02/24/2016 - Negative Interest Rates In Japan: Prompting Home Safe Sales To Store Cash
Central banks implementing negative interest rates are now prompting cash hoarding as bank depositors run out to buy safes for homes to put their cash inside instead of in banks .. “The thinking is simple (if crazy): if you do away with physical banknotes, the effective lower bound is thereby eliminated. You can make rates as negative as you like because the public has no recourse as people aren’t able to push back by eschewing their bank accounts the mattress .. So once again, we see that when one experiments with policies that fly in the face of logic (like charging people to hold their money), there are very often unintended consequences and when you combine sluggish demand with NIRP in a monetary regime that still has physical banknotes, you get a run on cash. And on safes to store it in.”
