{"id":13589,"date":"2015-04-24T00:00:00","date_gmt":"2015-04-23T22:00:00","guid":{"rendered":"https:\/\/michelsanti.blog\/2015\/04\/24\/negative-rates-no-a-revolution-in-attitudes\/"},"modified":"2018-10-17T17:43:32","modified_gmt":"2018-10-17T15:43:32","slug":"negative-rates-no-a-revolution-in-attitudes","status":"publish","type":"post","link":"https:\/\/michelsanti.fr\/en\/swiss-franc\/negative-rates-no-a-revolution-in-attitudes","title":{"rendered":"Negative rates? No, a revolution in attitudes!"},"content":{"rendered":"<p><a href=\"https:\/\/i0.wp.com\/michelsanti.blog\/wp-content\/uploads\/2018\/10\/1000-francs-suisses.jpg?ssl=1\"><img data-recalc-dims=\"1\" fetchpriority=\"high\" decoding=\"async\" class=\"alignnone size-medium wp-image-5381\" src=\"https:\/\/i0.wp.com\/michelsanti.blog\/wp-content\/uploads\/2018\/10\/1000-francs-suisses-300x200.jpg?resize=300%2C200&#038;ssl=1\" alt=\"1000 francs suisses\" width=\"300\" height=\"200\" \/><\/a><\/p>\n<p>How should we live in a world where interest rates are negative? It is a genuine paradigm shift that tells us to prepare for global deflation. While the U.S. will be spared, our Europe is sinking into economic stagnation, an ice age likely to be secular in nature. Switzerland and Denmark are leading the way and the SNB\u2019s base rate of negative 0.75% (- 0.75%) will probably drop further into the red.<\/p>\n<p>Since no other central bank in the financial history of the world had previously pushed rates to such negative levels, the Swiss experience will be an especially interesting one. Switzerland is the country with the largest denomination banknote in circulation in the world, 1,000 Swiss Francs (about 955 euros or ,055 at this time). As I have often <a href=\"http:\/\/www.michelsanti.fr\/un-monde-sans-cash-pour-un-monde-sans-recession\/\" target=\"_blank\">said<\/a> and <a href=\"http:\/\/www.michelsanti.fr\/supprimer-cash\/\" target=\"_blank\">written<\/a>, most recently in &#8220;<a href=\"http:\/\/www.michelsanti.fr\/suisse-declare-guerre\/\" target=\"_blank\">Switzerland declares war<\/a>&#8220;, \u201conly the disappearance of cash allows negative rates established by a central bank to have their optimal effect. In the presence of negative interest rates &#8211; that is to say, a tax on bank account balances \u2013 nothing prevents investors and speculators, and even the average citizen, to refer to banknotes as &#8220;fiat money&#8221; paying a 0% interest rate. In an environment where the number of 1,000-denominated Swiss Franc banknotes has doubled in 10 years and where it represents one third of the 60 billion Swiss cash in circulation, it is clear to me that this number will keep expanding in the presence of negative rates paid on bank accounts.\u201d<\/p>\n<p>&nbsp;<\/p>\n<p>Indeed, it seems that this banknote proportion has changed considerably since 17 January 2015 (date the above was written) as some rumors indicate that 1,000-denominated Swiss Franc notes now account for almost 50% of Swiss cash in circulation! This frenzied accumulation of CHF 1,000 notes threatens the efficiency of the Swiss National Bank\u2019s monetary policy and it may undermine its strategy of negative rates. The Swiss authorities can certainly eliminate 1,000 Franc banknotes, forcing investors to use the 200 Franc banknote and multiplying fivefold the costs associated with cash conversions. In an extreme situation, the SNB could even abolish all denominations in excess of 50 Francs terribly complicating savers\u2019 lives and forcing them to handle 20,000 50-Franc notes (representing 1 million Swiss Francs), instead of 1,000 1,000-Franc notes.<\/p>\n<p>As stated earlier, the SNB could also tax customer deposits in the banking system by applying such a tax when funds are withdrawn at bank retail counters. However, such a tax is not likely to be effective with slightly negative interest rates, up to minus 1% (- 1%). It seems clear that depositors will not be reluctant to pay fees of 0.5 or 1% of cash withdrawn at the counter. It would be quite different if interest rates were to be minus 5% (- 5%). Such a possibility should not be dismissed. Significantly negative rates are expected to continue for many months or even a few years. This new situation will fundamentally change our eating and spending habits. Our priority in fighting these negative rates will be to avoid leaving large cash balances &#8220;sleeping&#8221; in our bank accounts. Or we might well see said balances \u201camputated\u201d by a few precious percentages points.<\/p>\n<p>There are several new personal habits that will likely be adopted such as: paying our taxes before they are due, buying extra gift cards, buying more stamps, pre-paying our electricity and telephone bills, or even paying our rent or home mortgage in advance. The ultimate goal is to avoid paying negative rates on our bank deposits. Instead, &#8220;pass the buck\u201d to businesses or to the state. Our suppliers traditionally penalize us with late fees for delayed payment of a bill. But it may well be that we will soon see an inversion of this practice where the same supplier will increase our bill if prepaid! I was very serious when I spoke of a &#8220;paradigm shift&#8221; in the beginning of this article. The introduction of negative interest rates will strongly challenge our macroeconomic framework by puncturing the floor of our zero-bound world. It will gradually revolutionize our personal habits, our consumer economy and our laws.