Negative Interest Rates: Explained

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In July of 2009, The Central Bank of Sweden lowered its overnight deposit rate to negative 0.25% - effectively charging the country's retail banks to pay it to look after its money.
At the turn of the millennia, negative interest rates were somewhat of an economic fantasy: the same way that light-speed travel is a fantasy for theoretical physicists. Economists had speculated about what negative interest rates would mean, but nobody actually ever expected this phenomenon to exist in the real world.
Today, negative interest rates dominate the market for sovereign bonds and are the staple of many central banks. But how in the world does this make sense? Who in their right mind would pay someone to take their money? ... all this and more in today's episode!
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📚 Want to learn more about interest rates? We recommend reading "Interest Rate Markets: A Practical Approach to Fixed Income", by Siddhartha Jha
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Sources & Citations -
Buiter, W.H., and Panigirtzoglou, N., 2003. Overcoming the zero bound on nominal interest rates with negative interest on currency: Gesell's solution. The economic journal
Ilgmann, C., and Menner, M., 2011. Negative nominal interest rates: history and current proposals. International Economics and Economic Policy
Rognlie, M., 2016. What lower bound? Monetary policy with negative interest rates
Bech, M.L., and Malkhozov, A., 2016. How have central banks implemented negative policy rates?. BIS Quarterly Review
Scheiber, T., Silgoner, M., and Stern, C., 2016. The development of bank profitability in Denmark, Sweden and Switzerland during a period of ultra-low and negative interest rates
Danthine, J.P., 2018. Negative interest rates in Switzerland: what have we learned? Pacific Economic Review
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[@EconomicsExplained]

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[@kanegami4176]

inflation is not good for grouth, inflation decreases the value of your savings, if lets say you have 100$ and a loaf of bread is 1$ at 2% inflation you will no longer be able to buy 100 loafs with 100$ just 98, how can people being able to aford less stuff be any indication of grouth

[@kingslead8369]

@@kanegami4176 Inflation is for the purpose of people having reason to spend it rather then save it. This is most pronounced with the rich. Also, inflation was never really considered good per say, it was just better then deflation and the nearly impossible challenge of no inflation.

[@kanegami4176]

@@kingslead8369 a measure against the rich that strikes against the poor, the rich will always have most of their money in things like gold or real estate and inflation only makes them more money, while the poor and middle class are forced to spend every penny on things they mighnt not realy need otherwise in a few years their hard earned money will be worth a lot less

[@kingslead8369]

@@kanegami4176 While that may be true to a certain extent, the rich still like easily liquefiable things such as money to spend on their interests and meals. It's a ridiculous thing that some of them seem to think that something can increase in price without the buyers getting more power to buy such things. This means wages need to increase, or the products price need to decrease, or else we get the prime mortgage bubble that popped in 2007-2009, otherwise known as the Great Recession. Just because they keep it in assets doesn't mean those assets are 'safe' investments, so they have to spread out those investments. Besides that, those investments can and will help facilitate job growth, although the lack of trust that the economy will continue to grow might lead to investors not spending their money, and in those times for governments to step in to spend for all those that aren't: check out Keynesian Economics. I never said inflation was a good thing per-say, just that it's far better then deflation where companies could go out of business because everyone who noticed that that dollar you had before can buy something more today might mean you save it instead of spend it, which can really screw some companies over. Besides that, inflation does help companies cut wages during the recessions just by slowing the rate of growth, which can allow their to be more people working in the place of those cut wages, although that's not really a good or viable solution by any means. Government projects, such as building a road, or just spending more to replace the money lost are the typical best and most effective responses to such a crisis.

[@easygoingdude9990]

Watched the whole video and I'm no less confused than before I started lol

[@scotland369]

1) everyone is too broke to buy houses 2) banks are paying people to take out loans to buy houses. That's the jist of Neg interest rates.

[@ruthirwin8222]

Me too

[@Decatron2]

Easy: The central bankers are essentially printing money and bringing down interest rates to push up the value of assets. If asset values keep increasing investors keep lending and the economy keeps "growing". But you cant print money and lower interest rates forever. At some point currency looses all value and becomes monopoly money. At that point many assets like bonds will become worthless (because its a fixed income asset). This is already happening to some extent but the central banks are printing even more money and buying bonds as fast as they can to prevent the market from collapsing utterly. Because of central bank interference in the market the value of assets are increasing even though the underlying real economy is going down the toilet. What this means is that the people who are currently loosing their jobs are also loosing all purchasing power on their savings. The cenral banks are essentially saving the rich at the cost of the working class.

[@victorjohnson4971]

You can borrow money @ 0% interest to pay off your debt Banks do not want that

[@victorjohnson4971]

@@ruthirwin8222 you can borrow money @ 0% interest to pay off your debt

[@ArthurVIIJuliusPendragon]

“You will never be paid to borrow money”. I guess you missed the danish bank offering negative rate mortgages then...

[@Martlns]

How does that even work?

