European Central Bank Introduces The Negative Interest Rate

399px-Logo_European_Central_Bank.svgThings just keep getting rougher for average citizens in Europe. Some have faced government seizure of accounts to help fund government operations and requirements that they explain withdrawals to their banks. Now, the European Central Bank (ECB) is imposing a negative interest rate on banks for their deposits. So, you can keep your money under your mattress or put it in a bank where the bank will use it to earn money while charging you for the pleasure. This is of course the central bank which directly relates to individual banks as opposed to individual depositors. Those banks will now pay to park their money and those costs will be passed along to depositors. Banks are likely going to try to hide the fact that the interest rate is now negative through fees and other measures.

The ECB cut the rate on its deposit facility for banks from 0 percent to minus 0.10 percent. It also cut its main interest rate to from 0.25 percent to 0.15 percent as well as cutting the rate on its marginal lending facility by 35 basis points to 0.4 percent from 0.75 percent.

It is an interesting situation where banks will now be treated as solely a safe place for holding your money but you will pay for the service as a fee. Much like the airlines where aspects of what was once viewed as the basic service are being converted into fees, banks will now be treated as akin to a safety deposit box. However, unlike airlines or safety deposit boxes, the banks are making money off the deposits. It is a fundamental change in function of banks.

I have long been critical of the tax increases and measures in Europe that will likely have displacement impacts on investments and movement of citizens and businesses. In this case, I would expect people to look for alternatives from Internet banks to foreign banks.

362 thoughts on “European Central Bank Introduces The Negative Interest Rate”

  1. She feels threatened by other females who may steal your interest absent from her.
    A pet with long and un kept hair is not fairly to look at.

    It goes with out stating that condoms are also a should.

  2. You have a point, David. I’ve always maintained that he is not and should not be viewed as the spokesman for this issue; I do laud him for his efforts, but at the same time, he should have known his carbon footprint would have become an issue. That, to me shows a lack of discretion.

    Someone like James Hanson is more appropriate for carrying this message to the public; a scientist who had his research altered by politicians for political purposes, and resigned rather than compromise his findings in exchange for a salary.

  3. I forgot to point out that the USA Today article is rather old. How do we know that he hasn’t mended his weaselly ways?

    1. RTC, I think he has signed up now for the renewable energy program. The point still stands though that he did not do this on his own, but in response to his critics. To me it just looks like politics at play or he would at least thank his critics for making a good point and crediting them for helping him do better. Instead he portrays it like it was his own idea all along.

  4. Well, David, these are valid points. I’ve never said that Gore is an ideal spokesman for raising concerns over climate change, precisely because of flaws like these. Nevertheless, I try to be fair and open-minded when someone has a valid point to make.

    You can file that attitude under the heading of, “A Broken Clock Tells the Right Time Twice A Day”, and I take that approach when assessing decisions made by S. Ct. justices that I normally have little respect for, like Scalia and Thomas; there are times when I think they’ve used sound judgement (I know of admiration for both those Justices, so no need to expound on that). (Unless you really feel the need.)

    The point is that Gore can be genuinely concerned about the future of our planets climate and there may be reasons why he appears hypocritical. As the trustee for his family’s estate, he has a fiduciary responsibility to maximize profit earnings; hundreds of thousands of dollars in Occidental Petroleum stock probably doesn’t give him much of a controlling interest in that company; and he hasn’t signed up for the power company’s green energy plan because he’s a niggardly sack o’crap.

    At any rate, thanks for bringing this evidence to my attention. As I said up top, they are valid points of criticism and are good reasons why Gore should step off until he gets right with clean energy. It still doesn’t change my opinion about climate change, which was never influenced by Gore or his movie – I’ve never seen more than a clip or two in movie reviews.

    I realize that we’re at a bit of standstill on whether climate change is real or not, and that’s probably where it’s going to have to rest. I find heartening to see you acknowledge the importance of clean energy, and elsewhere Karen has said she supports reductions in things like air and water pollution and heavy metals, and so forth. Those ideals work in concert with slowing the pace of climate change and things we can agree on.

  5. Note that I say “comparably sized homes”. I could add “in the same region”. Comparing natural gas consumption for a home in Tennessee to national averages is misleading.

