The negative rate only applies for banks which store their money overnight at the Swedish Central bank (Riksbanken). The interest rate at peoples' bank accounts is stil positive. They do this to force the banks to lend the money they lend from the Riksbank, and not just keep it (to reduce the bank's liquidity risk).
It's stil very low though. Too low if you ask me, solving an economic crisis through inflation is just the same thing as forcing everyone to lower their salaries, but people don't understand that so it's easier to get away with it.
The same thing will happen in the United States. It's only a matter of time. It has been talked about plenty of times. It's interesting to see Sweden is actually being a leader in the financial markets.
I agree. I look forward to seeing how this is reported in the Economist which for several years insisted as a matter of fact that negative interest rates were impossible (I suspect this represented the view of one particularly dogmatic editor).
Much depends on the exact phrasing. Offering negative interest rates on consumer accounts is ludicrous to the point of rendering it impossible. For a national bank, nah, not so much.
Actually I remember a few years ago reading an article that said that the Federal Reserve was studying the feasibility of embedding RFID tags into paper currency. Doing so would allow the banks to know how long a particular note had been out of the banking system and stuffed in a mattress.
Then a penalty could be assessed when the note was redeposited. The article said that such a system could allow banks to pay negative interest rates but still be less of a penalty than the penalty for hording cash. As I recall the article said that a $100 bill would be worth about $10 less every month that it was kept out of the banking system – just as an example of how it could work.
> solving an economic crisis through inflation is just the same thing as forcing everyone to lower their salaries
And debts, and bank accounts. If you look at it that way, it's sort of like compressing the part of the economy that doesn't consist of physical stuff.
It's stil very low though. Too low if you ask me, solving an economic crisis through inflation is just the same thing as forcing everyone to lower their salaries, but people don't understand that so it's easier to get away with it.