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The Wrath of Draghi: First German Bank Hits Savers with Negative Interest Rate
Wolf Richter www.wolfstreet.com www.amazon.com/author/wolfrichter
Deutsche Skatbank, a division of VR-Bank Altenburger Land, which was founded in 1859, is not the biggest bank in Germany, but it’s the first bank to confirm what German savers have been dreading for a while: the wrath of Draghi.
Retail and business customers with over €500,000 on deposit as of November 1 will earn a “negative interest rate” of 0.25%. In less euphemistic terms, they have to pay 0.25% per annum to the bank for the privilege of handing the bank their hard-earned money or their business cash.
Inflation has had a similar effect in the zero-interest-rate environment that the ECB and other central banks have inflicted on savers, but this time it’s official, it’s open, it can’t be hidden. Instead of lending your moolah to the bank so that the bank can lend it out to businesses and retail customers for all sorts of economically beneficial purposes, you’re financially better off hiding it in the basement. Grudging respect is due the ECB and other central banks: through the perverse regime of ZIRP, they have succeeded in transmogrifying “cash in bank” from an income-producing asset to a costly liability.
“Punishment Interest” is what Germans lovingly call this. It’s the latest and most blatant step of the central-bank strategy to confiscate in bits and pieces and over time the wealth that prudent people and businesses have accumulated, and that should have re-entered the economy via the intermediation of the banks.
Last summer, the ECB imposed negative deposit rates on member banks. At first, it was 0.1%, which has now doubled to 0.2%. The reason? The ECB dragged out its “mandate,” which is, as it said, “to ensure” that “price stability” is “below but close to 2% inflation,” which in turn is “a necessary condition for sustainable growth in the euro area.” Whatever. There is not a scintilla of evidence that inflation is required for economic growth; however, there is plenty of evidence that economic growth can stir up inflation. The good folks at the ECB know this. It’s just the official pretext for using inflation to eat up debt – along with savers.
“There will be no direct impact on your savings,” the ECB announced five months ago. “Only banks that deposit money in certain accounts at the ECB have to pay.” But it added ominously, “Commercial banks may of course choose to lower interest rates for savers.”
And that would be good for savers:
The ECB’s interest rate decisions will in fact benefit savers in the end because they support growth and thus create a climate in which interest rates can gradually return to higher levels.
Thank you hallelujah, ECB, for helping out the savers!
This is in line with its policy, as it says, to “punish savers and reward borrowers.” No kidding. To bring some perspective to it all, it adds, “This behavior is not specific to the ECB; it applies to all central banks.”
Now the wrath of Draghi is hitting German savers and businesses. The first bank is already trying it out. Other banks haven’t yet jumped in line. They’re taking a wait-and-see stance but refuse to exclude the possibility.
“There is no planning in that direction,” Direktbank ING Diba told the Welt.
“We believe that negative interest rates on deposit accounts – whether for private or business customers – are a dangerous signal…” said a spokesman of the German Savings Banks and Giro Association (DSGV). But he did not rule out either that some member banks might not follow the same example in the future.
“The banks will try to avoid negative deposit rates,” explained the Federal Association of German Cooperative Banks, but in this zero-interest-rate environment imposed by the ECB, negative rates on large deposits “cannot be excluded.”
“At the moment, we are not imposing negative interest rates on retail customers,” said the second largest bank in Germany, Commerzbank. At the moment….
“We cannot earnestly rule out punishment interest in the future,” said Frank Kohler, CEO at the Sparda-Bank Berlin, the largest cooperative bank in Germany in terms of membership. He pointed out that the banks that are the most susceptible to punishment interest are those whose business model relies on pure banking with individuals and businesses, and whose earnings cannot be improved by investment banking, risk-taking, gambling, market-rigging, and other big-bank activities that “have triggered the financial crisis in 2007.”
“So precisely those banks suffer the most that have never put the financial system at risk,” he said. “This is unfortunately not free of bitter irony….”
The door to punishment interest has been cracked open. It starts with large deposits and small rates. Then step by step, deposit amounts get smaller and punishment interest rates get larger until everyone gets smacked with it, and no money is save. It’s all part of the time-honored central-bank strategy to flog savers until their mood improves.
Germans don’t get to do this, but the lucky Swiss get to: they get to go to the polls and tell their central bank what to do about gold. A yes-vote will send shock waves through the gold market and other central banks. Read… What the Swiss Gold Referendum Means for Central Banks
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Already done by bail-in
"On the basis of a potential scenario, the key shareholders and depositors of special privileges, who will have the suitable access on 'inside information' about an oncoming banking crisis, will have the opportunity to withdraw capitals and deposits on time, leaving the rest, therefore mostly, small depositors and independent shareholders, to pay the bill."
http://failedevolution.blogspot.gr/2013/07/why-banksters-laugh-with-rece...
