A German Bank has levied negative interest rates on regular customers for the first time, meaning that customers will lose a percentage of their balances every month. Specifically, the bank Suddeutsche Zeitung is charging customers 0.5% per year for any deposit no matter how big or small.
Previously negative interest rates in Germany had only impacted deposits that were greater than 100,000 Euros since banks have an allowance of deposits that are interest-free. However, Suddeutsche Zeitung used up this allowance and is now ‘forced’ to charge customers negative interest, mostly due to customers from other banks that have used up their allowances flocking to Suddeutsche Zeitung.
Negative interest rates have been rapidly spreading worldwide, with $17 trillion of negative interest bonds globally at this point. Negative interest rates essentially represent money printing and inflation, since banks and corporations can take out loans from the Central Bank without paying any interest, and actually get a profit on top. This makes simply taking out loans of free money a profitable business model for top banks.
However, one of the major downsides is that these interest rates are applicable to small-time creditors, such as people depositing money at the bank. Now banks in Germany can charge people fees on their savings, even though the banks are profiting off of the savings by making various investments.
Negative interest rates on bank deposits are a detrimental tipping point for the banks since it makes it so people have an incentive to not hold money in the bank. This is likely causing people to flock to storing their money in cash, or Bitcoin (BTC) and other cryptocurrencies.
Although Bitcoin (BTC) is volatile, it is perhaps a safer way to store money than cash, since Bitcoin (BTC) is cryptographically secure.
It seems the negative interest rate tsunami is only beginning, and it could lead to a crypto rally as people abandon banks and buy Bitcoin (BTC).