Re:Interest Rates: Naturally Negative?
by eigenvalue on Tuesday August 13, 2019 @06:02PM
(#20690703)
My guess is that these analyses by insurance companies don't properly take into account the risk of theft. All that cash in a bunker makes a very appealing target for thieves, both insiders and outsiders. Also, if it starts happening with any frequency, the central banks will just forbid hording of cash (e.g., by refusing to allow member banks to provide the cash if it exceeds a certain amount).
Re:Interest Rates: Naturally Negative?
by outworlder on Tuesday August 13, 2019 @06:48PM
(#20691051)
> My guess is that these analyses by insurance companies don't properly take into account the risk of theft.
So your guess is that insurance companies, companies for which their entire business model revolves around risk management, are not taking into account something as mundane as risk of theft?
That's a... curious line of reasoning.
Due to the low interest rates German insurance companies are already considering to store cash in their own vaults instead of buying bonds: https://translate.google.com/translate?hl=&sl=de&tl=en&u=htt...
Slightly negative interest rates work because physically storing cash is going to be more expensive than buying bonds (especially if you factor in costs for security, insurance, etc.). But if interest rates decreases further it's soon going to be cheaper to store cash, which is going to create a lower bound for the interest rate (assuming the government doesn't prohibit storing large amounts of cash).