  6. David: I have to tip my hat to you on this one. While I wouldn’t necessarily consider ABC News to be the most impeccable news source, I’ll accept the report as true. Thank you for tracking that down and supplying it. Your effort provides an interesting and telling contrast to schulte’s comment which precedes yours.

    As far as Gore’s electric bills go: As a wealthy individual, he owns a large home. You, of all people, the way you prioritize “property”, should be the last person to judge condemn someone for that.

    Because his homes are large and likely equipped with many technological features, he’s naturally going to have fairly substantial utility bills. The things to consider is what types of efficiencies has he introduced and how do his bills compare to comparably sized homes. Considering the size of his estate, I would say that his bills are fairly low.

    1. RTC, most people expect that if someone is raising the alarm and calling everyone to live a carbon neutral lifestyle, then he would be leading the way by example. He has basically been pressured to do so by his critics, which makes one wonder how much he really believes his own rhetoric.

      Here is an article from USA Today that expresses this sentiment more fully:

      —————-
      Gore isn’t quite as green as he’s led the world to believe
      http://usatoday30.usatoday.com/news/opinion/editorials/2006-08-09-gore-green_x.htm

      … [snip] …
      In the Washington, D.C., area, utility companies offer wind energy as an alternative to traditional energy. In Nashville, similar programs exist. Utility customers must simply pay a few extra pennies per kilowatt hour, and they can continue living their carbon-neutral lifestyles knowing that they are supporting wind energy. Plenty of businesses and institutions have signed up. Even the Bush administration is using green energy for some federal office buildings, as are thousands of area residents.

      But according to public records, there is no evidence that Gore has signed up to use green energy in either of his large residences. When contacted Wednesday, Gore’s office confirmed as much but said the Gores were looking into making the switch at both homes. Talk about inconvenient truths.

      … [snip] …

      Gore has held these apocalyptic views about the environment for some time. So why, then, didn’t Gore dump his family’s large stock holdings in Occidental (Oxy) Petroleum? As executor of his family’s trust, over the years Gore has controlled hundreds of thousands of dollars in Oxy stock. Oxy has been mired in controversy over oil drilling in ecologically sensitive areas.

      … [snip] …

      The issue here is not simply Gore’s hypocrisy; it’s a question of credibility. If he genuinely believes the apocalyptic vision he has put forth and calls for radical changes in the way other people live, why hasn’t he made any radical change in his life? Giving up the zinc mine or one of his homes is not asking much, given that he wants the rest of us to radically change our lives.

      ——–

  7. That said, you don’t actually know for a fact what Al Gore’s carbon footprint is. You know what the Fox and Rush spinorama wants you to think.

    1. RTC – Given Al Gore’s possessions, etc. it is not hard to figure out his carbon footprint. If you think it is less, print a better figure for him.

    2. RTC, why would you assume Fox News or Rush Limbaugh as my source? You are wrong on both counts. My source is ABC News.

      “Armed with Gore’s utility bills for the last two years, the Tennessee Center for Policy Research charged Monday that the gas and electric bills for the former vice president’s 20-room home and pool house devoured nearly 221,000 kilowatt-hours in 2006, more than 20 times the national average of 10,656 kilowatt-hours.”

      “The Center claims that Nashville Electric Services records show the Gores in 2006 averaged a monthly electricity bill of $1,359 for using 18,414 kilowatt-hours, and $1,461 per month for using 16,200 kilowatt-hours in 2005. During that time, Nashville Gas Company billed the family an average of $536 a month for the main house and $544 for the pool house in 2006, and $640 for the main house and $525 for the pool house in 2005. That averages out to be $29,268 in gas and electric bills for the Gores in 2006, $31,512 in 2005.”

      I imagine he flies on airplanes more than most people too.

  8. David: as long as your on board with a cleaner, more sustainable world, then that’ll have to do. Providing you’re being truthful about your view, then that’s good enough

  9. Aridog: You threw us for a moment by commenting about the original topic of the post; these conversations drift and shift a bit over time and we’ve come ’round to climate change at present. But you’re right, nominal fees for the services banks provide are a value, to a point. Banks in Europe are getting carried away, however. A link provided in the post will take you to another relating how banks are refusing to allow depositors from making withdrawals without providing a good reason (and it better be good).