Funny though it is a Direct Bank without branches and a sub of a Mutual. At least we all know Skatbank exists with this publicity stunt
and any money over €100K the banksters see as theirs to take if and when and whilst they are waiting to do this they will nibble at it in the meantime
In case there's any doubt please note that the current banking Ponzi scheme can be kept afloat only in conditions of economic 'growth' and inflation. That knowledge is what drives ZIRP and the punishment of savers.
I don't see this as sitting well with the traditional German mindset of saving as opposed to borrowing. When it sinks in that this is in fact what is being DONE, there may be blowback from the German business community. Which I believe have an important voice in German politics.
When fiscally conservative businesses find themselves being 'taxed' on their hard-earned savings in order to provide low-interest loans to spendthrifts, much Teutonic shit will hit the fan.
"...the wrath of Draghi.
Retail and business customers with over €500,000 on deposit as of November 1 will earn a “negative interest rate” of 0.25%. In less euphemistic terms, they have to pay 0.25% per annum to the bank for the privilege of handing the bank their hard-earned money or their business cash."
behold the wrath of Draghi. just in case you opened an account for over half a million EUR last time you visited the eurozone, don't forget to close it
and here, my dears, the rubber hits the tarmac. or propaganda meets reality
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without inflation expectation component and without risk component... well, take inflation and risk away and there is no interest
"you save what you get and you get what you save"
You go first; I'll bring up the rear.
Let's see if I have this right... the Central "Banks" are going to penalize people for saving (in banks), which they seem to believe will encourage people to BORROW (from banks) and become debt slaves, because with inflation/hyperinflation they will never be able to pay off what they borrow, and any currency that they hoard apart from banks will gradually (or not so gradually) become worthless, thus FORCING people to borrow from the banksters (see above).
That about sum it up?
Sooo... what about the "Law of Unintended Consequences"? (One of my favorite laws!!!)
What about the things that these brilliant banksters would never consider - like the possibility that the people who would have put their money in banks ("savings") will now NOT put money, or any form of wealth in banks. ie the wealth generators and wealth holders will stop sharing with the banks?
It seems to escape the imagination of banksters that they are not necessary to the performance of ordinary daily human functions - like eating, sleeping and shitting. That these functions can be carried on without them, and throughout most of history, money has not generally been required for these activities, and finally, that "money" can be a very slippery term.
A fact that the "banksters" and "banks" should consider is that "money" is not necessarily "currency", and in fact throughout history it is usually NOT. And that all the Banksters REALLY control is CURRENCY, WHICH THE PEOPLE CAN GET BY WITHOUT.
As for gold (generally PMs), again throughout history the vast majority of people have none, want none, and get by really well without them.
As to their last and final fallback belief, that they and their money control the armies and that outside of armies, "guards" can be "hired" at a relatively low rate... what do they plan for the General or Guard company owner who figures out that a bankster is just a flabby target, and that if the world was a really equitable place, the people with guns would be in charge, not the banksters? (And unlike the banksters, "Free Armies" generally share the booty AND the risk with their troops.)
As some few are wont to say, "We live in interesting times."
Completely agree. Plenty of opportunity right now for free people and free armies...
So long as we can still keep what we kill moving forward, it's all good...
the world needs to be careful what it wishes for.
A sound formula for retirement savings, Ghordius.
LOL. Well, as I say, he can go first, I'll watch and see how it turns out for him.
I know what you mean. And yet, how did people save, without fiat? One ounce of gold is... one ounce of gold
saving is not investing. if you don't want risk, you don't want investment. speculation is not saving, too
if this is going to be terrible, it will depend from the outcome. remember which currency exerts such a gravitational pull on all the others. it's not the EUR
I'm so glad you poiinted that out. one ounce of silver is one ounce of silver. Yeah, I think I like that idea. Saving in a currency is not a risk; Ghordius unless you're sound asleep it's guaranteed confistication; inflation//devaluation exists; it's ongoing.
"It’s the latest and most blatant step of the central-bank strategy to confiscate in bits and pieces and over time the wealth that prudent people and businesses have accumulated, and that should have re-entered the economy via the intermediation of the banks."
Let's be clear. These "prudent" people would have never had the cash in the first place had the government, aided by central bankers, not dished out cash and benefits like candy over the last several decades. There is already too much currency in the system, that is why the intermediation process cannot complete itself. Too much cash, not enough opportunities.
In the process, COMPLETELY destroying entire generations of young people who cannot get a job because their parents, grandparents and great grandparents voted in hyper-socialist governments far too timid to tax the current electorate. Instead, content with passing the bills to the unborn. Now their jobs are in other parts of the world.
As far as I am concerned, re-confiscating savings is only a good start. Age-based wealth and death taxes to re-confiscate funds (to pay off the debts) of soverign nations are also required.