[@ArthurVIIJuliusPendragon]

MattCog the bank is able to benefit from savings through international money markets so they said they wanted to pass on the savings to customers. More here: www.theguardian.com/money/2019/aug/13/danish-bank-launches-worlds-first-negative-interest-rate-mortgage

[@Xalgucennia]

@@ArthurVIIJuliusPendragon So why would I ever pay back a cent of the money? Wouldn't the loan just disappear by itself? Wouldn't I just borrow the maximum I could and watch the money and just watch the money roll in? Basically get multiple free houses?

[@Gee-xb7rt]

@@Martlns Most countries have tax breaks for mortgage debt, it was a Keynesian program that every one liked because the majority benefited from it. A centralized bank is still the government its not that different, just more streamlined because the tax department isn't involved. In the US, Canada, and Asian countries using the tax break has also led to a whole lot of money laundering through real estate, Europe doesn't have that problem because they limit the amount of property an individual can own, Europe could never produce a Donald Trump or Charles Kushner, they got rich off welfare for the rich.

[@ArthurVIIJuliusPendragon]

Xalgucennia because loans have monthly minimum repayments with cause you to default if you do not pay them

[@Jyval]

How to be a successful financial institution: 1. Crash the economy 2. Get the government to pay your dues 3. Get free money from negative interest rates 4. Threaten to crash the economy again if the interest rates ever go up

[@DorothyGTyas]

*Hammer to nail: B•A•M ! ! !* 👍🤓

[@SoeZ-M4]

Im gonna try it burning all the forests of my countrie. Wish me luck

[@unusuario5173]

Has this already happened somewhere?

[@J-IFWBR]

@@unusuario5173 well last global financial crisis maybe? althou Lehman brothers wasn't saved, most european Banks were saved by the state and they get negative interestrate loans from the central bank currently.. This wasn't a clever master plan from the beginning, but they just played their cards right, and rode along the wave.. So ya it pretty much happend already.. Cheers!!

[@demigodgamez]

@@SoeZ-M4 Did you cause the Amazon Rainforest fires?

[@video99couk]

I'm not a great fan of borrowing money. I paid off my mortgage early by overpaying whenever I could afford it. I don't have a car loan, instead I drive a 25 year old Toyota Celica (the world's most reliable car? It broke down once, about 15 years ago.) When we wanted an extension, we saved up and then paid for it. My credit card is configured for full automatic payment on due date. If I can't afford something, I don't buy it. It's a simpler way to manage finances.

[@ryanpenrod1859]

Thank you for being a good person. I wish there were more of us that didn't feel it was necessary to constantly over=leverage our finances.

[@TheIdiotPlays]

Are you scotty kilmer? Joking aside, that is a good way of living. My brother does the same thing, though he works two jobs at the same time. And drives a 99 a3.

[@video99couk]

@@TheIdiotPlays I would like to think my Celica is in slightly better shape than Scotty's: www.colin99.co.uk/mycar-2018.jpg

[@paulfears337]

You need a mercedes 300d can pick one up under 2000 and they will run forever

[@ultimatetadpole9607]

Best way to be. I've worked with people paying credit car debt for like 20 years.

[@woobykal68]

"people buy things they don't need with money they don't have"

[@lordbunbury]

carlo fraiia to impress people they don’t like

[@brynleytalbot778]

Lord Bunbury And that's sanity?!? Consumer economies were always a pipe dream with the reality check delayed time and again. Once the middle class totally collapses we'll get back to a friendlier society where debate emerges, once again, instead of a class deeming themselves right because they're professionals and above everyone else. Hence buying things to impress others they don't like with money they don't have. The entire ethos of being middle class.

[@lordbunbury]

Brynley Talbot It's only after we've lost everything that we're free to do anything

[@guilhermesartorato93]

@@brynleytalbot778 If you allow me to make a sugestion, middle class doesn't need to disappear - its "mindset" needs. Actually I even read some random Internet user posting that the so-called "middle class" doesn't exist for real, but is just an academic abstraction fetishized by consumerist society under the sponsorship of 1% percenters who benefit from - and laugh at - the schism this "proles vs. outer-parties" thing causes.

[@robinlillian9471]

Brynley Talbot: It's NOT the middle class. It's the rich people, and the corporations they own. They have FAR more money than any middle class person. However, if the rich can get you to blame brown people or middle class whites instead, they win. Divide and conquer.

[@EconomicsExplained]

Hi Guys I hope you enjoy the new Video :) I will be answering questions on here for as long as I can keep up with the comments. I will also be hanging out and chatting live on the new discord server that you can join here: discord.gg/TjWDPAA Otherwise please like and subscribe if you enjoy :D

[@shubhamsehgal2336]

Please enable captions sir. Thank you for explaining :)

[@vojack5283]

Great video, would you be able to make one on fractional reserve ratios and credit? and how it all ties back to inflation?

