The government isn’t penalizing you for not spending money. The bank is providing services (safeguarding and transferring money, primarily) and that costs money. The difference is that for the first time in a long time they can’t make enough from deposits to cover that cost.

> The difference is that for the first time in a long time they can’t make enough from deposits to cover that cost.

Yes, and the reason they can't make enough is because central banks are pushing down interest rates in order to nudge people into spending vs. saving. If central banks were not acting as a lender of last resort (at record low interest rates no less), the cost to borrow would be higher, and savers would likely be seeing higher interest rates.

That isn’t penalizing savers; that just isn’t actively subsidizing them (and by extension the rest of the investing world, since that would easily be the most attractive place to have your money in the world).

Also, central banks have a mandate to be the lender of last resort. It’s one of their most fundamental duties and they’ve been doing it for as long as they’ve existed.

> the cost to borrow would be higher

We don't know that, do we? It depends on the supply and demand for savings.

It's not like they have physical cash to guard these days. Most of these accounts and money is "just digits in a mainframe somewhere". Kind of similar to what happened with traditional vs ebook publishing - there are still some costs, but no longer shifting physical things from place too place should save the customer some costs.

That doesn't make maintaining it free, just cheaper. There's a lot of money out there looking for investments, driving up prices and hence driving down returns.

you are saying that like cybercrime was easier to fight than physical heists. That seems like a bad assumption? And I'm in no way a "banks" fan...

The government will also penalize you for not using those services however. For instance, in many places it's impossible to purchase real estate with cash.

You pay for that as well, about 100 a year if you do not touch your money.

Orweillian term? Where the hell do all the insane moral attachments come from?

Positive interest is compensation for delaying spending and a fee for staying in debt.

Negative interest is a fee for delaying spending and compensation for keeping others in debt.

It's not about "governments thinking", it's about maintaining the balance of supply and demand between debt and credit.

The fact that you desire to hold onto money at 0% just shows how profitable it is.

https://youtu.be/j5l_Oeg6kMo

Right, I have zero shame about doing this to avoid the truly insane limits (it's like $15,000) before negative interest kicks in per account in Denmark.

You can change your money into a currency that's run under a policy more to your liking, if you please.

You can argue that it’s a consequence of the ECB’s policies, but the ECB is not part of any government.

And neither is the federal reserve in the US. The Federal Reserve is allegedly independent from the government. Does the ECB work in a similar manner?

> And neither is the federal reserve in the US. The Federal Reserve is allegedly independent from the government.

No, its not.

The Fed Board of Governors (like other independent federal agencies) is independent within the government; which is a term of art for executive-branch agencies with leadership board/council/commission that have terms (both length and staggering, usually) and partisan composition rules which prevent them from being reshaped over a short term to reflect the partisan interest of the current President and/or Senate majority, even when those are aligned.

Because its powers are assigned by Congress under law and freely changeable by Congress through new law, it is not and cannot be independent of government (even of by “government” you mean only the President and Congress.)

It is quite independent. They are in a tug of war with the commission and the council of ministers by design, so their autonomy fluctuates with time, but the commissioners (and several member-states) are regularly quite unhappy with the ECB. The ECB typically does not care about politics and looks only after economical indices. They are known to be afraid of the tiniest bit of inflation, which resulted in counter-productive policies at time.

I am not familiar enough with the federal reserve to say how similar they are.

Should your capital increase over time without it being put to productive purpose?

Banks don't just sit on piles of cash, they lend it out. That's literally what banks do with the money people deposit in them, it's the whole point of banks!

I'd argue that the main point of banks is that they protect your money from theft. Given that most people who use banks are poor and don't actually receive any significant interest.

They don't receive significant interest because banks choose not to share any interest with the end customer. Easy access savings rates have been sub-1% for so long in the UK that customers have instead turned to exploiting introductory offers on current accounts.

You got it completely backwards.

Banks grant credit (bank money) when debtors promise to work.

Your money is effectively a share in the bonds that banks hold onto. In other words, the point of banks is not for people to store their money and earn interest, it's to provide liquidity and a trusted intermediary. When the bank pays interest it basically tells you to keep your money to make room for the investment spending. You and a company want to buy a car, you say the company should go first and you wait until the next car is produced.

In theory you could do the same thing without the bank by writing an IOU saying you work x hours and then use that as money. The problem is that people have to trust you and the IOU is not fungible (it may be worth $4k when all you want to buy is $50 worth of groceries).

https://youtu.be/xkQn56Dtslk

That’s not at all how banks work. BoE helpfully explain https://www.bankofengland.co.uk/knowledgebank/how-is-money-c...

EDIT: This whole comment is pretty pointless in context. I didn’t read the the thread closely enough. It’s the sort of argument at cross-purposes that makes us all hate internet comments. I’ve left the text in place so readers can see what other people were responding to, but, y’know, I think it’s pretty dumb.

