Negative interest rates and what it means

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December 18th, 2016 at 6:57:59 AM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 1068
Posts: 12569
I think that Cesspit's comments are interesting. In 1981 the 50 pound note was only worth about US$100 (today it is roughly $63) and the 20 pound note was worth about $40.

Circulation of 50 pound note in millions of pieces
Mar 20, 1981 introduced
Feb 28, 1982 5.48
Feb 28, 1983 12.66
Feb 29, 1984 18.18
Feb 28, 1985 21.78
Feb 28, 1986 24.66
Feb 28, 1987 29.50
Feb 29, 1988 35.10
Feb 28, 1989 41.08
Feb 28, 1990 45.84
Feb 28, 1991 47.50
Feb 29, 1992 50.30
Feb 28, 1993 54.64
Feb 28, 1994 57.68
Apr 20, 1994 Houbloun 50 pound banknote introduced
Sep 20, 1996 Wren banknote demonetized

Quote: TheCesspit
Nope the Wren was what I saw bundles over in the builders hands. By 1994 I was studying and seeing a fifty was like seeing unicorn poor.

So despite the relatively small number of banknotes (for a population of roughly 60 million), Cesspit remembers them as common in an industry that prefers cash.

The idea of cash is very powerful. If the federal governments pull out of cash, then private industry or banks will step back in and provide the equivalent.
November 26th, 2017 at 2:40:21 PM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 1068
Posts: 12569
It looks like negative interest rates once adopted are difficult to shake. Ten years ago a negative interest rate by a central bank was only a concept. In sweden the repo-rate varied from +1.50% to 4.75% from 2000 to 2011

Traditional economic theory holds that people will convert bank accounts into cash without the inducement of earning interest.

The Swedish Riksbank deposit rate is the rate of interest banks receive when they deposit funds in their accounts at the Riksbank overnight and is normally 0.75 percentage points lower than the repo rate.

The deposit rate dropped to zero percent on December 18, 2013 only two weeks before the 1000 - kronor Vasa banknotes without foil (~$120) became invalid.Seven months later the deposit rate went from zero to negative and is forecast to remain zero or below at least seven years.

Forecast for the repo rate by Swedish Central Bank
2017 Q 3 -0.50%
2017 Q 4 -0.50%
2018 Q 1 -0.50%
2018 Q 4 -0.27%
2019 Q 4 +0.24%
2020 Q 4 +0.75% -> deposit rate is zero.

The suspicion became widespread that the huge reduction in circulation levels of banknotes (50% from 2007 to 2016) is related to monetary policy. Under the best of circumstances banks consider cash a money losing proposition, but with negative interest rates it becomes a severe liability.
November 26th, 2017 at 6:48:29 PM permalink
petroglyph
Member since: Aug 3, 2014
Threads: 25
Posts: 6227
Quote: Pacomartin
Under the best of circumstances banks consider cash a money losing proposition, but with negative interest rates it becomes a severe liability.
Banks may not like the inconvenience of cash, but I would think they would hate Bitcoin cutting them entirely out of the loop? Banks did fine under the cash system, with fees on everything money.
The last official act of any government is to loot the treasury. GW
September 27th, 2019 at 7:17:25 AM permalink
Pacomartin
Member since: Oct 24, 2012
Threads: 1068
Posts: 12569
The moneyfactory.gov (website for Bureau of Engraving and Printing ) stopped poscting monthly production reports in January.

That may seem like a minor quibble, but the last time they stopped printing monthly production reports was about a decade ago.

Quote: HISTORY

In October 1995 the BEP began printing the $100 with the bigger portrait. The new note featured an array of new anti-counterfeiting devices to make the money more secure. The next series was promised in 10 years, a date which was never met

In April 2003 the BEP began producing the colorized $20 banknote. While not as valuable as the $100 note, there was concern that it was easier to run a counterfeiting operation with the smaller denomination and a new harder to copy note was needed here first. The colorized $50 note began production in July 2004, and the colorized $10 note in October 2005, and the colorized $5 note in November 2007.

In February 2010 the BEP began printing new color $100 notes with a host of new anti-counterfeiting devices. But the production of new banknotes was an unmitigated disaster threatening the cash supply of the USA. The new notes had so many problems that they couldn't be distributed.

The BEP was forced to restart printing the old style banknotes and did not release the colorized ones until October 2013. But for fiscal year 2011 production was only 38% of the year before.

STOP POSTING UPDATES
In order to avoid embarrassing questions for several years the BEP stopped posting the monthly production reports


BTW I am guessing that box has 30 stacks of 2*1000 notes per bundle. So I am guessing upwards of $60 million.

Steven T. Mnuchin who has been Secretary since February 13, 2017 has his signature on the $1, $10, and $20. Jacob J. Lew, Secretary of Treasury under President Obama from February 28, 2013 until January 20, 2017 still has the signature on the new $2, $5, $50 and $100 banknotes. While it often takes some time to get the new Secretary's signature on a new series of notes, a delay of over 2.5 years doesn't normally happen unless there is a problem.

Since the monthly production reports have stopped being posted since January, the plausible explanation is that the production process has broken down again. It is unlikely that problems are with the smaller denominations because the banknotes are far less complicated.

It's interesting that President Trump has been pushing zero or negative interest rates with his tweets. If he creates a panic situation and people begin hoarding $100 bills just as there is a production issue, then we might have a chaotic reaction.

The 1000 Swiss Franc banknote worth ~$1000 is far more complex than the $100 banknote (with 13 anti-countereiting devices), but it costs 10X as much to produce, and there is no need to print billions of them.
September 28th, 2019 at 8:08:17 PM permalink
petroglyph
Member since: Aug 3, 2014
Threads: 25
Posts: 6227
Why are banks borrowing up to one hundred billion per day? https://wallstreetonparade.com/2019/09/the-fed-is-offering-100-billion-a-day-in-emergency-loans-to-unnamed-banks-and-congress-is-not-curious-enough-to-hold-a-hearing/
The last official act of any government is to loot the treasury. GW
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