[@AlejandroRodriguez-se4ue]

Hey, great work, keep it up! I wanted to suggest you make videos on the economics of the American health service and if it could be feasible to make it free like some of the candidates say or not. Maybe taking money off their military budget would suffice? How can you make sure the hospitals don't start charging a lot more, effectively bankrupting the system? Also, another video could be: how do health insurance stays in business? I'll elaborate on that: my home insurance is basically playing the odds that, although they have 1 million paying customers, only a small fraction of those will ever need to make a claim, since not all of them will need to repair their home (unless in Pompeii :D). Health insurers have a 1 million paying customers and ALL of them WILL need health services, or they'll die young, which will make them not that profitable, considering the lots of monthly payments they will not do. So how do these companies stay in service without denying service to their clients? Once again, thank you for making these topics more comprehensible!

[@happyblueconsort3106]

Hi, Love your vids. Are there any theries on how our living standars could look like if all countries became somewhat developed and exploitation of cheap labor force could not be done? Is something like that sustainable or do we need to keep "using" other countries to maintain our western lifestyle? Would love to watch a video on this *wink wink*

[@electroninja8768]

"Extremely secure assets like government bonds." Glares at the UK, waiting for their response. >.> Cool video btw.

[@Pezmage1]

"250k for a house" *cries in California Bay Area*

[@videogamebomer]

Its that or the valley

[@donnyvu5153]

Median salary in the bay area: 100k Cries the whole world.

[@TempestRequiem0]

*cries in Vancouver*

[@atm1947]

@@donnyvu5153 still not enough to afford a house even after 3-5 years of working and saving all your money bruv. The example in the video was 80k/year for a 250k house. Here it's 100-200k/year for a 1.1mil house.

[@michal5642]

@@atm1947 That is not even for a good house, more like for a two room house on the outskirts of the bay.

[@AbdulGoodLooks]

Make a video about stock buybacks and how they affect the economy please

[@gigiduru125]

They don't really. Stock buybacks are just a way of returning capital to the shareholders. Like paying a dividend but if the shareholders don't want to get taxed they don't sell and just keep the now higher price stock. Why would you believe companies paying more in dividends would affect the economy? It does however show that they don't have better ideas about what to do with the money right now.

[@thetooginator153]

Abdulmajid Nasir - What did your mom keep reminding you? “Say please”.

[@AbdulGoodLooks]

@@gigiduru125 How they affect the stock market then?

[@AbdulGoodLooks]

@@thetooginator153 XD

[@ArawnOfAnnwn]

@@AbdulGoodLooks By raising demand for the stocks. Companies buying up their stock is (almost) the same as anyone else buying up their stock. More demand = higher stock price.

[@jimmysandgren6988]

As an economy student i really like your videos! I just happend too live in sweden. And about the last thing you said in the video. There is a Danish bank that is actually paying people to take out a home lone at the moment "Danske Bank" in denmark of course, but still. You can get paid to borrow money at the moment.

[@laczektwo]

I living i DK and have a home lone on -0,41 %, my bank is Jyske Bank. But but but I have a fee on 0,98 %

[@fpsmeter]

Take the loan, sell the house after some short time, repay remaining loan. Repeat. Infinite money :) Caveat: you may lose if value of the house drops faster than the negative mortgage rate. Which is kind of interesting, as it would suggest that bank expects housing market crash.

[@LoggyWD]

They charge hefty fees so the real interest is greater than zero.

[@tkash3856]

@@fpsmeter thats a bubble waiting to pop flipping houses is a gimmic thats got housing prices so over valued lol expecially on easy credit

[@eliazzortega]

Jimmy sandgren getting paid to borrow money? May you explain please? Is it just by buying a house??

[@abraintrust]

Nothing makes sense anymore, but I’m sure we will be seeing negative interest rates on our savings and checking accounts before we see it on loans and mortgages.

[@ihateyankees3655]

The goal is to stimulate spending. They'll put negative interest rates on your savings and then attack cash to force people to constantly buy new things.

[@abraintrust]

@@ihateyankees3655 encourage spending, discouraged savings, punish savings, steal savings, force debt slavery.

[@ihateyankees3655]

@@abraintrust buy gold, crypto, and ammunition.

[@WillEberli]

@Bob Jones They won't stop, their life is boring without constant 1 upping each other.

[@dilberta6046]

Brain Trust I'll never pay for a savings account. I'd be saying bye-bye to two major banks, so it seems like it'd behoove them not to let that happen. Since I'd be far from alone pulling my $ out and putting it elsewhere.

[@TheCreator1197]

"There will never be a time when YOU are paid to borrow money" "My plan is ruined!" haha ;)

[@fanoftheterror]

Can you do a video of how Healthcare for all would work economically in the US? How it would affect the US? How it affected other nations in the past and in the present? Downsides and upsides? Maybe compare plans of Bernie Sanders and Elizabeth Warren for Healthcare for all? Thanks!

[@EconomicsExplained]

I plan to explore both of these candidates separately in future video's and will address healthcare when I look at Bernie.

