Cashless society

zagfles

FOREVER21 wrote: »

If bank rate drops to negative rate then I for one will cease to be a customer of any bank.

I will then resort to paying bills etc, by cash, and make my best efforts to spend my surplus cash.

I seem to recollect that I managed quite well before Internet banking became fashionable, and now being retired I would have the time to pay bills with cash.

No please not for me a cashless society.

Hence the reason to want to get rid of cash if interest rates go negative. And the encouragement to spend surplus cash to boost the economy is the main reason for negative rates. Like in Japan, they want to encourage spending and discourage saving.

Ballard

zagfles wrote: »

The point is that you couldn't really have negative interest rates if you still have cash. People would just keep their savings in cash under the mattress instead of putting it in a bank and losing money through negative interest rates!

To an extent there is truth in this but it only works if the amount of cash is small. If you have under £10,000 in your bank account then you could take the risk of being burgled or losing it in a house fire. If you have significantly more then I would suggest that the risk is too great and you'd be better off paying your bank to keep hold of it.

There are, of course, negative rates in Euroland at the moment and they haven't done away with cash.

Ballard

FOREVER21 wrote: »

If bank rate drops to negative rate then I for one will cease to be a customer of any bank.

I will then resort to paying bills etc, by cash, and make my best efforts to spend my surplus cash.

I seem to recollect that I managed quite well before Internet banking became fashionable, and now being retired I would have the time to pay bills with cash.

No please not for me a cashless society.

Could you actually do that? How would you receive your pension? Would the loss of direct debit discounts (gas, electric, telephone, for example) be less than the interest that you'd be charged?

Ballard

boliston wrote: »

Surely if interest rates went negative people would borrow large sums simply to pocket the income

If you borrowed £100,000 what would you do with it? You can't leave it in a bank as you'd be charged more than you'd earn. A bank is unlikely to lend you money to keep it under your mattress.

zagfles

Ballard wrote: »

To an extent there is truth in this but it only works if the amount of cash is small. If you have under £10,000 in your bank account then you could take the risk of being burgled or losing it in a house fire. If you have significantly more then I would suggest that the risk is too great and you'd be better off paying your bank to keep hold of it.

There are, of course, negative rates in Euroland at the moment and they haven't done away with cash.

"Under the mattress" is metaphorical of course. The reality is with significantly negative rates people would invest in fireproof safes, or use bank safety deposit boxes. But when rates are only slighty negative eg between 0 and -1% it probably isn't worth it.

Super_Whiskey

Ballard wrote: »

To an extent there is truth in this but it only works if the amount of cash is small. If you have under £10,000 in your bank account then you could take the risk of being burgled or losing it in a house fire. If you have significantly more then I would suggest that the risk is too great and you'd be better off paying your bank to keep hold of it.

There are, of course, negative rates in Euroland at the moment and they haven't done away with cash.

Even if you do take money out of the bank in order to avoid losing it, you'll pay for it through higher insurance costs.

Negative interest rates are aimed at banks who have high reserves at their country's central bank in order to get them to lend the money out at lower rates so people and businesses can borrow that money cheaply to help stimulate the economy through more purchases or investment/growth that they otherwise might not able to afford.

Ballard

zagfles wrote: »

"Under the mattress" is metaphorical of course. The reality is with significantly negative rates people would invest in fireproof safes, or use bank safety deposit boxes. But when rates are only slighty negative eg between 0 and -1% it probably isn't worth it.

I would suggest that if rates went below -1% pa there would be more startling things of concern than paying your bank to hold your funds. I can envisage negative rates but I think that it'd only be just below zero. Anything below that would indicate the imminent total collapse of the economy.

JuicyJesus

skcollobcat10 wrote: »

But it would be that people would have no choice and be at mercy of bankers. They could charge what they wanted for bank accounts.

They already can. They just don't because anyone looking to charge for transactional banking would be finished as an organisation in the current marketplace.

ChiefGrasscutter

Ballard wrote: »

Cash is expensive for banks to handle so they'd probably be happier without it but I don't see what negative interest rates has got to do with it. You'd still have money in your account and that would attract negative interest.

you really do not understand.....really?
It is all pretty obvious

If you impose negative interest rates then "everyone" will withdraw their money from banks and become a cash only society.
This is bad news (for the government) as the black economy will predominate.

So to impose negative interest rates it is essential that the banks/HMG move to a cashless society first. This will ensure that ALL monies in the UK are subject to a negative interest rate and not just those monies held in bank/building society etc accounts.

Negative interest rates as imposed on the UK population as a whole cannot work without first a cashless society.
Negative interest rates of course would be the method by which HMG could force people to spend money rather than save it for a rainy day in the future.
You would be left with two options: spend it or get it effectively wealth taxed.

Ballard

ChiefGrasscutter wrote: »

you really do not understand.....really?
It is all pretty obvious

If you impose negative interest rates then "everyone" will withdraw their money from banks and become a cash only society.
This is bad news (for the government) as the black economy will predominate.

So to impose negative interest rates it is essential that the banks/HMG move to a cashless society first. This will ensure that ALL monies in the UK are subject to a negative interest rate and not just those monies held in bank/building society etc accounts.

Negative interest rates as imposed on the UK population as a whole cannot work without first a cashless society.
Negative interest rates of course would be the method by which HMG could force people to spend money rather than save it for a rainy day in the future.
You would be left with two options: spend it or get it effectively wealth taxed.

I don't agree at all that "everyone" will withdraw their money from the banking system. Those with a few grand might well do but anyone with more than that and a brain cell won't leave tens of thousands at their house. They may buy stocks, foreign currency or bricks and mortar, for example, but the vast majority will still need a bank account and they will still keep the account funded. £50,000 would cost £20 a month at -0.5% but that would buy security.

I repeat that Europeans, Danes & Japanese still have cash in their societies despite the negative interest rates.