanism will be communicated in a press release to be published at 3.30 p.m. CET today.

 

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Thu, 06/05/2014 - 07:49 | 4826075 Its Only Rock N Roll
Its Only Rock N Roll's picture

Wait until the Fed does this. 

Thu, 06/05/2014 - 07:51 | 4826082 PR Guy
PR Guy's picture

 

 

...and here's the real reason why Draghi needed to cut rates today...

 

https://www.youtube.com/watch?v=zV3UuMOfiaQ

 

 

Thu, 06/05/2014 - 07:55 | 4826107 OceanX
OceanX's picture

And, this is the type of trend that could spur crypto-currency use...

Thu, 06/05/2014 - 08:15 | 4826123 Headbanger
Headbanger's picture

Sell on the news!

Cause the ECB has reached the end of their rope now.

Thu, 06/05/2014 - 08:26 | 4826209 Sudden Debt
Sudden Debt's picture

nah, it's only for nerds. Normal people will never use it.

People are just sheep, they'll do absolutly nothing and continue to allow it.

Thu, 06/05/2014 - 15:59 | 4827844 daveO
daveO's picture

Sheep= Debt Slaves. They rejoice in the theft.

Thu, 06/05/2014 - 07:50 | 4826084 stocktivity
stocktivity's picture

Rally on!  It's all Bullshit!!!

Thu, 06/05/2014 - 08:22 | 4826199 Sudden Debt
Sudden Debt's picture

What bothers me about all this shit is this:

 

1. We all know we won't get the pensions like our parents get/got.

2. They told us: YOU BETTER SAVE MONEY FOR YOUR RETIREMENT BOYS!!!

3. And now... saving money is countered...

the pensions won't ever be paid and everybody get's taxes more on savings every day...

 

And nobody revolts. I don't really care, I've got the gold and silver to have a very good pension especially when everybody else will have nothing. But still... WHY DO I PAY 55% ON MY INCOME AND 21% ON WHY I BUY IF I GET NOTHING IN RETURN!!!!????

Thu, 06/05/2014 - 09:27 | 4826474 Its Only Rock N Roll
Its Only Rock N Roll's picture

Yes, seems a bit counter intuitive doesn't it.  When the banks see an outflow of deposits and have capital shortfalls disaster looms. But what the fuck do I know?

Keynesian endgame is interesting to watch.

Thu, 06/05/2014 - 16:02 | 4827851 daveO
daveO's picture

They can only steal as long as there are savings. (Neg. rates will hasten the depletion of savings, it's crazy). Then, the debts go bad, anyway.

Thu, 06/05/2014 - 09:27 | 4826475 -.-
-.-'s picture

nah, it's only for nerds. Normal people will never use it.

People are just sheep, they'll do absolutly nothing and continue to allow it.

 

And nobody revolts. I don't really care, I've got the gold and silver to have a very good pension especially when everybody else will have nothing. But still... WHY DO I PAY 55% ON MY INCOME AND 21% ON WHY I BUY IF I GET NOTHING IN RETURN!!!!????

 

 

"Talking loud & Sayin' nothing..."

-James Brown-

Thu, 06/05/2014 - 09:15 | 4826415 SWRichmond
SWRichmond's picture

The interest rate on the deposit facility will be decreased by 10 basis points to -0.10%, with effect from 11 June 2014. A separate press release to be published at 3.30 p.m. CET today will provide details on the implementation of the negative deposit facility rate.

 

Wait until the Fed does this.

If this is comparable to the Fed charging interest on excess reserves, excess reserves which were placed in the banks' accounts by the Fed in the first place, then yes, when the Fed does this, this will be the signal.  I've been waiting for this obvious sign of desperation for years now.  We have had negative real rates for some time, partially hidden behind false inflation statistics.  Reality keeps intruding. 

Governments desperate for revenue = economy desperate for activity = central banks desperate for Money Velocity.  How's "charging you to save" sound?

Thu, 06/05/2014 - 16:03 | 4827857 daveO
daveO's picture

-.10 = the snow flake that triggers an avalanche.