[@memyselfandI90001]

is there another country the same size of US, it's split into federal states and has "Healthcare for all"? Also, what do you meant by "Healthcare for all"? Free healthcare for anyone with no conditions?

[@fanoftheterror]

@@memyselfandI90001 Canadian style healthcare. I know that there are some downsides to it, but I'm not entirely sure if some candidates plans for nation wide healthcare would be the same as Canada's or diffrent.

[@fanoftheterror]

@@EconomicsExplained thanks!

[@asdaviqs5950]

@@memyselfandI90001 And Brazilian state Healthcare

[@quazar5017]

"But no economist ever expected them to ever exist in the real world." Real world: "We don't do expectations here."

[@J-IFWBR]

=D very nice

[@ricktasker8248]

Your answer ends up being that no one can explain negative interest rates. Thanks for the honesty.

[@victorliu5689]

Hi Economics Explained. I'm a teenage enthusiast in economics and the humanities, and I absolutely love your channel. The way you explain everything is awesome, clear and concise, and the topics you address are very applicable when I read the news. You have helped me understand so much, your unbiased reviews of different countries... everything Keep it up!!

[@yakzq8]

Not precisely unbiased, haha; loads of his videos - while great, have a very much Western bias.

[@bonekollektor1659]

It's just another way to slowly squeeze the financial life out of the average person.

[@J-IFWBR]

our system is made in a way that is designed to make the rich richer and make the poor even poorer ( or makes them work way harder) .. One day this probably will backfire in a realy uggly way =( But we could of course change this mechanics befor this happens =)

[@sten260]

very easy to counter attack the banks, put all your money into stock market and just hold stocks not USD. also in the end you will get rich which is nice bonus

[@naturecollision]

bone kollektor the magic trick of robbing real assets kicks in when they all suddenly raise interest rates. most people on cheap,credit will lose everything, this will be 2008 times 100. bottom line, don‘t ever take out a loan. if you want a house, pay for it. if you can‘t, don‘t.

[@sarcasmo57]

Economists are really not confident about the future huh?

[@luism5514]

So what is the worst case scenario for this? Then what is the worst case possible scenario?

[@JOSHINGEORGD123]

Yes you're right

[@ivanl.1881]

Just wanted to say, economics and finance were always the one topic that fried my brain. This channel is actually helping me learn it on more than the most basic level. Thank you!

[@liamcoffen5564]

I'm an economics major and most concepts discussed on this channel I can understand fairly easily but I'll admit I had to rewind a bunch and put some thought into it for me to grasp this. Great job explaining such a trippy concept. Much love for this channel.

[@ihateyankees3655]

People should be far more worried about this than they are.

[@JohnDoe-gc1kt]

I agree

[@slly4276]

Yes, we should live according to our means. Banks are encouraging people to borrow so that people will always have to work to pay back the banks. This is the only way banks can survive.

[@tacticalbondsh]

So we got negative interest rates, where's our FTL travel?

[@EconomicsExplained]

I know which one I would prefer

[@eustache_dauger]

Would that FTL technology still be subject to special relativity though? Hmm.. 🤔

[@quisqueyanguy120]

Soon

[@tkgwildfire5339]

@@eustache_dauger The White drive doesn't. All it does it bends spacetime around it to speed it's apparent speed faster than light.

[@tomraines6554]

Thank you, thank you, thank you! I was searching for a video for so long until you (my favorite econ yter) uploaded! Thanks!!

[@VanaeCavae]

You need to do a video about Singapore's economy .

[@Lozo39]

Antarctica Would love to hear about this awesome country.

[@baloniMCYT]

make a video about Antarctica's economy

[@thearchives1094]

@@baloniMCYT dunno what's interesting about the Antarctica economy, other that it is frozen

[@redradcomrade]

And of Antarctica

[@nikhiljoshiPi]

Antarctica credit score is frozen too

[@supremechandeliernormak514]

Everyone: Thats just a brunch Of fantasies.. Sweden: Hold my central bank

[@jholid6y]

USA: hold my beer

[@ioratv]

Negative interest rates ‘harm Swiss economy’ Deutsche Bank Sees Negative Rates Worsen Europe Banks’ Retreat I wonder what these headlines are

[@Gee-xb7rt]

Deutsche Bank is an investment bank, an entirely different beast than a central bank. That article in Bloomberg depends on the reader's ignorance of how the finance infrastructure works, the guy Bloomberg is named after has a vested interest in you being confused. The US currently wouldn't have a negative interest rate because there is so much lobbying in DC by "too big to fail" investment/financial services banks. Ultimately you are the one sent the bill for all the public relations done by investment/financial services banks to confuse you. In the US part of that pr is to demonize the American central bank, the Federal Reserve. People get paid to launch conspiracy theories, "think tanks" at investment/financial services banks aren't coming up with better ways to loan money, they are coming up with ways to maximize profits at the consumer's expense. If you have ever been hit with a late fee because your due date changed that is what finance think tanks do, they rely on you depending on a regular due date and swap it out to collect that late fee.

