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Central Banks Helpless As Denmark Goes NIRP, Cuts Deposit Rate To NEGATIVE 0.2%

Tyler Durden's picture




 

A few days ago we noted that the ECB may well be contemplating the monetary neutron bomb, which would see it lower rates to below zero, ushering in a Negative Interest Rate Policy. Today, Mario Draghi cut such speculation short promising the ECB has not discussed this. Yet one bank which certainly has is the Danish Central Bank, which just lowered its Discount Rate to 0%, joining China, England, the ECB, and, of course, Kenya in easing, but also went one step further and cut its deposit rate to negative 0.2%. Keep a note of this: NIRP is coming to a central bank, and shortly thereafter to a bank deposit branch, near you very soon.

From Bloomberg:

Denmark’s central bank cut its main borrowing costs to record lows and brought the rate it offers on certificates of deposit below zero, as policy makers test uncharted territory to fight a capital influx.

 

The benchmark lending rate was cut to 0.2 percent from 0.45 percent, while the deposit rate was reduced to minus 0.2 percent from 0.05 percent, Copenhagen-based Nationalbanken said in a statement today. The move followed a quarter of a percentage point cut in the European Central Bank’s main rate to 0.75 percent. Nationalbanken doesn’t hold scheduled meetings and only adjusts rates to defend the krone’s peg to the euro.

 

“There’s no experience of how negative deposit rates will affect the financial markets and the krone,” Jacob Graven, chief economist at Sydbank A/S, said in a phone interview today before the decision was announced. “It’s a sign of the strong Danish economy. This is good. The opposite situation would be far worse, if the central bank would have to hike rates to defend the krone. We have a luxury problem.”

 

Denmark has stepped up its battle to prevent the krone from strengthening beyond its currency band as the nation’s haven status attracts investors. Danske Bank A/S, the country’s biggest lender, said last week it now has a risk scenario that envisages Denmark abandoning the peg should the cost of fighting currency appreciation grow too high. The bank doesn’t view this as a likely outcome, it said.

The liquidity trap has been sprung. Soon everyone will be paying their banks for the privilege of holding their cash for them.

 

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Thu, 07/05/2012 - 12:28 | 2589231 twotraps
twotraps's picture

exactly.  would like to have put on some long term raio spread betting against treasuries....you'd have a free trade on at this point.  Hard thing is, when things move now...the way to make money is fade it with options, then leg into something later to keep a cheaper trade on.....so doing exactly the opposite, taking stupid risk just to have longevity if you are trading options for a big move like we are talking about.

Thu, 07/05/2012 - 11:29 | 2589023 Everybodys All ...
Everybodys All American's picture

wait fro the US Treasury ten yr to go negative yield first.

Thu, 07/05/2012 - 10:55 | 2588828 hedgehog9999
hedgehog9999's picture

fuck you Copenhagen Nationalbanken!, hope you lose all your deposits, lots of banks and credit unions still offer a respectable positive interest rate.....+ even as fiat, that paper is worth more under a matress...

Reverse fracctional banking on the launch pad.......

 

Thu, 07/05/2012 - 10:49 | 2588833 Everybodys All ...
Everybodys All American's picture

Why would anyone hold money at those banks?

Thu, 07/05/2012 - 10:58 | 2588892 stocktivity
stocktivity's picture

That's the point...they are forcing savers to take more chances with their savings to get a higher return. If people put money in stocks and the market keeps going up, the illusion of better times should keep people spending money. It's all Bullshit!

Thu, 07/05/2012 - 11:09 | 2588951 BlackholeDivestment
BlackholeDivestment's picture

...is this the part where Zombie Bank Brain comes to mind,lol, ...to describe depositors 

http://www.youtube.com/watch?v=gMOIVgcik44

Thu, 07/05/2012 - 11:33 | 2589035 Everybodys All ...
Everybodys All American's picture

There is no way this will change risk appetite or spending behavior in EUrope. They will just park it in some other foreign bank.

Thu, 07/05/2012 - 10:50 | 2588843 Son of Loki
Son of Loki's picture
Competitive devaluation now may engulf Denmark

 

The head of Denmark's central bank has warned that the Danish krone is coming under intense pressure from investors seeking a haven in Europe and betting that the currency's peg to the euro could be cracked by the crisis.

Nils Bernstein, the governor of the Danish central bank, said that the upward pressure on the krone was the most severe he had seen in his seven years as governor, and warned that negative interest rates could be on the cards if the problem continues.

"You can see from our history that we like to keep the krone within a narrow band, half a percentage point or less," said governor Nils Bernstein. "I think we have to tools to continue to do that, and if it is necessary to move into negative interest rate territory, we will be ready for that."

