It Begins: German Bank 'Charging' Negative Interest To Its Retail Customers

Tyler Durden's picture

Submitted by Simon Black via Sovereign Man blog,

Don Quixote is easily one of the most entertaining books of the Renaissance, if not all-time. And almost everyone’s heard of it, even if they haven’t read it.

 

You know the basic plot line- Alonso Quixano becomes fixated with the idea of chivalry and sets out to single-handedly resurrect knighthood.

 

His wanderings take him far across the land where he gets involved in comic adventures that are terribly inconvenient for the other characters.

 

He famously assaults a group of windmills, believing that they are cruel giants. He attacks a group of clergy, believing that they are holding an innocent woman captive.

 

All of this is based on Don Quixote’s completely delusional view of the world. And everyone else pays the price for it.

 

Miguel de Cervantes’ novel is brilliantly entertaining. But the modern-day monetary equivalent is not so much.

Central bankers today have an equally delusional view of the world. Just three months ago, Mario Draghi (President of the European Central Bank) embarked on his own Quixotic folly by taking certain interest rates into NEGATIVE territory.

Draghi convinced himself that he was saving Europe from disaster. And like Don Quixote, everyone else has had to pay the price for his delusions.

On November 1st, the first European bank has passed along these negative interest rates to its retail customers.

So if you maintain a balance of more than 500,000 euros at Deutsche Skatbank of Germany, you now have the privilege of paying 0.25% per year… to the bank.

We’ve already seen this at the institutional level: commercial banks in Europe are paying the ECB negative interest on certain balances.

And large investors are paying European governments negative interest on certain bonds.

Now we’re seeing this effect bleed over into retail banking.

It’s starting with higher net worth individuals (the average guy doesn’t have half a million euros laying around in the bank). But the trend here is pretty clear– financial repression is coming soon to a bank near you.

It almost seems like an episode from the Twilight Zone… or some bizarre parallel universe. That’s the investment environment we’re in now.

Bottom line: if you’re responsible with your money and set some aside for the future, you will be penalized. If you blow your savings and go into debt, you will be rewarded.

If we ask the question “cui bono”, the answer is pretty obvious: heavily indebted governments benefit substantially from zero (or negative) rates.

Case in point: the British government just announced that they would pay down some of their debt that they racked up nine decades ago.

In 1927, then Chancellor of the Exchequer Winston Churchill issued a series of bonds to consolidate and refinance much of the debt that Britain had racked up from World War I and before.

This debt is still outstanding to this day. And the British government is just starting to pay it down– about $350 million worth.

Think about it– $350 million was a lot of money in 1927. Thanks to decades of inflation, it’s practically a rounding error on government balance sheets today.

This is why they’re all so desperate to create inflation… and why they’ll stop at nothing to make it happen. (It remains to be seen whether they’ll be successful, but they are willing to go down swinging…)

What’s even more extraordinary is how they’re trying to convince everyone why inflation is necessary… and why negative rates are a good thing.

On the ECB’s own website, they say that negative interest rates will “benefit savers in the end because they support growth and thus create a climate in which interest rates can gradually return to higher levels.”

I’m not sure a more intellectually dishonest statement could be made; they’re essentially telling people that the path to prosperity is paved in debt and consumption, as opposed to savings and production.

These people either have no idea how economies grow and prosper, they’re outright liars, or they’re completely delusional.

I’m betting on the latter. Either way, this assault on windmills has only just begun.

As Don Quixote himself said, “Thou hast seen nothing yet.”

*  *  *

Our goal is simple: To help you achieve personal liberty and financial prosperity no matter what happens.

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Tsar Pointless's picture

Oh, NO! I'm worried! I guess I'll have to find somewhere else to store my hundreds of thousands of euros.

Wait...I DON'T HAVE HUNDREDS OF THOUSANDS OF ANY CURRENCY. I guess I'm not worried.

CrazyCooter's picture

Dont they know that "Deutsche Skatbank of Germany" means "German Shitbank of Germany" in English?

Regards,

Cooter

Gamma735's picture

Like Dominoes will the Western countries' economies fall in desperate attempts to keep their failed system running.  Central Banking is evil and destorys freedom.

Cognitive Dissonance's picture

"I'll gladly pay you interest each and every Wednesday if you'll let me deposit my money in your bank today." - Wimpy

ZerOhead's picture

If the negative interest rate is between 50% and 100% per annum the technical term is "bail-in"...

hedgeless_horseman's picture

 

 

 

Good article, Simon!

On the ECB’s own website, they say that negative interest rates will
“benefit savers in the end because they support growth and thus create a
climate in which interest rates can gradually return to higher levels.”

 

I’m not sure a more intellectually dishonest statement could be made;
they’re essentially telling people that the path to prosperity is paved
in debt and consumption, as opposed to savings and production.