Thu, 06/05/2014 - 07:50 | 4826076 slaughterer
slaughterer's picture

DAX should break 10,000 today on this news.  Nobody is selling it.  

Thu, 06/05/2014 - 07:52 | 4826077 PR Guy
PR Guy's picture

And now we wait for the consequences

 

Thu, 06/05/2014 - 07:50 | 4826079 RealityCheque
RealityCheque's picture

Go for it you desperate clowns.

Thu, 06/05/2014 - 07:50 | 4826081 Let The Wurlitz...
Let The Wurlitzer Play's picture

I guess Europe is in a depression.

 

Thu, 06/05/2014 - 07:52 | 4826093 PR Guy
PR Guy's picture

 

It's been in a depression since 2007

Thu, 06/05/2014 - 07:53 | 4826096 max2205
max2205's picture

And new highs....makes sense

Thu, 06/05/2014 - 07:50 | 4826083 Croatian Patriot
Croatian Patriot's picture
Everything is proceeding as I have forseen"

 

https://www.youtube.com/watch?v=LAf0QnLFS7Q

Thu, 06/05/2014 - 07:51 | 4826085 world_debt_slave
world_debt_slave's picture

Pulling out all the stops to get savers to become speculators.

Thu, 06/05/2014 - 07:51 | 4826086 TumblingDice
TumblingDice's picture

Central banks sure do suck.

Thu, 06/05/2014 - 07:51 | 4826087 youngman
youngman's picture

why pay interest when you can charge it.....

Thu, 06/05/2014 - 07:53 | 4826088 slaughterer
slaughterer's picture

Draghi convinced the German gov that destroying the € would be good for exports.  Hence the neg deposit rates.  This follows a European parliament campaign that was waged on the message:  € stabilitiy as a chance for the middle class.   Another false lie.  

Thu, 06/05/2014 - 08:33 | 4826238 Wahooo
Wahooo's picture

Wonder when Germany and Russia will tie the knot.

Thu, 06/05/2014 - 07:52 | 4826091 edwinorc
edwinorc's picture

This is of course bearish for gold

Thu, 06/05/2014 - 07:59 | 4826118 asking4it2k
asking4it2k's picture

Everything is bearish for gold nowadays. The FED tells their "primary dealers" to sell paper gold to keep the price down on purpose.

The FED wants no one to save and everyone into stocks.

Thu, 06/05/2014 - 07:52 | 4826092 katchum
katchum's picture

Deposit outflows will accelerate.

Thu, 06/05/2014 - 07:55 | 4826104 max2205
max2205's picture

This should be our que to fill the mattress

Thu, 06/05/2014 - 07:57 | 4826109 buzzsaw99
buzzsaw99's picture

yeah, i guess they WANT bank runs

Thu, 06/05/2014 - 16:06 | 4827872 daveO
daveO's picture

Runs are a good excuse for banking holidays. 

Thu, 06/05/2014 - 13:17 | 4826181 BolanosGhost
BolanosGhost's picture

I wouldn't be surprised if deposit withdrawal limits or some other similar capital control is announced at that 3:30 sentencing. I only hope we get to see more plywood guillotines! 

 

Edit: Potentially erroneous comment. So is this rate just negative for member bank deposits at the ECB? or does this carry over to individuals' deposits at branch banks? I haven't really read an artilcle that made that clear yet.

Thu, 06/05/2014 - 07:52 | 4826094 Hindenburg...Oh Man
Hindenburg...Oh Man's picture

in any case, it was clear that gold would react negtively (although I'm not sure why this should happen with lower rates--stronger dollar?).

Thu, 06/05/2014 - 07:53 | 4826097 Charles Nelson ...
Charles Nelson Reilly's picture

And gold gets hit... Makes sense!?!

Thu, 06/05/2014 - 07:54 | 4826103 katchum
katchum's picture

first they sell euro for dollar and then buy gold with dollars.

Thu, 06/05/2014 - 07:53 | 4826098 asking4it2k
asking4it2k's picture

Wait isnt the ECB is already buying US treasuries via Euroclear in Belgium ??