 

http://gata.org/node/11482

 

Ben is getting jealous...Nils, et. al. are beating him at his own game.

Thu, 07/05/2012 - 10:51 | 2588844 Calculated_Risk
Calculated_Risk's picture

Your REALLY fucked when you can't even run a business that prints money!!!

fucking bankers!

Thu, 07/05/2012 - 15:06 | 2589816 twotraps
twotraps's picture

That is actually a great way to look at it.

Thu, 07/05/2012 - 10:51 | 2588846 Snakeeyes
Snakeeyes's picture

Here is the thing. None of this is doing any good other than raising the likelihood of devastating inflation. So why do it? Never mind!

http://confoundedinterest.wordpress.com/2012/07/05/central-banks-gone-wild-yet-spainitaly-see-higher-sovereign-yields/

Thu, 07/05/2012 - 10:51 | 2588851 sudzee
sudzee's picture

Back in 2008 a big problem, we were told, was money markets breaking the buck. Now everything is breakin the buck. I think its about time to load up on a couple tons of pork and beens.

Thu, 07/05/2012 - 10:56 | 2588881 BlackholeDivestment
BlackholeDivestment's picture

...is that the, awe what is it? ...starts with a ''B'' and ends with Hole. http://www.youtube.com/watch?v=_tkT3AvE8kk

Thu, 07/05/2012 - 10:56 | 2588883 Svendblaaskaeg
Svendblaaskaeg's picture

"Soon everyone will be paying their banks for the privilege of holding their cash for them."

 

...not everyone - I prefer paying Germans Danish kroner for the privilege of holding Swiss gold bars and American Silver Eagles 

Thu, 07/05/2012 - 10:59 | 2588896 crawl
crawl's picture

How long will it take the Danes to withdraw their cash from the banks? 

Thu, 07/05/2012 - 11:43 | 2589093 Svendblaaskaeg
Svendblaaskaeg's picture

..I had no problem finding a Danish bank that offer 3.75%

http://www.fih.dk/

Thu, 07/05/2012 - 11:00 | 2588903 aleph0
aleph0's picture

The next  Bank Run in Europe soon ? ... all that cash suddenly disappearing under mattresses.