[@gentuxable]

I am verry sorry to be amused that a bank with such a history of controversies makes such claims. Even if I doubt it is a reinsurance that the contrary happens. As a swiss I stopped saving.

[@Gee-xb7rt]

@@gentuxable Yeah, Deutsche Bank is notorious for being sleazy, I don't think most Americans know that though, its comparable to Bank of America and Wells Fargo in the US, if you don't have to use their services then don't.

[@ioratv]

@@Gee-xb7rt I don't live in the US But how, why, when?

[@seneca983]

Ironically, Deutsche Bank has been getting cheap credit partially because various investors have thought it's the German central bank and therefore safer than a regular investment bank.

[@creditbayauto]

Awesome video. I just found your channel a month ago and already your entire library. Keep them coming.

[@EconomicsExplained]

Thanks for the support mate :) glad you enjoyed!

[@OopsFailedArt]

Beautiful job explaining this difficult concept. I'm in finance and have been having this conversation with my clients and your way of explaining this will be super helpful. Thank you!

[@WildVoltorb]

Your clients are idiots

[@therealnoodles7638]

Fuk your clients

[@OopsFailedArt]

Wow. Thank you internet. My clients are not idiots. They are fantastic individuals who are brilliant in their own respective field. A trader isn't an idiot because he doesn't understand quantum physics or speak 7 languages so why would those people be idiots when they don't understand finance?

[@dancingwithfools]

Would be great to see a vid exploring possible long term consequences from negative rates...

[@EconomicsExplained]

The thing is though nobody really knows, it would be pure speculation on my behalf and nothing more

[@oroville12345]

Just look at Japan

[@hafiz8379]

Here in the uk most interest rates don’t even cover inflation so your loosing money anyway

[@Jyval]

Rich get richer and everyone else gets poorer

[@brynleytalbot778]

Dancing With Fools Some predict a total collapse of the FIAT banking system. It's negative rates plus quantitative easing that poses the question no one wants to contemplate due to the prospect of a total world collapse of the financial system. Negative rates imply that the underlying currency is worthless, effectively constantly declining in value. Since the Gold Standard was diluted by Nixon, I believe, the underlying value of currency has been linked to belief rather than an asset base. Some new cryptocurrencies are being backed by gold. Some predict those to be the new currency to replace a bankrupt FIAT system run by the central banks. In truth, as EE says, it's anyone's guess, because no one knows. We're in uncharted waters so economics has no historical precedent on which to base its presumptions for the future. It's one chaotic mess.

[@Gatinois]

I'm not sure if it's capitalism or its opposite.

[@Gatinois]

@@RaveMasterSRB My point wasn't about if it's good or bad, but more like, '' what's the next evolution of those systems '' . It might be interesting to bring it to a country with low development and see what happen.

[@spacejunk2186]

The opposite.

[@justwobert9850]

It's level 100 capitalism

[@ytbpenguin]

This is a crony capitalism. Makes rich super rich and make 99.999% poor. Didn't you guy catch on this video? Already explained in the Video how unfair the current fiat money system is.

[@olivers-g4021]

@@ytbpenguin whats the alternative?

[@abhinavitsmebellamy]

Thank you, so much for this. Really well explained!!

[@sarathw5740]

Thank you for the video. I watched many videos on this topic and this is one of the best and it answered most of my questions.

[@domaspaukstys]

my friend took a house loan with no caps on interest rates and his interest rates were attached to eurobor. So when eurobor dropped bellow 0 - he got paid interest on his loan. Of course banks are smarter now and add caps to their interest rates in contracts, but for few lucky ones to get loans at the time just before negative rates were a reality - negative rates will pay ;)

[@L0stEngineer]

Thank you for these videos. As an aerospace engineer, economic was a freshman level class and the wierd magical reason on why I suddenly didn't have a job. Thank you for explaining it.

[@rotters2556]

You don't have a job as an aerospatial engineer?

[@foty8679]

I want to become an aerospace engineer!

[@3of11]

TFW you find a new KZbin channel you like and will be binge watching the back catalog all night

[@rajasmasala]

I have to say thank you for your thorough explanation of economics. Your KZbin work is a very important counterpoint to the hardcore austerity advocates on KZbin like Visualpolitik.

[@mudwader1198]

Big fan. Must ask, where do you get your stock footage from? Looks amazing!

[@harrison748]

Thx for helping me get to sleep

[@EconomicsExplained]

Haha you are welcome? I think that was a compliment?

[@itsmidtrib1569]

I watch these to help me fall asleep too. Not because it’s boring but because the information is too much for my little brain to comprehend and it just shuts off

[@DeanCheers]

Honestly great explanation of inflation/deflation, never looked at it that way.

[@nickvandop3916]

Great informational videos. Rly getting into your channel lately

[@SergeMTL]

Outcome = Perpetual debt servitude in a cashless society for the plebs.

[@aminelemam]

YES.