Your solution lacks moral direction. These older generations were served up a promise by a government/banking oligarchy that cloaked its deceit with a vision of economic growth based on Liberty and Justice. The people so many call sheeple are folks like my parents who had the idea drummed into their heads from infancy of a government founded by the People and for the People and operating under the guidance of Reason. Sacrifice would be required at times for the common good, but the end game was moral and just. That was the cloak of the oligarchy that allowed it to move around the world unchecked to steal capital and labor. Make the Oligarchy pay, not the Citizens.
So you despise what the state has done to the economy and want to let the state confiscate the wealth of individuals to fix it....brilliant...
Lasagnapersona, you can go right along and continue to define "wealth" as the net worth entities and individuals own outside of the government. I refer to the net worth entities and individuals own outside of the government as the "Assets". For that matter, add in unfunded liabilities for pensions, SS, etc. The liabilities are on the "State" side of the ledger. That is the amount politicians were to afraid to collect. Cause they would have never been voted in. These are liabilities that must be paid down or inflated away which is crushing youth in the entire developed world.
See, you all thought you had your commune working great, right? You figured that if you graciously included the unborn to receive no benefits, but all the bills, no one would be the wiser. All I'm saying, is that the gig is up.
And the people that benefitted the most from the 20th century socialist experience, should be responsible for paying down the debts.
Oh, and BTW, I believe the article stated the charge was for accounts with amounts over 500,000 Euro. If it had said every account and that the working poor and those impoverished by 20th century socialism experiment would be impacted, I would feel differently.
nobody is going to pay down any debts; yuu're completely out of it. lost the plot. their jobs are in foreign countries because their governments put them there. If the working poor were affected you "feel" differently. yeah; you would; but you still wouldn't be able to think straight, and you still wouldn't be bothered to find out what actually happened in the 20th. century. You are the problem.
Real wealth is real things, 'assets' are often derivatives of real wealth with counterparty risk.
When savers save they do so to obtain real wealth in the future. When the vehicle they are offered for saving in is flawed they they will be deprived of the real wealth they want and the paper promises they accepted for giving up their savings will fail.
Currency and all currency derivatives like bonds always lose value over time as the state over prints to satisfy the demands of voter for 'more help'.
Gold is a uniquely useful vehicle for savings. It is usually suppressed but from time to time rises in value as it did in 1980 (a 24x increase in 6 years.) Some of us see another explosion to the upside and are buying physical to protect our savings...but that's just crazy talk.
Oh, definitely crazy talk; the experts have got everything figured out; there's nothing to worry about.
Mr Ponzi was an expert too!
Hey look guys a Statist.
Enjoy the gas chamber!
I'll stick with ZH. The experience is almost as good!
me thinks after posting that kind of drivel, you're not really big on experience. We'll just start calling you 10 second Tom now.
https://www.youtube.com/watch?v=Jk7WuvNKe_g
Start confiscating funds from bank accounts and see what happens. Are you really that stupid are did you forget to type /s?
They guarantee deflation by charging 'reverse interest'. It may take a while for depositors to catch on but, when they do, the Bank of Stearns and Foster will reap the most profits.
@sun tzu, I think he really is that stupid...and angry that nobody stuck a tit in his/her mouth.
LOL I love tits. @sun tzu, that avatar... maybe not so much...
You are due for a Ayn Rand enema. Now bend over this won't hurt a bit.
Somethig tells me Ayn would not have been a slow warm fuzzy bang. But I'd a done her anyways. Just to hear her talk about small government during the particulars would have been worth it.
Size matters.....
The Most,
I believe you mis-identify who the "prudent" savers are.
They are not the TBTF banks that have received trillion$ of handouts,
nor are they the MIC industry beneficiaries of cost-plus warfare & policing.
Nor do the top .01% have their wealth deposited in savings accounts.
(and before you buy into any "generational" blame-finding, at least consider
what is the primary age group of the military-police enforcers of the empire)
I don't think you understand how Nature, chaos theory, or moral hazard work.
That's gonna leave a mark.
Or maybe recreate one;)
It would have in the old days, now its going to leave a euro.
Think of it as payment to watch your money
A payment for them to safeguard their own liabilities.
This shit is just too fucking sweet!
So... why did I ever give up drinking my breakfast, again?
American banks already do it but call it a 'service charge'.
'Blind-side' charge. That's been my experience. I always close an account after getting blind-sided.
All your moneys are belong to us...
It's starting people, the unraveling of the euro and the western banking system.
Doesn't Skatbank in English slang mean something like CrapBank?
Hey CrapBank, I've got a deposit for you right here.,,,
in Germany Skat is a card game for 3 players. There is no strip version, though.
It's actually a shell game.
shitbank
fecesbank
manurebank
turdbank
This'll help get Germany out of the Euro.......
More probably, this will help the Germans (re)discover GOLD... preferably in its phisical form...
I'm not so sure.
History has showed that pissing off the German people has had unusually bad consequences. They would tend to focus on the perpetrator, not on 'wise investment choices'.
It ranks somewhere up there with "Poking the bear"