Could someone explain very simply what negative interest rates are?

Could someone explain very simply what negative interest rates are?
by

1 Answer

Answer :

answer:Normally, when you have a savings account, interest causes your balance to increase over time. Negative interest means your balance decreases. So, negative interest applied to normal people means that YOU are paying the bank to store your money. (there have actually been economic “experts” suggesting that, to “discourage” normal people from saving, and instead “encourage” them to spend it.) Applied to banks taking loans from central banks, it means that the amount of money they would have to pay back, decreases nominally over time. So basically, the central banks pay banks to borrow money. Of course, that would never be applied to normal people taking loans.
by

Related questions

With interest rates so low, what might be a good investment?

Description : With interest rates so low, what might be a good investment?

Last Answer : answer:Well that’s the million dollar questions now isn’t it :) My investing club is looking into domestic and international stocks that deal in: trees, water, pipline manufacturers, biotech and precious metals, palladium especially.

If we operate in a "free market," how come the "fed" sets interest rates and not the market?

Description : If we operate in a "free market," how come the "fed" sets interest rates and not the market?

Last Answer : Well, the answer is that we don’t operate in a free market economy, it is highly regulated. But you might want to read up on the Federal Reserve system, as the Fed doesn’t set ALL interest rates, just those that are tied to certain federal funds.

If you borrow the very first dollar into existence, but promise to pay it back with another dollars worth of interest, where do you get the second dollar? How do you pay it off?

Description : If you borrow the very first dollar into existence, but promise to pay it back with another dollars worth of interest, where do you get the second dollar? How do you pay it off?

Last Answer : By making more debt from another party. The entirety of today’s economy is based on creating more and more debt. Because of interest, you have to create more debt, there is no way around it, and this cumulative debt grows and grows, until the entire house of cards invariably collapses.

How could I find the best Roth IRA rates?

Description : How could I find the best Roth IRA rates?

Last Answer : Roth IRA's can be self directed stock accounts, hold real estate, or many other types of investments. They need to consider what type of investment and what they hope to achieve when they start ... interested in learning more about stocks they can open an account at Scottrade for their ROTH as well.

No politicking, just economics. Would simply taxing all goods and services work better than the American system of taxation? Akin to sales tax.

Description : No politicking, just economics. Would simply taxing all goods and services work better than the American system of taxation? Akin to sales tax.

Last Answer : I think, and have for awhile, taxing individuals is messy and inefficient. Taxing all goods and services is even more messy and inefficient. If I had to redo from scratch, I’d perhaps only tax corporations, inheritances, and capital gains as a way to simplify everything.

The relationship between maturity and interest rates is known as ________ A. Yield Curve B. Zero Coupon Yield Curve C. Negative Yield Curve D. Neutral Yield Curve E. None of the Above

Description : The relationship between maturity and interest rates is known as ________ A. Yield Curve B. Zero Coupon Yield Curve C. Negative Yield Curve D. Neutral Yield Curve E. None of the Above

Last Answer : B. Zero Coupon Yield Curve Explanation: The Zero Coupon Yield Curve aka the Spot Curve is a relationship between maturity and interest rates which differs from a normal yield curve

What are good CD rates? What bank should I go to?

Description : What are good CD rates? What bank should I go to?

Last Answer : You should be able to find a better rate than that. Some savings accounts are .9% now. As you shop for rates I would suggest not locking up the money for more than 2 years because it looks like the economy is starting to move, maybe rates will rise a little.

Is there a benefit to making a principle only payment on a simple interest loan?

Description : Is there a benefit to making a principle only payment on a simple interest loan?

Last Answer : Paying extra principle will reduce your interest costs. Sometimes the reduction is in the next payment, but there is always a reduction at the end.

Compound interest question?

Description : Compound interest question?

Last Answer : Most payment schedule pay both interest and principal each month. I’ve never heard of compounding principal. I have a couple of amortization formulas in the office.

Why would corporations offer bonds that pay 5 to 6% interest?

Description : Why would corporations offer bonds that pay 5 to 6% interest?

Last Answer : some do because they need to borrow more than the banks are willing to loan.

