As a Dutch person, negative interest rates feel so wrong.
The Dutch government is over the moon.
They can now lend money with negative interest rates.
Yes, you heard that right! The Dutch government can now lend money and get paid for it.
We do like to complain about our own government, I guess like everyone else in the world does about theirs, but financially the Netherlands do pretty well.
Our government has been earning more money than it's pending for years and has been using that money to reduce the national debt.
But that's about to change. Now, they want to lend extra 'free' money to invest in public transport, infrastructure, Artificial intelligence and technology, science research and more.
As a Dutch person, I have mixed feelings about it.
Saving is in our blood and we are tight spenders. I'm pretty sure we are known for it ( probably not always in a positive light).
I fear debt a lot and would do anything to get rid of it if I had any.
But I definitely do believe in investing and with 'free' money a lot can be done to improve the country and the economy if spent wisely.
Also, I do have some reservation about the longevity of the Euro (FIAT) as many people in crypto do, so using some of it to improve the country, while it still has value, instead of paying off debt could be very wise too.
But if you ask me honestly, I personally don't understand negative interest rates at all.
I'm sure bright minds can explain it to me but as a Dutch person, I wouldn't lend my money willingly to anyone knowing I would get less back. It just doesn't make sense to me.
I might as well put it under my mattress.
And negative interest rates are causing some more problems that I can see coming.
Our pension funds must invest in safe investments. Government Bonds being one of them. But they no longer give a return, it now costs money, and that's a problem. Pension funds need to make a return to pay the pensions. I wish them good luck trying to figure that one out.
I don't rely on pension funds for my old age btw. I'm taking care of that myself.
(I expect no-one of my age to ever receive a pension when they are 70 and everyone that currently pays for one, expecting to get one, will get screwed.)
Other problems you can expect is negative interest on your saving account. I'm pretty sure that's coming to.
That's going to fun. I'm sure the Dutch (that love to save money) will not like that very much.
I always learned in school that lowering interest rates could help the economy because people tend to spend more when money is cheap.
But...now money is free (for the government for now). I just don't know, it just feels so wrong. And there are already signs of a new recession on its way...what will they do next? Give even more free money when lending money?!?!
Man...
When I think about these things too much I'm always very happy to already be living in an alternative reality and that I have different investments in place to spread risk.
Blockchain and cryptocurrencies being my favorite one obviously.
For me, it's Noah's ark of value and I'm sure glad I'm on board already.
But I also, fully understand why some people prefer gold and silver or other precious metals for the same reasons.
These last two have being going up pretty well lately (especially silver), and well with all this free money and uncertainty, I guess it's easy to see why.
There are some interesting times ahead.
I'm no economist so I could be very wrong about the whole thing. And I sure hope so.
But I'm not counting on it.
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It will be interesting to see 1 year from now the ROI on these projects (if they can be tracked). It would be interesting to see how / if the public transportation and infrastructure has made people lives better. As well as what impacts the scientific research and AI has on the country in general.
I hope all the investments work out for the country and the impact they have is greater than the negative interest rates possibly will have in the long term.
No person or business would lend money with a negative interest rate, but a government will to try to prop up the economy. When there's an expectation of a recession (like there is now) banks get more stringent about lending money. When that happens it's harder for people and businesses to borrow money, which reduces spending, which reduces profits, and leads to a vicious cycle and ultimately recession.
So to try to combat that, governments are now paying banks to borrow money from them via negative interest rates instead of the other way around. I don't see any way to look at negative interest rates as anything other than a really bad sign for the future of the global economy.
At this moment, Belgium, Germany, Denmark, France and now also The Netherlands can lend money at a negative interest rate. That is completely devastating for the European economy. But the ECB, IMF etc... see that differently. For them it's free money. But for who? The big companies and the large investors. For the normal man, that depends on a bit of interest for his old days, it is havok. This is a turning point in economic history, and will eventually cause hyperinflation. Sad, but inevitable
As you say the banks, companies and large investors get money at 0% percent. When passed on to the ordinary person, they have to pay interest on that FREE MONEY.
I think its the sign of a broken system. Paying people to loan money just shows that they have no room to grow the economy with this system and that they're just letting it implode.
In South, Africa savers get about 5.9% and it costs around 10% to get a loan, not saying our system is the greatest by any means but it makes more sense to sort of encourage saving and not loaning.