[@AdamSmith-gs2dv]

Oh and let's not forget hyper inflation like we see in Argentina or Venezuela.

[@deathguarddavegoogley2022]

Negative interest rates can’t go mainstream while physical cash exists. That’s why the authorities in many countries are trying to push us all into digital only cash.

[@clubberlang589]

Death Guard Dave Googley Why Toyota Corona (Corona Virus 🦠) is utilised to instil fear in the every citizen from using cash as a means of trade. Furthermore, be aware if they could get us to abandon cash 💴 then they can close the branches and your money 💰 can be stolen either by deeply negative rates being adopted or a bank 🏦 bail in. Never loose cash and tell the store 🏬 who says only accept digital payment only, you hand them a bunch of coins.

[@Sukerkin]

Nice work :thumbs up:. My first degree was in Economics and the fascination of the subject has never left me :).

[@SupeHero00]

Thank you! Awesome video :)

[@Helpie114]

Extremely interesting , thanks for the effort

[@bhanureddy2087]

I learnt more in this video than my tenth standard economics 😓

[@darealrulezbreaker9493]

really? all i heard was blabla banks paying to banks blabla interest bla bank bank bank and then some alkehrl3aj342l43klk. not sure if i am stupid or this system is stupid.. but its probably both

[@slappy8941]

Yet in none of your English classes did you ever learn the difference between "then" and "than", did you, dumbass?

[@bhanureddy2087]

@@slappy8941 I also wrote more twice

[@scifience8297]

Do a video on the difference between market and planned economies

[@DaoQui]

My guess is that we are being driven to a cashless economy, where only a digital currency exists. Meaning you can't withdraw the money from the bank. In that case, negative interest rates come to play to force you to spend the money, because otherwise it will get eaten by said negative interest rates.

[@yt.personal.identification]

And when it all falls down, we know who will foot the bill.

[@nitishkumarjurel241]

Just a request, can you do a video on economy of Argentina?

[@costa97vm]

Basically sucks, huge inflation, high debt, very high taxation, the government spent way more than its earnings, fascist politicians and politics and general misconception regarding basic economic factors, cheers mate from Argentina

[@Hitohato]

great Video, very interesting!

[@EconomicsExplained]

Haha thanks but it is impossible that you could have watched the whole thing in this time, you posted this 3 minutes after the video was uploaded XD

[@kaustavkumar3060]

Thanks for making this video. And yes, I think something like this has been implemented in a country like India (where I currently reside) & it's called 'Average Monthly Balance (AMB)'. In simple words, it's a minimum account balance 1 must have (on an monthly-averaged basis) in ANY type of bank account be it Savings account, Current Account, etc. for a given month, failing to do so will result in bank charge (negative interest). I have faced bank-charges myself on failing to do so, hence I know...

[@AnixCo1990]

It’s time to end central banking and get the system out of the debt and death paradigm

[@jonatannystrom7203]

If negative interest comes to us consumer’s wouldn’t that risk creating a loan bubble where everyone takes loans and saves money at home instead of at the bank

[@switchplayer1016]

No individual banks will still have there own loan rates. The fed rate is more or less the minimum they charge.

[@pilchardpliskin9381]

Not if the rate of inflation remains positive. Countries can also get inflation from having a large enough trade surplus.

[@laurentstorchi290]

yes, there is an increased risk of a loan bubble. This will become apparent to the broader public when interest-rates go up again and it will become much harder to service the loans that are now (unnaturally) cheap.

[@centreman3731]

that`s why they force to cashless system.

[@spacejunk2186]

Why so you think politicians push for the abolishment of physical cash?

[@17ephp]

Unproductive Lending I.E (real estate transaction credit, consumer credit, car loans, speculation credit etc) all it does, it increases money supply today, while leaving the same amount of goods and services tomorrow, thus creating inflation and eventually bubbles.

[@MegamanTheSecond]

this channel makes the global financial system collapsing before our eyes seem like its ok lol

[@EconomicsExplained]

Say it with me “everything is fine”

[@xLuluffy]

Great Video! Why does the Japanese Yen appreciate against many other currencies? Shouldn't the currency depreciate since the Japanese government are printing a large quantity of Yen to pay for the government expenses? And aren't investors worried that the rising public debt of Japan may result in that the Japanese government will default on their debt in the future? Looking forward to your next video. Cheers!

[@therealnoodles7638]

the yen appreciate because of investors and speculators. It has nothing to do with Japanese government printing large quantities of yen. Although investors will take this into account, it has no direct impact on the value of the yen in the forex market. Investors don't care because Japan can never go bankrupt. It always pays back the bond and any interest the investors have earned. It issues its own currency as do the United States and US bonds are the safest in the world. It will only default if it chooses to do so, such as Russia in the 90's.

[@IXPrometheusXI]

@@therealnoodles7638 How come it can't go bankrupt? If it never has to, why would it chose to?