This verges on pedantry in this context. Banks are required to have a certain amount of capital in reserve to make loans (the reserve requirements and capital adequacy ratios set by central banks). Deposits from consumers give the banks the reserve capital they need to make those loans.

Without a way to use the deposits to make money the banks would just as soon not have your money.

> Banks are required to have a certain amount of capital in reserve to make loans

Not if these loans are secured then they can make as much money as they want from thin air.

> Deposits from consumers give the banks the reserve capital they need to make those loans.

No. At least in the US, they just need to secure the loan with an asset that can be held from the dealers. Most of the time, if you got your mortgage from a bank, they'll just liquidate for real cash.

> Without a way to use the deposits to make money the banks would just as soon not have your money.

Which is why, in this new system, banks have become hostile to customers. Banks are no longer in the business of helping customers but trading money market funds.

>(the reserve requirements and capital adequacy ratios set by central banks).

Those are 0% or effectively zero in most developed nations.

Not OP, but I'd say, sure why not. Why does it have to be productive? It's arguably yet another paternalistic government intervention in the form of tweaking and twiddling with economic and regulatory knobs.

This is exactly the opposite of paternalistic government intervention. If the money can’t be put to productive use then the bank can’t profit from holding your money and they’d just as soon not have it. If you insist on giving it to them anyways they charge you for the privilege.

Formally, it’s the central bank penalizing you as it is independent from your federal government. Of course, the federal government (being it the US or a EUR member state) loves low interest rates for deficit spending.

That's also a really weird way to describe it. It's just a form of wealth tax, nothing related to the government disapproving of your choices.

Seems like a strange way to implement a wealth tax since it only applies to a single type of wealth (cash) and not equity, real estate, commodities, etc.

That's the point though: large amounts of cash should not be sitting there, they should be circulating through investment. It's not a tax as much as an incentive. Inflation functions the same way by making holding on to cash a losing proposition.

There is just SO MUCH cash right now in the hands of the wealthy classes and it's just sitting there in bank accounts not being circulated.

There are actually a lot of different forms of wealth tax in the Netherlands.

What are you referring to? If anything I know the Netherlands as having a comparatively few forms of wealth tax compared to other countries, the main wealth tax is mostly based on 'one form' that is completely undifferentiated (i.e., any net wealth, as part of box 3)

Low interest rates rather increase wealth than decrease it. Except for cash, almost all other assets increase with low interests such as stocks, real estate etc. So the wealthy generally get more with low interest rates and not the other way around. Probably also one of the reasons why it is so difficult for central banks and politicians to decide to increase the interest rates although it's most likely badly needed.

It’s not a tax (the governments are not getting any money from this). If it were, it would be terrible, because outrageous wealth is not in cash on bank accounts. It’s in things like real estate or stocks, which don’t lose any value because of negative interest rates.

> If it were, it would be terrible, because outrageous wealth is not in cash on bank accounts.

The only outrageous wealth you listed was real estate because of the land component. Nobody gets hurt by stocks. People get hurt if money ceases to circulate because money is needed to pay incomes, taxes and debts. If all the money piles up in one bank account everyone stops working. Meanwhile if one person owns all the stocks people can still work and be happy.

> Meanwhile if one person owns all the stocks people can still work and be happy.

I know you didn't mean it quite so literally, but this paints a rather dystopian picture: a single person holding effectively all the material wealth while everyone else happily shows up every day to work for them

You can have an outrageous amount of something that is not intrinsically bad. Money, or wealth in general, is not a bad thing in itself, but its distribution can be outrageous.

This applies to regular people in Spain. Banks have started to pass these costs to the customer and practically all kinds of accounts that have traditionally been free now cost money to keep, even if you only make minimum wage. Needless to say, I'm not happy with the ways the EU screws over poor people.

We see these low interest rates worldwide, twisting them into somehow the EU having them to screw poor people over is laughable.

Note that low interest rates affect those with money (i.e. not poor) much more than those without much money.

> Note that low interest rates affect those with money (i.e. not poor) much more than those without much money.

I disagree, wealthy people (even middle class) don't hold cash, they invest it

It's not a question of a tax on the rich vs. a tax on the poor, it's a tax on savers to benefit borrowers and spenders. You're forcing the responsible to subsidize the irresponsible. Donald Trump loves low interest rates for example, because he uses debt for everything. My grandmother by contrast, would always be sure to have a rainy day fund with plenty of cash. Having lived through the Great Depression, she knew it was prudent to always keep some cash on hand and not have everything tied up in illiquid assets.

Sadly the world no longer values savings and prudence. Might as well jump out on the risk curve and get rewarded with everyone else. Those with the worst loans in '08 were bailed out so there is little downside. I wish it were not this way but might as well take advantage

Very true - at the same time, when everyone start thinking like this, the bubble may pop

I didn't say they don't exist anywhere else, but they didn't exist here until recently.

I also didn't say the purpose is screwing poor people, but like many other things like car emissions caps, they introduce new regulations and laws and bullshit without thinking the poor are often disproportionately affected by them.