Is anyone here knowledgeable about Variable Rate Demand Notes? (Floating Rate Demand Notes) - they seem to pay attractive interest, but are not regulated or insured.

Description : Is anyone here knowledgeable about Variable Rate Demand Notes? (Floating Rate Demand Notes) - they seem to pay attractive interest, but are not regulated or insured.

Last Answer : If you are comfortable with the company, it is probably a good investment. Depends on how much money you are talking about. Is it long term money or short term money. If long term, ... fixed annuities. (NOT VARIABLE ANNUITIES). Despite the similarity in name, they are very very different products.

Is it right for an auto financing company to charge interest on a monthly basis without adjusting interest charges for bi-monthly payments?

Description : Is it right for an auto financing company to charge interest on a monthly basis without adjusting interest charges for bi-monthly payments?

Last Answer : I see your “moral” argument but think that the legal answer is it depends on what the contract you signed says. I’m not a lawyer, and perhaps someone who is will chine in, but I think that if the contract sets those terms, then it’s legal.

Does anyone have any suggestions for good credit cards (good rewards program, low interest, etc.)?

Description : Does anyone have any suggestions for good credit cards (good rewards program, low interest, etc.)?

Last Answer : I LOVE my JetBlue American Express Card. Now, I take a vacation every year and my flight is always free.

How does my bank account interest work?

Description : How does my bank account interest work?

Last Answer : Tthe acronyms are a little different in the UK than the US, but I could make a rough guess and say that you'll be making somewhere around 5% annually (if that's tax free, that seems quite good). For £1000 ... a year or £4.16 a month. That's not an exact answer, but it should be in right ballpark.

Best interest rate for private student loans?

Description : Best interest rate for private student loans?

Last Answer : citibank mine seem to be really low what is your current rate?

I am unemployed. Do I pay federal tax on interest rate income i make from investing in treasury notes?

Description : I am unemployed. Do I pay federal tax on interest rate income i make from investing in treasury notes?

Last Answer : I would check the IRS website….but you probably do have to pay taxes on that income if it exceeds a certain amount.

What does 6.8% interest actually mean?

Description : What does 6.8% interest actually mean?

Last Answer : answer:If you didn't pay a dime of the original $2000 for three years, then by the time you start paying it back, you'll actually owe $2,436 (2000 1.068 to the third power). The interest applies to ... to pay down the debt, but the private ones will want you to take as long as possible to do so.

Negative Paypal balance?

Description : Negative Paypal balance?

Last Answer : The process for a chargeback on paypal is sometimes very hard to dispute. The customer can basically say that they didn't receive the product or they returned the product and you are liable to refund them. ... plan with them before it goes into collection. Even if it's 20 bucks a month. Good Luck

How much money does it take a canidate to possibly become president. I mean everything from start to finish, tv ads, staff, cars, planes, protection, hotels on and on and on. Could someone tell me the total cost of all this for just one politician?

Description : How much money does it take a canidate to possibly become president. I mean everything from start to finish, tv ads, staff, cars, planes, protection, hotels on and on and on. Could someone tell me the total cost of all this for just one politician?

Last Answer : Around $500 million USD.

If you could afford it, could you envision yourself living very simply and basically, with TV but no internet access at all, in a secluded (but safe) rural area, or would you find living like that impossible?

Description : If you could afford it, could you envision yourself living very simply and basically, with TV but no internet access at all, in a secluded (but safe) rural area, or would you find living like that impossible?

Last Answer : What about normal phone service? If I had normal phone service so that I could still get in touch with people that way, I would be able to do it.

Negative yield line form i. Near the supports in the case of slabs fixed or continuous at the edge. ii. At mid span in the case of slabs fixed. iii.At mid span for simply supported circular slab [ A ] i [ B ] i and ii [ C ] i and iii [ D ] i, ii and iii

Description : Negative yield line form i. Near the supports in the case of slabs fixed or continuous at the edge. ii. At mid span in the case of slabs fixed. iii.At mid span for simply supported circular slab [ A ] i [ B ] i and ii [ C ] i and iii [ D ] i, ii and iii

Last Answer : [ A ] i

Bending moment at supports in case of simply supported beam is always (a) Zero (b) Positive (c) Negative (d) Depends upon loading

Description : Bending moment at supports in case of simply supported beam is always (a) Zero (b) Positive (c) Negative (d) Depends upon loading

Last Answer : (a) Zero

Hello. I live in Bulgaria. Our familly is poor and I don't have very much money. I'm 15 years old and I don't think it's legally to work. What ways you know for earning money?