[@therealnoodles7638]

​@@IXPrometheusXI because of fiat currency. and modern technology. Steam can't run out of games to sell because they are digitally available. It doesn't have physical copies of games. It can choose to stop selling games. Equivalent to a government choosing to be bankrupt. Why would a government choose bankruptcy? For political reasons or political stunts.

[@Jyval]

@@IXPrometheusXI Basically if they were to go bankrupt the situation would already be so bad it wouldn't matter what they were holding

[@petersmythe6462]

The fact that we're seeing this AT ALL I think is evidence of deep, unsolvable structural issues that ultimately will be capitalism's undoing.

[@petersmythe6462]

Or more likely, lead to barbarism.

[@Kevin_Street]

If I understand you correctly, the reason many central banks have gone to negative interest rates is because their usual tool of keeping interest rates low or at zero isn't working. After years of keeping interest rates extremely low there are still many institutions and people out there sitting on huge piles of cash and not spending enough. So the central banks have decided to go past zero into negative territory to stimulate more spending.

[@CaracasBob]

Thanks for the video. You should read Mises and Rothbard to get a better understanding of what interest rates really are.

[@MalcadorTheSigilite]

Can negative interest ever be a thing amongst us plebs? A possibility?

[@coleweede1953]

Pleblo native Americans are safe

[@poxpower]

Yes if there was large deflation of the money supply. Then I could lend you 1000$ today and expect at best 500$ back in a year and it still would be a good deal, because there would be, say, 60% less total money in circulation, so the purchasing power of 500$ is now higher than the purchasing power of the 1000$ I gave you originally. This can't happen without massive government meddling though, I imagine. I'm not an expert no periods of monetary deflation, governments usually don't do it, because governments owe debts so they inflate the currency to repay less money. Deflating their currency would mean they owe even more money. Obviously if you were the guy who decided how much money you'd pay back to people, you would tend not to increase that amount haha.

[@markschroter2640]

@@poxpower The government is the dog, the banks wag it.

[@ryntopps]

@@poxpower Then why would I lend you the $1000, instead just keep it and now I will have a $1000 at higher purchasing power instead of $500

[@poxpower]

@@ryntopps yeah I guess you are right haha this wouldn't work

[@davidbrewer7937]

It is what happens when some clowns loose control of the money system then break the interest rate knob off at the lower end stop while trying to get the system back on the tarmac...

[@appynoon]

LOL! great summary :)

[@Larry82ch]

What also is a reason for negative interest rates is the consern for overvaluation. If your currency jumps in value dramatically, your whole exports sector comes crippling down, since no one abroad wants to pay your prices.

[@lazolabooi8212]

Can you please discuss the causes of a recession and how can it be averted? Your explanations are really good and understandable for us who did not do economics.

[@firstgenchevelleman]

Recessions are absolutely necessary. They bring economies back into balance.

[@warbylpunkaz8797]

Sometimes BS is simply BS --- Don't justify insane ideas.

[@MetroAndroid]

Central banks are privately run by unelected officials and have the entire economy (print money, banks, all credit card/online transactions and payment processing) as leverage against politicians.

[@huckleberryfinn6578]

Fake News. Central Banks are not privately. Not even the FED!

[@BlackTomorrowMusic]

Here's a simple economic concept. If you don't already have the money, don't buy it. I'm sure the economists will scream "Blasphemy!" at this.

[@Requiemrexx]

Hey EE, can you please show us some math examples? I love learning about these economic principles but would enjoy even more specific applications, too!

[@KapnKetchup]

I really love your channel for a while but I think especially for vids like this a more visual representation on screen would probably help new viewers or those with less knowledge on the topic a lot.

[@centreman3731]

the legal law that allow bank to rob money more!!!

[@uknowngamer1017]

Great video idea: What if no one in a country owed debts? How would the economy be? Would it boom or sink?

[@sambro1064]

Economics Explained, are you going to make a video on weworks?

[@RobertMOdell]

Propaganda trying to defend this horrific crime. It is a sin that will be severely punished.

[@J12H]

HOW TO create armies of slaves.

[@no.no.4680]

I literally got an ad that said "Instead of taking your money, what if your bank paid you money"

[@tompuijpeNL]

Hi I live in the Netherlands and the biggest reason also explained in the video for negative interest rates is for people to spend more, but here the banks are getting more and more risk averse while consumers/people save more, so general rule less money flow. Than government got this policy: no savetax till 400k and 1.8% tax on ROI for individual investments (so no ROI or corp tax for companies are changed). Government said: saving needs to be more fair compaired to investing. Three thing WTF?! This is in contradiction with monotary policy right? And is investing not better than saving on long term for economy because your money is actually used directly. Lastly, why won't anyone just start a corp and only get corp tax?

[@AdamSmith-gs2dv]

The reason for the contradiction is because the Netherlands uses the Euro and therefore does not have control over its own fiscal policy, the ECB in Frankfort does and they want negative rates

[@DutchDeathZone]

Hi the bank, I'm dad.

[@EconomicsExplained]

Hi dad I am the senate!

