If you are born before the year 2000 you grew up with one rule: save money and earn interest. Especially our German fellows are very committed to saving money in ordinary savings accounts. They stashed away €2 trillion or 55% of GDP, in ordinary bank savings and term deposits. The krauts are saying no to stocks and real estate.
Savings accounts are the way to go in most European countries. The Dutch stashed away 335 billion euro in savings accounts.
This is good news you might think. It is good that people save money. It earns interest and compound interest. Just one catch since the central banks began their qunatative easing war – the interest rates hit an all time low. And they are below the inflation rate. That means that your money does not compound – it is actually getting less.
Germany inflation is currently 2,2 – the interest rate on your savings account is 0,4%. Every year you are losing 1,8%. That means the Germans are losing thirty-six billion every year. Gone forever.
It gets worse when the central bank is declaring war on the people like in Sweden. They lowered the interest rate to -0,35% (MINUS 0,35%). No mistake here. The current Swedish interest rate Riksbank (base rate) is –0.350 % Riksbank. The Swedish central bank is the oldest bank in the world and is also called Sveriges Riksbank or the Bank of Sweden.
The current inflation rate in Sweden is about 0,1%. That would mean if you are saving in Sweden – you would be losing 0,45%. Still better than the Germans, but in Sweden banks will start charging you for storing money save in bank accounts. That is why Swedes will start hording cash.
That is why people in Sweden are starting to hoard money in cash at home. You can’t combat inflation but at least you are not paying the banks to hold your money. Crazy times. I am very curious how “The Great Negative Rates Experiment” in Sweden will turn out. In the end, it is just money and nowadays it is only 0 and 1 stored somewhere in computers.