This is happening. Your money will simply cost you money.
In August 1999, the central bank’s interest rate was about 13% and inflation, after years of three-digit numbers, was around 10% and slightly below that.
These numbers tell us that the public has received interest on its deposits that today can only be dreamed of
In general, it is clear to every man and woman that when depositing money in the various deposits offered by the banks we receive interest on it. Sometimes more and sometimes less, but this arrangement is known to all – the bank offers me interest on every shekel I deposit at the bank.
That was the case until the financial crisis of 2008. The crisis devastated the cards. Central banks have found a solution to fighting the financial crisis through expansionary policies – that is, interest rate cuts
As the years went on, the central banks lowered their interest rates until we got to the bottom.
This morning, one of the economic sites posted about the radical changes caused by interest rates worldwide.
As part of an attempt to propel the economy the required policy is monetary expansion which is essentially a tool whose function is to reduce interest rates. But what happens when interest rates are already at zero ?!
When the interest rate reduction tool reaches zero, a negative interest rate move should be considered.
When interest rates are positive – we will receive money for our deposits.
The higher the interest rate we would be interested in the proposed deposit without seeking other adventures for money. We will reduce investment in securities, we would prefer to keep the money in our bank account – which will lead to a slowdown in consumption and hence a slowdown in economic growth.
But when interest rates go down, our considerations are likely to change.
And what happens if the interest rate we get is only zero ?! We will most likely look for alternatives that can give us a better return.
And what happens to interest rates becoming negative? I’m sure you don’t know this idea.
Negative interest rates mean you have to pay for your money.
Deposit money into the bank – pay interest on it, want to take out a mortgage – the bank will pay you for this.
True, this is not the case in Israel, nor in most economies in the world. However, it already exists in some Scandinavian countries.
It is estimated that low interest rates will remain here for quite some time.
Will a negative interest rate situation spread in the world? time will tell.