Try this for intellectual dishonesty.  On The Fed's own website, they say:

The Division of Banking Supervision and Regulation is responsible
for the oversight of U.S. banking holding companies, foreign banking
organizations operating in the U.S., and state-chartered member banks of
the Federal Reserve System
. The Division develops and
implements safety and soundness and other regulations for these entities
under Board direction and in collaboration with Reserve Banks and other
domestic and international regulatory authorities. In addition, the
Division supports the conduct of monetary policy by monitoring current
conditions and prospective developments affecting the banking industry
and financial markets more generally.

If the Fed's own website were to list who actually owns The Federal Reserve Bank, it would be the very same U.S. banking holding companies, foreign banking organizations
operating in the U.S., and state-chartered member banks of the Federal
Reserve System
it is charged with regulating.

Self-regulation for the mother-fucking win!

nope-1004's picture

Meh.... 1250 Euros (~ 100 per month) for someone that has 500,000?  It's like a convenience charge to keep in the the bank for someone with that kind of a balance.

 

Ya ya, I know.  It's the PRINCIPLE of the matter, just like all the other bailouts, banker lawsuits, and legal accounting (FASB) that's gone on over the years.  Right?

Lore's picture

It's like big government. It starts small.

ZerOhead's picture

So long as the bank's negative interest rate is less than 10% however it's refered to in the industry as a "tasting" the customer accounrt...

HardlyZero's picture

This is not...

Fifth Column

Fourth Estate

 

Its is...

Third RAIL....the Banksters and going over there and touch it .

 

Unbelieveable

http://www.youtube.com/watch?v=GKYcgMU-nJQ

Cacete de Ouro's picture

Ahh, the famous Skatbank, brought to you by Skatman

http://youtu.be/y6oXW_YiV6g

McMolotov's picture

I was just about to post that, but then I figured people would hate me the rest of the day.

Cacete de Ouro's picture

It's annoyingly catchy, I'm probably still be humming it tomorrow...

BrosephStiglitz's picture

The skatman looks like John Maynard Keynes.

Bunga Bunga's picture

"Skat" is a game for three players, something like a shell game.

TheFourthStooge-ing's picture

Ist das nicht im Arsch gefickt?
Ja, das ist im Arsch gefickt!

Ist das nicht sehr verächtlich?
Ja, das ist sehr verächtlich!

O, diebische Betrug Skatbank,
O, diebische Betrug Skatbank.

MontgomeryScott's picture

@ CrazyCooter:

"Dont they know that "Deutsche Skatbank of Germany" means "German Shitbank of Germany" in English?"

NO, NO, NO...

A 'Scat-bank'. if I understand correctly, would be a group (a 'bank', as it were) of people that all look like 'Fat Bastard', all together; with deliveries on deck, ready to crown their openings to deliver their 'treasures' to their client recipient(s).

These are simply a group of bankers, doing God's work, delivering their results to their client savers. I fail to see the resemblance. HEY, if you don't WANT to pay them for their services, you are always free to LEAVE (but 'early withdrawl' will be penalized, as agreed upon).

 

Bangalore Equity Trader's picture

Listen Pointless.

Ha. That "WAS" funny. A good opener for a Simon Black thread. But seriously, why would anyone have fiat. Fuck that.

My mates and I here in India accumulate "FAVORS". I believe in America you call it barter.

I do masonry work on the weekends as a hobby. Also Residental/Commercial electrical, circuit design, 3D prototyping, accurate concept models, master patterns and investment casting patterns. My friends an I trade goods and services as credits with no monies changing hands.

It's an excellent method. You quickly learn who is the greedy one and no one trades with him ever again(Fuck you Baasim!)

Anyhow. I want you to try this method to overcome your dependance on worthless fiat. Start small and grow big.

Tinky's picture

Wow, a constructive contribution. I'll be damned!

Bangalore Equity Trader's picture

Listen! Is that you Baasim? Fuck you!

TheReplacement's picture

LOL first up vote from me.  That was funny.

Larry Dallas's picture

So you are proposing we go back to 3rd world bartering? How does one create wealth that way when you can't use your hands after a certain period of time? You have a career expectancy of an NFL player.

 

Bangalore Equity Trader's picture

Listen.

No. I want you to be a tribesman. Use everyone around you to create wealth for "YOU". Then discard them and live like king and help only tribesmen so they can discard and live like king.

Smart guy you are.

unrulian's picture

So...you do investment casting patterns and 3D prototyping on the weekends between digging outhouse holes (masonry) and posting 24 hours a day on ZH?

Bangalore Equity Trader's picture

Listen.

I'm not Doo Chung Rollar Bering!

MontgomeryScott's picture

AND, you said,

"Use everyone around you to create wealth for "YOU". Then discard them and live like king and help only tribesmen so they can discard and live like king."

LISTEN.