I think a lot of investors holding negative yield bonds will eventually dump and try to put their money in precious metals and emerging markets bonds because well anything is better than no return.
I think the Western economy is going to go through some of the biggest changes with the next crisis looming and we'll all follow but emerging markets with the least debt to GDP will recover much faster and it could bring about a whole new global economy.
I had no idea that savers still get a decent interest in SA.
Wow, 5.9%, that was normal when I was a kid on my little saving account.
Always calculate interest minus inflation =risk +reward on money.
Inflation is 4.5% there and its much riskier
That is true, our currency has been heavily inflated over the last few years and the buying power is nowhere near what it was, lol thats why I came to crypto
So each year I assume you're interest rates kept dropping until now negative? That's insane, do Dutch people even bother saving or do they rather invest in things that give a return like property, stocks, pension etc?
5.9% is the standard base, the larger your sum saved you can get up to 7.2%
Most funds simply don't see good investments and park their money, when many do the same you get negative yields.
They believe that a small negative yield in a save government is better than buying in to a bubble. Clear bubbles are again in the real estate, stocks, almost all resources are on a new high.
Negative yields are simply the first signs of panic and classical banking is on its way out. Let's hope this process won't be a repetition of 1931.
Thanks for the breakdown. I guess thats why precious metals are looking like a better investment so you can at least hold your value. Yeah stocks, real estate, student debt, car loans are all massively inflated there's pretty much nowhere to go for investors either you're parking, holding precious metals or looking at emerging markets that have some sort of opportunity
While I know a recession will be disastrous for many since so many people live paycheque to paycheque it will be interesting to see how it works out now that we have crypto as an alternative.
The previous GFC birthed BTC can the next once kick off major adoption?
They have been talking about these coming in the US. It was a term I wasn't really familiar with until I looked it up a couple of days ago. It is a pretty scary concept if you ask me. I can't imagine having to pay interest to keep my money in a bank. On top of that, they pay me to take out a loan? Nuts!! The sad thing is, there isn't much we can do to stop it, so we just need to hedge our bets in other areas to make sure we are secure.
Hedging seems wise indeed. It's what I am doing.
that gives people who have saved their money complete live the feeling that their money is worthless.
In the long run, I think it will be tremendous. Not getting interest on your money does not make sense. Why should one take the risk of a loan default.
The states rehabilitate their dilapidated funds on the backs of the citizens.
The future will show how high inflation will rise. Hard times will come.
It is crazy as it is penalizing those savers who have done the right thing to save for goals like retirement. I am surprised there has not been more public outcry on this as it surely hurts many in the economy.
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I'm sure the people that see the misery comming are diversifying. It's hard to fight it.
I've been reading and watching some youtube videos that are starting to change the way I see debt... It seems that in the current inflationary system where debt creates money, good debt is actually ok and should be used as an investment tool. Examples of good debt, buying a house with debt and putting it out for rent. It seems that many real estate investors are doing this.
If dutch people want to keep getting interest on their deposits they should change to crypto and use one of the available interest platforms (nexo and celsius are my fav) to get interest on their deposits, they can even keep their deposits in "dollars" AKA stable coins, 8-10% interest rates on deposits and BTC gets 4%-5%, it's quite good. However, with negative interest rates I would take this opportunity and just get a loan out and buy a house to rent, or invest in a real estate portfolio. Houses are eternal, as long as human exist we will always need a house to live in! And land is also scarce on this earth.
Just my opinion, not financial advice, never financial advice
I'd be more than happy to take on a million dollar loan, if it meant paying back $900,000 ten years from now. Who wouldn't take that deal?
!!! But...now money is free (for the government for now). I just don't know, it just feels so wrong. And there are already signs of a new recession on its way...what will they do next? Give even more free money when lending money!!!
YES, I TOTALLY AGREE!!!
Europe, North America etc. is just following Japan with deflation, negative interest rates and more, more QE.
Central banks policies have completely reversed their policies of having 2 percent inflation. THEY HAVE NOT BEEN ABLE TO DO IT!
So I thought as to why we are now entering into negative interest rates?
WELL GOVERNMENTS ETC. CANNOT PAY THE INTEREST ON WHAT THEY HAVE BORROWED, OTHERWISE THEY WILL DEFAULT. SO BY HAVING NEGATIVE INTEREST RATES, THEY CAN KEEP BORROW MONEY - AS IN A SENSE IT'S FREE.