Thu, 07/05/2012 - 11:01 | 2588908 francis_sawyer
francis_sawyer's picture

OT MIND READING session

~~~

Quick... Think of a country in Europe that begins with the letter "D"

- now think of an animal that starts with the same letter as the last letter in the country you thought of...

- now think of a fruit that starts with the last letter of the animal you just thought of...

...francis_sawyer contemplates...

You're thinking of a kangaroo with an orange in Denmark!

Now my next mind reading trick... I see stuffed mattresses everywhere... How do you get that money out of the mattresses? Hyperinflation...

 

Thu, 07/05/2012 - 11:19 | 2588977 Oldballplayer
Oldballplayer's picture

Actually I was thinking of the Kiwi, the little bird from New Zealand and Illawarra plu.  But I get your point.

 

Thu, 07/05/2012 - 11:19 | 2588978 Oldballplayer
Oldballplayer's picture

Actually I was thinking of the Kiwi, the little bird from New Zealand and Illawarra plu.  But I get your point.

 

Thu, 07/05/2012 - 11:25 | 2589007 Sudden Debt
Sudden Debt's picture

eeeuuuuhhh....

D... Donkey... Yellow watermelon...

 

Thu, 07/05/2012 - 12:14 | 2589183 francis_sawyer
francis_sawyer's picture

"Donkey" isn't a country in Europe... Or wait! Maybe it is...

Thu, 07/05/2012 - 11:05 | 2588933 Jake88
Jake88's picture

i wish i could understand this stuff. won't everyone take their money out.

Thu, 07/05/2012 - 11:12 | 2588958 Winston of Oceania
Winston of Oceania's picture

See Dollar Menu above...

Barter and PM's me hearty's

Thu, 07/05/2012 - 11:22 | 2588993 Sudden Debt
Sudden Debt's picture

just unreal...

untill....

it's all...

to late...

 

Thu, 07/05/2012 - 14:23 | 2589669 Bobportlandor
Bobportlandor's picture

Jake88 start here with these videos [watch] [browse all] look under Finance, or go to Credit Crisis then on to Paulson Bailout.

http://www.khanacademy.org/

Thu, 07/05/2012 - 11:06 | 2588938 DollarMenu
DollarMenu's picture

Once enough people take their money out of the banks as cash,

there will be a new currency issued, one with an expiration date.

Old currency no longer legal tender, limited exchange period.

The only way to extend the expiration date will be to make a NIRP deposit

at your friendly TBTF.

There can be no end to their imaginative games.

Thu, 07/05/2012 - 11:17 | 2588972 laomei
laomei's picture

China's not 0%, I'm still getting over 6% on my fixed deposits and about 1% on my non-fixed. 

Thu, 07/05/2012 - 11:20 | 2588984 Sudden Debt
Sudden Debt's picture

GOLD!!

SILVER!!

WHY FREAKING PAY A MANIPULATOR TO STORE YOUR MONEY FOR SAFETY?!!

GOLD!!!

SILVER!!!

Fri, 07/06/2012 - 06:46 | 2591140 laomei
laomei's picture

Why limit yourself?  Sure, i've been stacking.

2kg of gold, 100kg of silver

But it's not like that's my whole stash.  All about diversification my friend.  Cash, PMs, land, property. Then a little bit in funds... even though it's not doing anything significant, but meh.

Thu, 07/05/2012 - 11:22 | 2588995 arkady
arkady's picture

“It’s a sign of the strong Danish economy. This is good. The opposite situation would be far worse, if the central bank would have to hike rates to defend the krone. We have a luxury problem.”

What? 

Thu, 07/05/2012 - 11:27 | 2589012 Sudden Debt
Sudden Debt's picture

what about "It's a sign of stupidity!"

Thu, 07/05/2012 - 11:42 | 2589088 arkady
arkady's picture

I just feel like we are living in the twilight zone when I read crap like that.

Thu, 07/05/2012 - 11:27 | 2589014 Mark123
Mark123's picture

Sometimes you have to shake your head at some of this stuff....this one caught my attention since it is central to the whole post 2008 world.  Basically it says that taxpayers MUST pay the full cost of unwinding the pnzie scheme built by bankers that already sucked all the wealth from the system.  In other words, we get raped, go to the police, and the police bring in the rapist and ask you to lay down and get raped by them again.  What a sweet world.

From Bloomberg:

Euro-area leaders sought to ease the terms of Spain’s bank bailout by assuring bondholders their claims won’t be junior to those of taxpayers.

Thu, 07/05/2012 - 11:35 | 2589047 High4Life
High4Life's picture

-ve deposit, WTF, that's like a freakin overdraft by the bank.  When and where are they gonna cover that?  They mind as well declare bankruptcy.  If I were their depositor, I'll withdraw completely, and buy gold.  This is absolutely fraudulent and criminal!! 

Thu, 07/05/2012 - 11:39 | 2589073 williambanzai7
williambanzai7's picture

What new monetary paradigm will we have after the great reset?

iKredyts?

Thu, 07/05/2012 - 11:46 | 2589103 Skizo
Skizo's picture

On the 3 of Juli the Danish goverment sold 2y bonds (3.65Billion DKK) @ -0.05% and 10y (1.8Billion DKK) @ -0.05%

All I can say is: What Interbank market?

Thu, 07/05/2012 - 11:52 | 2589126 Frastric
Frastric's picture

MAD: Mutually Assured Destitution

Thu, 07/05/2012 - 13:00 | 2589379 elwu
elwu's picture

"The liquidity trap has been sprung. Soon everyone will be paying their banks for the privilege of holding their cash for them."

Or they take the money and buy assets. And consume more. I would.

Thu, 07/05/2012 - 13:25 | 2589478 Bansters-in-my-...
Bansters-in-my- feces's picture

Remind me again why we need banks,I keep forgetting.

Thu, 07/05/2012 - 13:28 | 2589482 Fix It Again Timmy
Fix It Again Timmy's picture

We need banks so the bankers have somewhere to go in between leaving home in the morning and playing golf in the evening...

Thu, 07/05/2012 - 13:41 | 2589532 ChacoFunFact
ChacoFunFact's picture

The power of Demurrage: The Worgl Phenomenon

http://realcurrencies.wordpress.com/2012/07/02/the-power-of-demurrage-the-worgl-phenomenon/

 

"The velocity of money is a badly neglected aspect of monetary theory. It is far more important than people realize and both in past and in the present depression, sluggish circulation played a major and negative role. The most obvious way of increasing the velocity of money is Silvio Gesell's demurrage, a negative interest rate, in effect a tax on holding money. This is not just theory. There is a famous case in which it was implemented. The Wörgl experiment showed truly extraordinary results and is legendary in Interest-Free Economics."

Thu, 07/05/2012 - 15:01 | 2589795 Bansters-in-my-...
Bansters-in-my- feces's picture

Testing...Testing....

Teasting...1...2...3

Thu, 07/05/2012 - 15:12 | 2589842 Bansters-in-my-...
Bansters-in-my- feces's picture

Denmark just got a Tit Twister>>>>>

Ouch.!!!

Thu, 07/05/2012 - 22:07 | 2590763 WallowaMountainMan
WallowaMountainMan's picture

i'd be worried if i actually had any money left over from my paycheck.

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