  10. Aridog, Kudos for doing some historical reading here. The more the merrier is what my mom would always say.

  11. davidm ~

    “I wish the conversation focused on what our proper responsibility was toward not polluting the environment. Then we could all just work together toward a pollution free community.”

    Brother, are you indirectly implying that we are polluting the environment?

    1. paulette wrote: “Brother, are you indirectly implying that we are polluting the environment?”

      I will directly say it. We are polluting our environment and we can do better to clean it up. I really don’t think it is too far away where a significant portion of our homes and transportation vehicles can be entirely run on clean energy. Many are already doing it. Of course, if you live in Tennessee where Al Gore is from, much of their energy is from hydroelectric dams, so they have it easy. Too bad Al Gore doesn’t avail himself of that advantage over us and have a smaller carbon footprint.

  12. I view this action as similar to most large commercial banks on their checking and savings accounts. I utilize one with Chase Bank for day to day expenses and consider the $12 fee I pay them as merited. The savings portion of this day to day account (anything requiring activity inside 30 days) is nominal (a just in case deal) and I pay no fee for that…and even earn a whooping 0.01 % per month. 🙂 It is a “service” and I pay for it gladly because other than for taxes, I have not had to write a check manually for a half dozen years, and I can reconcile daily if I choose with a few clicks on the mouse button.

    Yes, as Feynman says, if I had all my worth in that one account I’d be looking for a better place to store and earn, e.g. “invest”….but I do that already. My “facility account” as I call is just that…for my ease of transacting day to day…and worth every penny of the $12. If this move makes some banks get up off their cash (which wilts daily in case they don’t notice it?) and invest, the good for the Central Bank.

    I’m new here so bear with my simple mind. So far I am very impressed by the quality of posts, of comments, and the lack to stupid hostility. When I;m done reading the last 30 days of posts and remarks, I will be back.

  13. Nonetheless, I’m thinking the sun will burn out before mankind completely figures out the nexus between consciousness and the quantum world.

  14. Nick,

    The problem of induction becomes smaller and smaller as computers become faster and faster.

  15. For centuries, scientists “believed” the liver pumped blood through our circulatory system. The heart was found to be the pump about 300 years ago.

    1. Nick, you are on a roll here. Keep them coming. I’m adding some of these “consensuses of science” to a book I’m working on.

  16. RTC: “I said the U.S. is responsible for most of the increase in GHGs.

    It’s true. historically we have produced more within our own borders, but now we have outsourced our manufacturing to other countries to do our dirty production for us. China is creating all that pollution producing the goods we consume.

    You must work for Fox News”

    =========

    You have a unique and childish grasp of the concept of responsibility; much like that found on FOX news.

    Responsibility necessitates an element of control.

    Simply because you, a United States citizen, have a Christ like concern for the global environment it does not follow that the United States is “responsible” for the acts of China.

    That’s because the United States does not “control” China; for if we did, we’d call it part of the United States.

    Circle of concern

    Circle of influence.

    Two different things.

    Please make a note of it.

    =========

    RTC: “We could easily do the same Korea has been doing for years by imposing environmental standards on goods we that allow into the country. And do the extent that American manufacturers have been shipping jobs overseas, yes, we do have some control.”

    =============

    And this means we are “responsible” for the actions of China?

    What’s the weather like on your planet?

  17. David,
    One of the things that cracks me up is when the likes of RTC or Annie call us “flat Earthers” because we won’t follow the “consensus”. The irony is hilarious since it was the consensus that the Earth was flat.

    The fact that RTC doesn’t even know the DDT enviro scam and would rather have children die, tells me all I need to know about him. But hey, he doesn’t have to deal with malaria, so the hell to the rest.

    I’ve asked for direct proof of mans direct influence on the climate but RTC can’t give any. Instead, he thinks I’m 22 and thinks it cute to call me “Jimmy” as if that proves his point.

    I agree with you about pollution and as a nation becomes richer, through their economy, the populous start to demand cleaner processes. Look at at China. I am currently working on a project to help them develop their own natural gas powered turbines for energy production. This will help offset all of the coal plants they have now. And they are a communist country.

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