[@raideveloper]

4:10 "but they don't want inflation to go up to 4%" brazillian laughs

[@lucasatilano8008]

Raissa Correia Brazil has pretty high interests in order to avoid more inflation

[@luiza4142]

Kkkkk triste a nossa realidade

[@highervisiongaming4030]

10:37 Hey, keep 'em coming there bud.

[@libertatusinperpetuum2046]

It has always fascinated me that people want to talk all day about their assets, about economics, bank rates, money markets, LIBOR, mutual funds, stocks, savings, etc. etc. When the VAST majority of these people haven't yet realized that what they own and everyday call "money" is not money at all. They own and trade in fiat currency and call it money when in fact what they own is DEBT issued by a central bank. Why would people use debt and call it money? Because they have been programmed to believe that way, thats why.

[@bitzs]

No one: Absolutely no one: KZbin: wanna see a banking video? Me: ... yes

[@vovacat1797]

Hmm, paying someone to look after your money sounds intuitive to me. I mean, if money is safe there, isn't it worth paying for?

[@aresgood1]

oh. you think it's safe. cute

[@vovacat1797]

@@aresgood1 Maybe it's not so much about safety, but about transferring that responsibility of keeping the money to someone else.

[@christripodi7071]

So basically an accountant you pay them to look after your money

[@samuelthornton9179]

@@aresgood1 there would be bigger problems if the government defaults

[@thelaw3536]

Inflation alone makes money not safe if their is no growth to it. With negative interest you will be losing money on top of inflation not to mention how anything that has a positive yeild will be better than putting your money there. The banks use your deposited money for business and if people get paid to borrow, it stands to reason eventually large amounts of people will borrow. Would you like .4 percent of 300k euros for free? There are plenty of ways to spend store cash for safety purposes. Even us Treasury bonds are a better alternative.

[@IOUaUsername]

It's not just economists and accountants who use future values. In engineering we do the same thing backwards, called net present value, to weigh up future maintenance and operating costs of machines and structures vs the original investment.

[@methos-ey9nf]

That flash to Star Wars was too fast!

[@saritar1000]

No views... 6 likes... Seems legit.

[@aresgood1]

yeah... they are counted on different servers. the one who counts the views takes longer to update cause it works with bigger numbers

[@iliketobewithpeople9821]

Stop like uploading at 9:45 pm thx bye.

[@TheCaid100]

Do you really like social interaction?

[@iliketobewithpeople9821]

@Togos Na70 Ever heard of a joke?

[@jmbpinto73]

Some time ago, i found my book of financial mathematics from the nineties. It says there "negative interest rates are not possible". I smiled alone to the book. Is not that "we are paid to borrow" but we had the chance to refinance home loans to much better rates than we had.

[@leonardlangner9949]

Could you do a video explaining future investment?

[@SanchitKalra007]

Can you please suggest ways/sources to learn about finance from scratch? I’m really keen on learning about it since I’ve started watching your videos.

[@okok...ok.]

Hey, love your videos. Can you make a video on the economy of Venezuela?

[@J-IFWBR]

he did =)

Cool cheers from Portugal 🇵🇹

[@ednorton47]

Inflation is not the increased price of goods. That is only a symptom of inflation. Inflation is an increase in the supply of currency that is in excess of the amount of goods and services that are available.

[@denisyu783]

Unlike ECB the Fed doesn't normally lend money to banks. It controls the interest rate via the Federal funds rate - the rate at which bank in the US lend money to each other overnight. When a bank accepts the Fed's money. it usually means that it has problems, so banks in the US avoid doing that.

[@Sum_Ting_Wong]

My new favourite channel

[@benkenon]

It’s wild that everyone having enough money to live = prices get higher. What a crazy system we choose to live under

[@tn15_]

Main point of negative rates in my opinion is money creation. Money cannot enter the economy unless a bank loans it. Even if the loan is written for say, -.5% over 30 years, that new money will circulate through the economy during that time increasing incomes to a much greater degree than the original nominal loss on the loan. Negative rates may actually be the psychological turning point to get the non-financial sector to go wild and actually borrow money at an increasing rate again. Although that may come with its own consequences.

[@konajonah]

really credit card cash back is a negative interest rate, where you are incentivized to borrow money for short periods of time and paid an interest rate for doing so. I find it fascinating how this effectively plays a role in the yield curve, where borrowing money for different lengths of time can make borrowing that money either profitable or costly. and how borrowing money multiple times for a short period each time is cheaper/more profitable than borrowing money one time but for longer.

[@fft2020]

5:04 deflations problems are much much worse that people stuffing cash under the mattress This video is very very simplistic

[@fft2020]

@Matt Sickle Deflation is only a problem when you are indebted to the core Which in our modern society means almost everyone

[@danipmg9000]

LOVE U MAN good job

[@EconomicsExplained]

thanks man I love you too!

[@vicgamesvt9682]

Basically negative interest rates is something that would go on if there was deflation but right now with a annual inflation rate we need interest.