Thu, 06/05/2014 - 07:57 | 4826112 Ghordius
Ghordius's picture

it would be hard to conceal. the ECB get's audited, you know? shocking, yes. imho this is either Russia or the FED

Thu, 06/05/2014 - 07:53 | 4826100 Ignorance is bliss
Ignorance is bliss's picture

Buy Silver and keep it hidden. The cost to the saver = zero. The benefit to the saver = priceless.

Thu, 06/05/2014 - 07:55 | 4826102 B2u
B2u's picture

Why -.10% not go all in and make the rate -100%

Thu, 06/05/2014 - 07:55 | 4826105 f16hoser
f16hoser's picture

BANK RUN BITCHEZ"S

Thu, 06/05/2014 - 07:55 | 4826106 BaghdadBob
BaghdadBob's picture

If, after this, there aren't mass bank runs, then we know 'Their' future plans will never come up against any meaningful resistance. Gold n Silver Bitchez...

Thu, 06/05/2014 - 07:56 | 4826108 Sudden Debt
Sudden Debt's picture

And when will you receive interest when you take a loan?

Seems just fair to me also...

 

In the beginning when Ireland joined the Euro, they did just that. You could loan 60.000 euro's without interest per person and when you invested it in whatever, you could downpay it with the interest.

Needles to say most people bought cars with that money and the investment culture didn't really took off but I still think it was a good idea.

 

Thu, 06/05/2014 - 08:00 | 4826117 Ghordius
Ghordius's picture

SD, you aren't a bank, are you? so those negative rates don't apply to you

Ireland? do you remember the Anglo-Irish bank tapes?

Thu, 06/05/2014 - 08:28 | 4826218 Sudden Debt
Sudden Debt's picture

Yeah, how long do you think before it will be passed to their customers??

Do you really think banks will allow depostis and give interest while they need to pay for deposits?

Really?

Do you really think they don't pass the buck? Have they ever not passed the bill to the consumer? Ever?

 

Thu, 06/05/2014 - 09:49 | 4826580 jonytk
jonytk's picture

they will just not deposit the money in the ecb and put it on sovereign debt, cheap finance for eur gov now.

Thu, 06/05/2014 - 09:52 | 4826593 Ghordius
Ghordius's picture

of course not. they are on the drip. they need healing, which means time

Thu, 06/05/2014 - 07:57 | 4826110 Itch
Itch's picture

funny shit.

Thu, 06/05/2014 - 07:58 | 4826113 buzzsaw99
buzzsaw99's picture

give it to me now. ALL CASH BITCHEZ!

Thu, 06/05/2014 - 07:58 | 4826114 NMFP
NMFP's picture

Another step closer to the abyss

Thu, 06/05/2014 - 07:58 | 4826115 SDRII
SDRII's picture

Wonder what axel weber thinks? Occupation is a bitch

Thu, 06/05/2014 - 08:00 | 4826120 thismarketisrigged
thismarketisrigged's picture

and despite the fact that every single person not living under a rock the past month plus, and algo knew this was going to happen, the '' markets'' go higher as if they r surprised this happened and it wasnt factored in

Thu, 06/05/2014 - 08:02 | 4826124 papaswamp
papaswamp's picture

Look for the Spanish economy to improve as secure mattress ( mattress with built in safe) sales skyrocket.
http://www.silverdoctors.com/spanish-mattress-firm-to-sell-model-with-bu...

Thu, 06/05/2014 - 08:07 | 4826133 NEOSERF
NEOSERF's picture

Please explain how NIRP helps the enormous capital ratio issue at Euro banks?  Am wondering in this unicorn world whether the ECB feels that having loans on bank books that can ignore marking to market are more fungible, flexible and convincing to play wth in another downturn than cash which is hard to count any other way than "cash". 