Description : Hello. I live in Bulgaria. Our familly is poor and I don't have very much money. I'm 15 years old and I don't think it's legally to work. What ways you know for earning money?

Last Answer : Perform a service. Landscaping House cleaning Child care Programming Fast food You know best what is needed in your area. Look around.

Do you think it's easier for people to make money if their standards aren't very high?

Description : Do you think it's easier for people to make money if their standards aren't very high?

Last Answer : Well, maybe in one sense, but in another there is danger of physical harm, of improisonment. No, I don’t think it is easier.

What's your view on CDs and interest rates given that (supposedly) inflation is about to pick up?

Description : What's your view on CDs and interest rates given that (supposedly) inflation is about to pick up?

Last Answer : I'd go with the one year. I have a .9% interest rate with a CD that has about 6 months left, and I can actually add money to it at any time, but I can not withdraw it once it is in ... in the next 6 months interest rates will start to rise. Complete guess, I obviously do not have a crystal ball.

Why are interest rates so low in countries like USA, UK?

Description : Why are interest rates so low in countries like USA, UK?

Last Answer : I think it has something to do with our unique economic theory on how to avoid bankruptcy through low interest overnight interbank loans. Or something like that. Calling @zenvelo…

How low can interest rates go in Canada and other countries?

Description : How low can interest rates go in Canada and other countries?

Last Answer : I don’t believe it could ever go in the negative, but we will see I really doubt it could go any lower than it already is.

What does it mean when a central bank increases interest rates?

Description : What does it mean when a central bank increases interest rates?

Last Answer : It's usually the interest rate that banks can borrow from each other and yes they have to pay back any money they borrow. Comercial banks will also use the central banks interest rate to ... central bank tries to reduce the amount of borrowing and therefore the potential exposure to loses of banks.

Map to show interest rates across the UK?

Description : Map to show interest rates across the UK?

Last Answer : Um I meant inflation. meh delete this thread.

Will the new credit card laws in the U.S. reinstate old interest rates for the customers they gouged before the new law?

Description : Will the new credit card laws in the U.S. reinstate old interest rates for the customers they gouged before the new law?

Last Answer : Actually, what I read and the notice I recieved from MasterCard, interest rates are going up to close to 30%. I am going to see if our local loan shark issues plastic. I think we can ... credit card interest rates, and 30% healt insurance premimums. Do you wonder why the middle class is shrinking?

What happens when the Fed cuts interest rates?

Description : What happens when the Fed cuts interest rates?

Last Answer : answer:Lower federal interest rates make it easier-that is, less risky and burdensome-for large businesses, especially private banks, to borrow money from the federal government. This in turn ... of cheap consumables. For more information, try: http://en.wikipedia.org/wiki/Federal_Reserve_System

Do you think the Fed did the right thing by lowering interest rates ?

Description : Do you think the Fed did the right thing by lowering interest rates ?

Last Answer : answer:http://www.lewrockwell.com/paul/paul166.html The Folly of Fed Interest Rates by Rep. Ron Paul, MD March 18, 2004 The Federal Reserve, acting through its rate-setting Federal Open Market ... private banking, where interest rates are set by the free market and dollars are backed by gold.

Based on current data, would you lower the interest rates?

Description : Based on current data, would you lower the interest rates?

Last Answer : The interest rate is set by the Federal Reserve Members and is based on the supply and demand of Federal Reserve Notes on hand, in this cases the differance between the DEBT and CREDIT in Their ... the Big money boys and the Politicians)! Read the archives in www.worldreports.org. Hope this helps

Now that the Fed has lowered interest rates another quarter point is it time to refinance our home mortgage?

Description : Now that the Fed has lowered interest rates another quarter point is it time to refinance our home mortgage?