As you climb the ladder, try not to step on too many fingers and toes of those you are passing; because when you eventually reach the top and are forced to make your way down, these people won't and can't help you descend comfortably. in fact, if you get to the top and have no more ladder to climb, these people will willingly push you over in their own internal desire to assuage their injuries that you inflicted on them. At that time, those 'tribesmen' will turn their backs and pretend not to notice as you cry out in distress and horror.

Don't continue to play the part of a fool.

Semi-employed White Guy's picture

Rules of Fight Club:

1.  Do not trade with Baasim.

2.  Do no talk about Fight Club.

3.  Do not trade with Baasim!

Irishcyclist's picture

Negative Interest Rates = Bank Bailin by Stealth

Jethro's picture

Dang!  I didn't see your comment before I posted mine.  That was exactly my first thought as well.

NoDebt's picture

Haven't had a bank account in 20 years now.  Doesn't mean I don't have an ATM card and checks.  It just means there are other places to bank than at a bank.

Just in fees, fines and penalties for crossing over imaginary lines you can be losing 20% of your account balance in year if you don't watch what you're doing.

If you can't quite swing life cash-only (harder than it sounds), at least avoid banking at banks.  They've sucked since forever.  Believe me, you have been paying them since forever, even without negative interest rates.

Overfed's picture

Bank with a a credit union for a checking account. Pay cash whenever possible. Buy silver. Bitchez.

Bunghole's picture

I pay cash for everything and ask for a 2% cash discount on purchases over $500

Starve the system.

sleigher's picture

no bank account here since 1994.  It was interesting anyways...  The guy in the branch denied me a savings account, told me it was a "character issue".  

I have not given 1 cent to a bank since that day.  Well maybe in some roundabout way I have but not directly.

ebworthen's picture

A NIRP of -0.25% for having over 500,000 Euros? 

They are going to chase money out of Germany.

And I suppose they'll scale that down gradually until it is 10,000 Euros, then 5,000, then 50.

Jethro's picture

It's like a slow motion bail-in.

seek's picture

"And I suppose they'll scale that down gradually until it is 10,000 Euros, then 5,000, then 50."

That's what bank fees are for. If you have accounts at TBTF bank (shame on you!) you're already likely experiencing negative nominal rates. God knows we've already been at negative real rates for some time.

Even my non-TBTF business accounts (but not my personal CU accounts) are negative nominal rates. They're stealing nickels everywhere.

ebworthen's picture

True that.  U.S. Bank was the only one I could find that wouldn't charge me a monthly fee for holding my money, and only if I applied for a Platinum credit card.  I don't use the card or account much, so they keep calling me to see if I "need" anything.

The TBTF's all charge a fee to hold your money - after they got bailed out - talk about adding insult to injury.

Panic Mode's picture

The old saying of people used to keep a suitcase of money under their beds perhaps is the new normal. 

seek's picture

It appears certain that it'll have higher returns than being in a bank account.

Just wait until banks start advertising "safety" to support the cost of keeping money in a NIRP account. That's going to be amusing.

WTFUD's picture

.25% teh, let's go All in and make it a 25% bail-in. s/

MontgomeryScott's picture

If I was a central banking spokesman, I would respond thusly:

"You don't seem to understand. The figure only represents two and a half 'basis points'. It would equate to only an additional $250.00 added as interest to a loan you took for your $100,000.00 house. If it is streched over 30 years (the average life of the loan), it would only be $8.34 per year. Naturally, the average loan is for $500,000.00, but even at that amount, it only equates to approximately $42.00 a year (I'm not actually good at math, though). Is THIS trivial amount too much to pay for all the other benefits that YOU, the CONSUMER, realize as you have the ability to enter our bank building and our air-conditioned environment?. In retrospect, WE see this as a 'win-win' situation for everyone. It's NOT YOUR MONEY, really, you know. We print it and disperse it and control the supply of this commodity that you have come to rely on."

Bell's 2 hearted's picture

"But the trend here is pretty clear– financial repression is coming soon to a bank near you."

 

maybe ... the author does not address another possible reason for negative (and low) yields in germany

 

imo, the reason for low yields in germany is a BET ON EURO BREAK UP (germany leaving)

 

buy debt denominated in germany ... if break up occurs the germany mark will soar compared to euro

 

low/negative rates is the price to pay for big gain in currency

Doubleguns's picture

Cash in the fiat and buy PM. Problem solved. I see this as PM positive. 

kchrisc's picture

"Pay us for the privileged of stealing your deposit and using it as a base against our counterfeit loan-money. And just wait until we force you to relinquish your interest in your deposit and turn it into equity in our ponzi."

An American, not US subject.

 

"We are the Zionist banksters: We own your fleece, your hide,, your flesh, and your lambs."

css1971's picture

WTF? A deposit is a loan to the bank.

Fine! Give me my paper please! Long safes and PVC pipes.

Bunga Bunga's picture

When you bring your fruits to the bank, they are eaten right away by the bank.