Negative interest rates are the biggest scam this year
FRB: Interest on Required Balances and Excess Balances
The ECB rules are similar.
I put a lot more credence with the former chairman of the Federal Reserve Bank than bozos at GFY pointing to the sky is falling claims at zerohedge
Quote:
What tools does the Fed have left? Part 1: Negative interest rates | Brookings Institution
Ben S. Bernanke | March 18, 2016 11:00am
What tools does the Fed have left? Part 1: Negative interest rates
[C]onclusion on negative interest rates
The anxiety about negative interest rates seen recently in the media and in markets seems to me to be overdone. Logically, when short-term rates have been cut to zero, modestly negative rates seem a natural continuation; there is no clear discontinuity in the economic and financial effects of, say, a 0.1 percent interest rate and a -0.1 percent rate. Moreover, a negative interest rate on bank reserves does not imply that the most economically relevant rates, like mortgage rates or corporate borrowing rates, would be negative; in the US, they almost certainly would not be. Negative rates have some costs, in their effects on money market funds for example, but these ought to be manageable. On the other hand, the potential benefits of negative rates are limited, because rates that are too negative would trigger hoarding of currency. Although the European experience suggests that rates can be more negative than the Fed staff estimated in 2010, I don’t think U.S. rates could approach the extreme values seen in Switzerland or Sweden without becoming counterproductive.
Overall, as a tool of monetary policy, negative interest rates appear to have both modest benefits and manageable costs; and I assess the probability that this tool will be used in the U.S. as quite low for the foreseeable future. Nevertheless, it would probably be worthwhile for the Fed to conduct further analysis of this option. We can imagine a hypothetical future situation in which the Fed has cut the fed funds rate to zero and used forward guidance to try to talk down longer-term interest rates. Suppose some additional accommodation is desired, but not enough to justify a new round of quantitative easing, with all its difficulties of calibration and communication. In that scenario, a policy of modestly negative interest rates might be a reasonable compromise between no action and rolling out the big QE Gun.
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Yes, currency would be more voluminous to hoard without larger denomination banknotes. Hard asset commodities or precious metals or gems might be a better way.
Of course the banks may try to take advantage of the negative rates their reserves are charged by passing along higher fees for small depositors. see:
Negative interest rate bank account impact - Business Insider