At first, NIRP was an anomaly. An obscure policy tool that
most analysts and market watchers assumed would be implemented on a
temporary basis in a kind of “let’s see if this is even possible” experiment with an idea that, from a common sense perspective, makes no sense.
But then a funny thing happened. Central banks from Denmark
to Sweden to Switzerland went negative and stayed there. They even
doubled down, taking rates even more negative and before you knew it,
the public started to catch on.
When NIRP failed to resuscitate global growth and trade,
the cash ban calls began. The thinking is simple (if crazy): if you do
away with physical banknotes, the effective lower bound is thereby
eliminated. You can make rates as negative as you like because
the public has no recourse as people aren't able to push back by
eschewing their bank accounts the mattress.
If that seems far-fetched, consider that the ECB is seriously considering pulling the €500 euro note and the calls are growing louder
for the Fed to drop the $100 bill. Of course officials are pitching the
big bill bans as an attempt to fight crime - because only a criminal
would pay with a $100. But the underlying push is for a cashless
society wherein monetary authorities can effectively force citizens to
spend and thereby boost the economy by simply making interest rates
deeply negative.
Now that the cash ban calls have gotten sufficiently loud
to be heard by the generally clueless masses and now that the likes of
Jose Canseco are shouting about negative rates, savers are beginning to pull their money out of the banks.
“Look no further than Japan’s hardware stores for a
worrying new sign that consumers are hoarding cash--the opposite of what
the Bank of Japan had hoped when it recently introduced negative
interest rates,” WSJ wrote this morning. “Signs
are emerging of higher demand for safes—a place where the interest rate
on cash is always zero, no matter what the central bank does.”
“In response to negative interest rates, there are elderly
people who’re thinking of keeping their money under a mattress,” one
saleswoman at a Shimachu store in eastern Tokyo told The Journal, which
also says at least one model costing $700 is sold out and won’t be
available again for a month.
“According to the BOJ theory, they should have moved their funds into riskier but higher-earning assets. Instead, they moved into pure cash that earned nothing,” Richard Katz, author of The Oriental Economist newsletter wrote this month.
Meanwhile, in Switzerland, circulation of the 1,000 franc note soared 17% last year in the wake of the SNB’s move to NIRP.
“One consequence of the decision to cut the Swiss central
bank’s deposit rate into negative territory in late 2014, and deepen the
negative rate to -0.75% early last year, may have been to increase
stockpiling,” WSJ reports.
“Holding money in cash would protect it from the risk of Swiss banks at
some point charging a broad range of customers to deposit money.”
“The connection between the increasing circulation of the big Swiss bill and the central bank policy is obvious,” Karsten Junius, chief economist at Bank J. Safra Sarasin said.
Well yes, it is. Just as the connection between soaring safe sales in Japan and Haruhiko Kuroda’s NIRP push is readily apparent.So once again, we see that when one experiments with policies that fly in the face of logic (like charging people to hold their money), there are very often unintended consqeuences and when you combine sluggish demand with NIRP in a monetary regime that still has physical banknotes, you get a run on cash. And on safes to store it in.
One Japanese lawmaker brought up the soaring safe sales in parliament on Monday. "It suggests a vague sense of unease among the public," Katsumasa Suzuki remarked.
We're not sure "vague sense of unease" quite covers it. People are rushing to buy safes to hoard their money in because the head of the central bank has lost his mind...
http://www.zerohedge.com/news/2016-02-22/safes-sell-out-japan-1000-franc-note-demand-soars-nirp-triggers-cash-hoarding