Thu, 06/05/2014 - 08:11 | 4826159 Ghordius
Ghordius's picture

simple: it doesn't. though I have to note that while the capital ratios of eurozone banks don't look the way I'd wish, most of those comparisons with non-eurozone banks have one fault in it: eurozone banks, generally speaking, lend way more directly to businesses, instead of packaging bonds and setting up IPOs

and this has something to do with the fact that the eurozone's economy is way less "financialized", more based on SMEs which aren't on the markets

if you take in this, suddently the average eurozone bank's business looks way different

Thu, 06/05/2014 - 09:27 | 4826465 Tortfeasor
Tortfeasor's picture

Ah yes, that's why Draghi is also announcing ABS purchases. Because there is no financialization.

Thu, 06/05/2014 - 08:09 | 4826151 Seasmoke
Seasmoke's picture

EVIL. 

Thu, 06/05/2014 - 08:14 | 4826169 Hughing
Hughing's picture

This helps the poor and middle class how, exactly? 

Also known as a bail in.

Thu, 06/05/2014 - 08:31 | 4826230 Sudden Debt
Sudden Debt's picture

They'll become less poor then their neighbours...

Thu, 06/05/2014 - 08:16 | 4826184 SpanishGoop
SpanishGoop's picture

Depostits at the ECB were already very low so the negative deposit rate won't matter a lot.

It is just psychological.

 

Thu, 06/05/2014 - 08:30 | 4826224 Sudden Debt
Sudden Debt's picture

It's not much if you have to pay 0,1% on 1000 euro's

it's a bit more if you have to pay it on 1.000.000 euro's...

A shitload more if you have to pay it on 1.000.000.000 euro's....

so... think big and than a meager 0,1% become horrific.

 

Thu, 06/05/2014 - 08:27 | 4826214 the not so migh...
the not so mighty maximiza's picture

negative intereest rates...what?????????????

Thu, 06/05/2014 - 08:46 | 4826286 shouldvekilledthem
shouldvekilledthem's picture

There's an exit from all this. 

https://bitcoin.org/bitcoin.pdf 

Honest money for the peasants by the peasants.

Thu, 06/05/2014 - 08:53 | 4826332 agstacks
agstacks's picture

Silver just got a major woody.

Thu, 06/05/2014 - 09:07 | 4826387 Obamanism
Obamanism's picture

Same with gold.

Thu, 06/05/2014 - 08:58 | 4826347 Hobbleknee
Hobbleknee's picture

What does this really mean? Is this what banks have to pay the ECB for deposits?

Thu, 06/05/2014 - 09:14 | 4826412 andyupnorth
andyupnorth's picture

I'm guessing the masses will decide to store their wealth in real estate... which will make it even more unaffordable for the next generation, sparking a huge revolution!

Thu, 06/05/2014 - 09:19 | 4826426 SelfGov
SelfGov's picture

When growth is dead the only way to keep the system going is to eventually embrace the shrinking. That is what negative interest rates do.

Thu, 06/05/2014 - 09:40 | 4826537 gcjohns1971
gcjohns1971's picture

For those who wonder why I am so critical on the Russian military moves, or various attempts to paint propaganda pictures that justify military moves, one of the reasons is here in this article.

1)  Collapse of the corrupt banking regimes in Europe and the US via monetary and fiscal collapse are already the inevitable outcome. This Negative Interest rate policy is case in point.  On one hand you could say that they have discouraged savings.   But on the other it would be more ACCURATE to say that they have discouraged savings in FIAT CURRENCY.

These regimes are their own worst enemies in this regard.   These regimes WANT WAR because it promotes fear.  Fear promotes irrationality.  Irrationality and momentum are the only things keeping them afloat.  First lesson of strategy - give your opponent what we wants only when his desires are destructive.

2) Killing people, or even threatening to kill them, is bad.  War is not the glorious enterprize that militaristic elites and naive populists believe it to be.

3) A simpler, cleaner solution is available that lacks all the violent blowback from future generations that military conflict brings:  Sell fiat Currency, Buy Gold.  

That's it.  Nothing more is needed to collapse the banksters scheme. 

The banksters' Center of Gravity and Decisive Points are in their control of the issue of FIAT CURRENCY.  War promotes fiat.  Gold defeats fiat.

Get it?

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