The other day The Wall Street Journalbroke the story in the world there were loans with a negative percentage.
Generally, after the financial crisis of 2007-2009 world of money and credit began to go through the looking glass – negative percent. The pioneers were the Central banks of Sweden and Denmark, has set negative interest rates on deposits… was Motivated this decision by saying that commercial banks should not “rest” in the quiet Harbor of deposits lender of last resort, and are obliged to work, giving loans to the real sector and reviving the economy.
A little later the same decision was made by the Swiss national Bank, but there was another explanation: negative interest rates are designed to curb the capital inflows from the European Union and the Eurozone, where at the beginning of the current decade was marked by the debt crisis and increased instability of the economy. Deterrence of capital inflows, in turn, is necessary to prevent excessive strengthening of the Swiss franc.
In 2014 followed a similar decision by the European Central Bank, and from 1 February 2016 a negative Deposit rate was introduced, the Central Bank of Japan. However, this is only the first series of paintings called “Interest rate surrealism”. Negative interest was in the history of capitalism. Modern man as difficult to comprehend negative interest, as the schoolboy of initial classes, it is difficult to understand what a negative number.
Then came the second series. The introduction of negative interest Central banks reacted immediately by commercial banks and financial markets. Some private banks in Switzerland and Germany starting in 2014 began to set negative interest on its Deposit operations. Thus, banks should not pay clients, and clients must pay to banks for placing their funds on Deposit. Strictly speaking, such a practice, some Swiss banks are adhered to before, but then customers are paying the Swiss moneylenders for privacy. Switzerland was the standard Bank secrecy, and secrecy costs money. However, under pressure from the U.S. Bank secrecy in Switzerland was liquidated. Therefore, the reasons for negative interest in Swiss Bank accounts are different now. On the one hand, this pushes them to the financial regulator (Swiss national Bank), preventing strong appreciation of the Swiss franc. On the other hand, these banks have limited possibilities of profitable placement of their assets, Bank profitability has fallen dramatically. And therefore, no sources for interest payments on passive operations. Today in many countries there is information that commercial banks warn their clients about the possible abolition of interest on deposits or even setting negative interest.
In parallel with the zero or minus commercial banks began the process of issue of debt securities with negative income. First of all, the question of the government securities. There is nothing surprising here. Commercial banks and other investors lost interest in the deposits, switched to securities. Increased demand for paper inevitably lowers interest rates on them. They were not high, but in the new conditions went into minus. So, at the beginning of last year, the Bank of Sweden held a bond issue for 3.5 billion kronor with a maturity in 2019 and a yield – 0,0503%. Assessment of JPMorgan Chase, negative returns in early 2015 was observed in European government bonds with a maturity of over one year totaling $ 2 trillion. $ . A year ago government bonds with a negative sign was only 6.8% of the world total government securities. As of 1 February 2016, according to estimates by Deutsche Bank, the share of bonds with a negative yield reached about 25%. Quietly epidemic of negative interest rates spread and the market for corporate securities. Such securities in the financial markets are scarce, but the tendency to growth of number and volumes of issues have emerged.
Two years ago began the third series. Negative percent has captured not only passive (Deposit) operations of banks and their asset operations. There were “negative” credits. Borrowing money became free. First it happened with some Central banks after the financial crisis continued to lower the refinancing rate, the key rate, interest rates on REPO operations, etc., Some Central banks are almost giving free money to commercial banks. Here’s how the picture looked in the end of 2015: the ECB – to 0.05% (main refinancing rate); the national Bank of Denmark to 0.50% (the rate of financing of deficit of liquidity); the Swiss national Bank is 0.05% (lending rate). And the Central Bank of Sweden’s REPO rate to get a negative or minus 0.35 per cent. According to the latest data, in Denmark the key interest rate has already dropped to minus 0.65 percent.
And here we come to with what began – a story published by the WSJ. This is the story of a Danish resident by the name of Hans-Peter Christensen. 11 years ago he took out a mortgage and for ten regularly paid the interest and fees. Hans-Peter Christensen, working as financial consultant, bought his home in the suburbs of Aalborg over 1.7 million kroner ($261 thousand. USA) in 2005, Then he repeatedly agreed to change the terms of a mortgage after the rate decrease. And at the end of 2015, the next quarterly payments calculation found out that Hans-Peter has to pay interest to the Bank but rather the Bank pays him interest 249 Danish kroner, equivalent to about 40 US dollars. It turned out that at the end of 2015 the interest rate on this mortgage loan amounted to – 0,0562%. It turns out that the loan rate fell below zero in the summer of 2015, However, Hans-Peter had to pay then Bank some pennies, but it was not the interest, and the Commission (payment of Bank services). Now, as you can see, the balanced result taking into account interest and fees in favor of Hans-Peter. After a while this story got wind of journalists, our Dane was the hero of the day. “My parents said I should hang this receipt in a frame to prove to future generations that this has actually happened,” says Christensen.
How many in Denmark such clients with “negative” mortgages, it’s hard to say. The Wall Street Journal cited figures from Realkredit Danmark, one of the largest mortgage lenders in the country. According to the statement specified Bank, last year he had 758 clients like Mr. Christensen. Such a client can be called a “credit investor”.
Of course, the story Kristeena could be attributed to the category of curiosities. However, the story isn’t as funny. Many (and bankers and their customers) can’t understand what is happening in this financial world of surrealism. “If several years ago you said that would happen, you would have taken for a madman,” says Andersen Torben (Torben G. Andersen), Professor at Aarhus University and one of the economic advisors of the government of Denmark.
Experts fear that the epidemic “negative credits” can occupy all of Europe. An example from Denmark is contagious, because a negative percentage has dramatically increased the demand for mortgage loans and they, in turn, greatly revived the real estate market. And here there are two serious threats.
Firstly, may cause overheating of the real estate market followed by a sharp collapse. And it will trigger a General economic crisis with unpredictable consequences. Mortgage loans almost free, and in neighboring Sweden. “It is dangerous, – says the Chairman of the Swedish Central Bank Stefan inhves (Stefan Nils Magnus Ingves). – Our population is much, very much. This should sooner or later change”.
Secondly, mortgages, who took out Hans-Peter, have a floating interest rate. What if tomorrow will turn into minus plus? It could be a disaster for many Bank customers. Euphoria “credit investor” appeal to panic and will end by depriving them of objects of real estate. Everyone is still fresh in the memory of the tragic events of the subprime crisis in the US in 2000-e years when on the street were evicted millions of Americans.
Negative interest on active (credit) to operations of banks – the final series of serial paintings “surrealism Interest”. However, it is the final phase of capitalism – socio-economic model, the cornerstone of which was interest
