Denmark's Jyske Bank lowers its negative rates on deposits

When people borrow money for a house, they only consider the monthly payments for the mortgage and not the absolute amount of money they are borrowing. This means that low interest rates are the main reason behind surging house prices and is why people have to spend decades paying back loans and being vulnerable to a drop in house prices. It creates too much debt in society and generally makes the economy more fragile than it has to be. The low interest rates may seem like a helping hand to house buyers but it is in fact the opposite: a transfer of wealth to house owners from people seeking to enter the market, a transfer of wealth from the younger generations to the boomers. This must end if we want to avoid a repeat of the 2008 crisis. But with the current levels of government debt, it's hard to see a political solution.

&gt; In August, Jyske became the first to offer a negative rate on a home loan, in effect paying customers 0.5% to borrow money for 10 years.<p>Surely this can&#x27;t end well?<p>Here in Sweden the house prices are so high in cities it&#x27;s almost impossible for young people to get a house, sometimes even an apartment. We&#x27;ve been waiting for the housing bubble to pop a while, but how long must we wait? The longer we do the worse it&#x27;ll be.

On the one hand this sounds eminently stupid. On the other hand, it means there is some sort of de-linking of money and time.<p>Negative interest rates roughly imply that Denmark crowns have no ability to preserve wealth over time. If anyone gets paid in crowns they should attempt to spend them immediately and buy something durable.<p>It is hard to see how this is an improvement over letting money hold value over time. Now there will be more competition over scarce real resources instead of wealthy savers holding a &quot;fake resource&quot; of cash in a bank account. And anyone who doesn&#x27;t understand interest rates might lost out from confusion.

Other than spreading it around multiple banks, the natural outcome of this will be increased investment, most likely in real estate at one end of the spectrum and on the other things like money market funds, treasury bonds, and to a lesser extent index tracker style ETFs.<p>If the trend spreads across other countries, and if you believe this is a trend that is hard to revert (falling interest rates), I&#x27;d say we&#x27;re in for a few more years of the stock market climbing with bigger and bigger valuations at crazier revenue multiples. Even though lately it seems like everyone is predicting that a crash is right around the corner, I don&#x27;t think it&#x27;s likely without a big external event happening to disturb this trend. Either some cyber &#x2F; regular war or some other event nobody is forseeing.<p>The 2008 big short dude recently predicted that the inflows of money into ETFs by a lot of very passive investors is gonna create a situation where big valuations are based on nothing other than people not having any other place to put their savings, but I think like in 2008, his prediction is very early again.<p>We&#x27;ll see, interesting times ahead.

It strikes me that with an absurdly low debt-to-gdp ratio of 34% and negative interest rates maybe the Danish government should invest more money in their economy. Maybe leverage the market to build the enormous amount of green infrastructure they and the world needs, the returns don&#x27;t need to be that high to pay off.

Soon enough we may find out that too much is invested into the expectation that interest rates will go down indefinitely.<p>When inflation finally strikes, there will be no tools left to fight it. Getting deeply into debt and buying as many assets as you can would then be the right thing to do.<p>Obviously, this is not financial advice.

Aren&#x27;t negative interest rates equivalent to inflation? Both lower the value of savings.<p>2% inflation and 1% interest rate on savings is the same as 0% inflation and -1% interest rate.<p>Even getting a -1% mortgage creates inflation, because who sells houses can ask somewhat higher prices and buyers will be able to pay them.

This is a really bad articles. The short term rates are not driving this. They don&#x27;t drive long term rates because be short term rates are largely driven by technical considerations (eg the recent fed interventions in the overnight markets because of liquidity issues).<p>I spoke to someone about this a while ago. These loans are often required by the government to message certain targets, and are meet positive for the banks because of other regulatory issues that may exist. These negative rates home loans wouldn&#x27;t exist without some regulation various regulation and government incentives.

Why does the concept of paying people to borrow money sound eerily familiar.

If I lower the interest rate it goes down, if I lower a negative rate it goes up?<p>Either way, I was unsure which way rates had moved just from reading the title.

In a world with crypto currencies, would a frugal Dane be wise to put their cash into a cryptocurrency?<p>I realize crypto is still seen as risky, however if it takes hold and overall market volatility stabilizes, how would easy access to borderless liquid digital assets affect the neg interest rate strategy?<p>Edit: remove mention of specific cryptocurrency in an attempt to shift focus to broader strategy.

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