Saving in Germany Worse than nothing (ZZ)

小呵呵

Referred by economics.com
From the print edition: Finance and economics
Nov 8th 2014 | BERLIN |


Interest rates turn negative for some
MANY German savers already see the paltry interest they earn on the savings they stash in banks—typically even lower than the country’s minuscule rate of inflation—as an affront. So the news that Deutsche Skatbank, in the eastern state of Thuringia, plans to apply a negative rate of interest to some deposits, was greeted with consternation.

The penalty will only apply to balances of over 500,000 ($625,000) in instant-access accounts, of which there cannot be very many. It is not, technically, the first time that German banks have applied negative rates: a few banks require businesses to pay to have their money looked after. Some government bonds have traded with negative yields. But this is the first time personal accounts have received such treatment. Presumably the bank hopes to nudge savers into other longer-term, less liquid or higher-return investments, which it can make some money by selling.

German savers are a strange lot; they shun stocks, bonds and houses, instead parking over 2 trillion in ordinary savings accounts. In other words, they are cautious to a fault. Some think that banks are simply flogging high-commission products; others that speculating in stock and property markets is a form of shameful gambling.

The European Central Bank has been hoping to encourage banks to lend by charging them a negative interest rate on the excess deposits they stash with it. But Germans are sceptical that ultra-loose monetary policy can spur lending and thus economic activity without deeper fiscal and structural reform. They accuse the ECB of postponing an inevitable reckoning for past mistakes with its interest-rate policy. Relations between the ECB and the Bundesbank, Germany’s traditionally hawkish central bank, are in the dumps.

The ECB’s intention, however, is not so different from Deutsche Skatbank’s: to encourage savers to switch to riskier assets, spurring productive investment. It does not seem to be working. Germans have responded to low rates by saving less. But private investment has plunged in recent years, mirroring the German state’s own underinvestment. Lack of investment is increasingly recognised even by Germans as a national problem. It is a hard one for the thrifty to shirk.