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>How should we live in a world where interest rates are negative? It is a genuine paradigm shift that tells us to prepare for global deflation. While the U.S. will be spared, our Europe is sinking into economic stagnation, an ice age likely to be secular in nature. Switzerland and Denmark are leading the way&hellip;<\/p>\n","protected":false},"author":4,"featured_media":13590,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"give_campaign_id":0,"_crdt_document":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"mc4wp_mailchimp_campaign":[],"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false,"jetpack_post_was_ever_published":false},"categories":[648941258,648941255],"tags":[],"class_list":["post-13589","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-negative-rate","category-swiss-franc"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Negative rates? No, a revolution in attitudes! - Michel Santi<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/michelsanti.fr\/en\/swiss-franc\/negative-rates-no-a-revolution-in-attitudes\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Negative rates? No, a revolution in attitudes! - Michel Santi\" \/>\n<meta property=\"og:description\" content=\"How should we live in a world where interest rates are negative? It is a genuine paradigm shift that tells us to prepare for global deflation. While the U.S. will be spared, our Europe is sinking into economic stagnation, an ice age likely to be secular in nature. 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Retail prices decline as consumers, who no longer have the means to maintain their current living standard, refuse to listen\u2026","rel":"","context":"In &quot;Swiss franc&quot;","block_context":{"text":"Swiss franc","link":"https:\/\/michelsanti.fr\/en\/category\/swiss-franc"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2018\/10\/Gr%C3%A4chen.jpg?fit=1024%2C701&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2018\/10\/Gr%C3%A4chen.jpg?fit=1024%2C701&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2018\/10\/Gr%C3%A4chen.jpg?fit=1024%2C701&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2018\/10\/Gr%C3%A4chen.jpg?fit=1024%2C701&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":19732,"url":"https:\/\/michelsanti.fr\/en\/bubble\/negative-rates-an-economic-curse","url_meta":{"origin":13589,"position":2},"title":"Negative rates: an economic curse?","author":"Michel Santi","date":"November 6, 2019","format":false,"excerpt":"\u00a0 Companies that don\u2019t pay interests on their debt are a like these students who never sit an exam: they somehow scrape by without any notable successes or accomplishments. The current level of rates should be encouraging investment because companies\u2019 margins are much higher than the cost of capital, that\u2026","rel":"","context":"In &quot;bubble&quot;","block_context":{"text":"bubble","link":"https:\/\/michelsanti.fr\/en\/category\/bubble"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2019\/11\/merlin.jpg?fit=442%2C343&ssl=1&resize=350%2C200","width":350,"height":200},"classes":[]},{"id":13684,"url":"https:\/\/michelsanti.fr\/en\/negative-rate\/if-only-the-right-knew-how-or-the-left-was-able-to","url_meta":{"origin":13589,"position":3},"title":"If only the right knew how, or the left was able to","author":"Michel Santi","date":"February 19, 2016","format":false,"excerpt":"Negative interest rates appear to be incompatible with our current banking system, because it is the banking institutions which have the most difficulty making profits in an environment of negative rates. It is the very fabric of our economy that has again been shaken as our world sinks further and\u2026","rel":"","context":"In &quot;Central Banks&quot;","block_context":{"text":"Central Banks","link":"https:\/\/michelsanti.fr\/en\/category\/central-banks"},"img":{"alt_text":"fork-in-the-road","src":"https:\/\/i0.wp.com\/michelsanti.blog\/wp-content\/uploads\/2018\/10\/fork-in-the-road-225x300.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":31308,"url":"https:\/\/michelsanti.fr\/en\/swiss-neutrality\/switzerland-a-negotiable-power","url_meta":{"origin":13589,"position":4},"title":"Switzerland, a Negotiable Power?","author":"Michel Santi","date":"March 11, 2026","format":false,"excerpt":"How a Prosperous State Turned Its Neutrality into an Adjustment Variable Switzerland is experiencing the most serious existential crisis of its modern history. What was once presented as a singular success story\u2014armed neutrality, admired mediation, insolent prosperity\u2014has turned into a spectacle of impotence and submission. By 2026, the verdict is\u2026","rel":"","context":"In &quot;Financial diplomacy&quot;","block_context":{"text":"Financial diplomacy","link":"https:\/\/michelsanti.fr\/en\/category\/financial-diplomacy"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2026\/03\/CH.png?fit=1200%2C800&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2026\/03\/CH.png?fit=1200%2C800&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2026\/03\/CH.png?fit=1200%2C800&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2026\/03\/CH.png?fit=1200%2C800&ssl=1&resize=700%2C400 2x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2026\/03\/CH.png?fit=1200%2C800&ssl=1&resize=1050%2C600 3x"},"classes":[]},{"id":13753,"url":"https:\/\/michelsanti.fr\/en\/public-deficits\/how-can-rentiers-be-euthanised-without-massacring-the-middle-class","url_meta":{"origin":13589,"position":5},"title":"How can rentiers be euthanised without massacring the middle class?","author":"Michel Santi","date":"July 13, 2017","format":false,"excerpt":"Today, 500 million people live under the regime of negative rates. 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