Last Answer : It depends what rate and term you have now. Add in closing cost to what you owe and do an amoritization. Then compare it to where you are at now.

Do you think the Governments rescue plan and banks interest rates cuts will save the economy?

Description : Do you think the Governments rescue plan and banks interest rates cuts will save the economy?

Last Answer : No. I don’t think it was meant to. I think it was meant to be a confidence booster to stop the pendulum from swinging the wrong way.

What is the personal loan interest rates in India?

Description : What is the personal loan interest rates in India?

Last Answer : Personal Loan Interest Rates varies from bank to bank.Best lender for personal loan with low interest rate is Buddy Loan India.

Which firms issue loans at minimum interest rates?

Description : Which firms issue loans at minimum interest rates?

Last Answer : I can advice a company that issues loans at a minimum annual interest. For review follow the link htt ps://bit. ly/35 JtvyC (just remove spaces).

When Compared to basic savings accounts CDs are liquid and have interest rates?

Description : When Compared to basic savings accounts CDs are liquid and have interest rates?

Last Answer : more; lower

What were interest rates 1990?

Description : What were interest rates 1990?

Last Answer : Need answer

What is the lending of money at interest rates higher than the legal limits called?

Description : What is the lending of money at interest rates higher than the legal limits called?

Last Answer : What is the answer ?

What banks offer the best interest rates on a debt consolidation loan in the Boston area?

Description : What banks offer the best interest rates on a debt consolidation loan in the Boston area?

Last Answer : There are a lot of banks that offer good interest rates on debt consolidation loans. The best one to choose is Regions.

What's the highest interest rates that the online financial institutions paying for 2 year CDs?

Description : What's the highest interest rates that the online financial institutions paying for 2 year CDs?

Last Answer : The higest rates can be between 1.5%-3% APR. The APR is different for each financial institution.

What are the interest rates for a savings account from Chase bank?

Description : What are the interest rates for a savings account from Chase bank?

Last Answer : Chase currently offers an interest rate of .5 on their savings accounts. These are not high rates.

Where can I find information about current mortgage interest rates?

Description : Where can I find information about current mortgage interest rates?

Last Answer : You can find information about current mortgage interest rates at www.bankrate.com. Another good site is www.interest.com/ Mortgage interest rates change each business day. Rates are published in major ... USA Today. In addition, you can check bankrate.com to compare specific bank interest rates.

Why do bank savings account interest rates change over the years?

Description : Why do bank savings account interest rates change over the years?

Last Answer : The interest rate at which they lend out money changes, which changes your interest rate. Banks are a buisness and if their interest rates are lower then your interest rates, they make no ... pay to the govenrment changes. Whnever the federal reserve rate changes,your interest rates can change.

Do you know if banks will still give high interest rates on savings accounts compared to a regular checking account?

Description : Do you know if banks will still give high interest rates on savings accounts compared to a regular checking account?

Last Answer : Most savings accounts hold little to no interest rate currently. They are basically the same as a checking account. If you are looking for higher yield interest, consider purchasing a CD.

What are good interest rates on Roth IRA accounts?

Description : What are good interest rates on Roth IRA accounts?

Last Answer : A Roth IRA doesn't necessarily give a set interest amount. "Roth IRA" simply designates that it is a retirement account using after-tax dollars. You can choose to invest in stocks, bonds, or money market as your wish, meaning the return can vary depending on your investment strategy.

how do I find my mortgage interest rates ?

Description : how do I find my mortgage interest rates ?

Last Answer : If you are unsure of what you are currently paying on your mortgage, you should contact the bank, credit union, or broker who is in charge of your policy.

What is the national average right now for mortgage interest rates?

Description : What is the national average right now for mortgage interest rates?

Last Answer : The national average for a 30 year fixed mortgage rate is 4.89%. This rate can either increase or decrease depending on the loan ammount. As of March 6, 2010, the national average mortgage interest rate ... 5.31%. The national average mortgage interest rate for a 15 year fixed rate loan is 4.68%.

What sort of interest rates do pawn shops charge (in West Virginia)?

Description : What sort of interest rates do pawn shops charge (in West Virginia)?

Last Answer : Who cares? If you're that poor and stupid, you don't have a choice.