Bank Of England Mulls Negative Interest Rates?

[6Foot2]

Link: Bank of England mulls negative interest rates - Telegraph

 

So the Government are still paying back the debt incurred by supporting banks when they failed after a run on those banks.

 

Wouldn't negative interest rates encourage savers to withdraw their money and keep it at home, spend it, whatever? In other words wouldn't this risk another run on more banks?

 

Just a thought.

[twin--turbo]

Back Door Tax!!

 

everyone would move money to non UK funds.

 

Rob

[flyinghaggis]

I suppose strictly speaking these "negative" interest rates would only be on offer to banks who borrow from the BOE. I guess the idea would be to prevent banks hoarding currency and theoretically encouraging them to lend out more. Savings accounts would presumably still pay you a positive interest rate as this is typically a couple of percent higher than the base rate so I doubt it would lead to a bank run though it would probably encourage people to spend rather than hold cash. It does sound like a slightly crazy idea though!

 

Of course you could already argue if a savings account is only paying you 1-2% and 'official/rigged' rate of inflation is 3% then holding money in a savings account is effectively costing you money.

Edited February 26, 2013 by flyinghaggis

[Duke5A]

Do you guys have the same issues we do with mega banks? Ones that are so stinking big that if they tank they'll take down entire swaths of the economy with them? We used to have laws on the books both preventing banks from growing this large and separating investment and commercial banking, but alas, these protections were widdled away over the years.