Negative interest rates in Japan were supposed to encourage people to go out and spend their money in efforts to stimulate the economy, but in fact there has been an unintended consequence, as Safe Sales have sky rocketed.
Safe Sales – Negative interest rates in Japan
Negative rates in essence mean that people actually pay for keeping their money in the bank, rather than receiving interest. The purpose of the economic policy was to get Japanese people and businesses spending their money, rather than leaving it in the bank. By spending on goods and services, the merry-go-round would get back to speed and Japan could spend its way out of a stagnated economy. Well it seems that they are spending their cash, but the main beneficiaries are the safe sellers who are doing a roaring business.
A Deutsche Bank economist, Torsten Sløk has written in a note distributed to clients that there has been a significant spike in safe sales since the implementation of negative interest rate policies.
Despite the obvious security risks people still see this as the best option for their money.
This trend is not just confined to Japan however. Analysts have started to notice something similar in mainland Europe starting to occur as well.
A portfolio manager at Aberdeen Investments, Luke Hickmore noted this while speaking to Business Insider. “Safe sales have shot up through the roof in Europe,” Hickmore said, adding, “people are taking cash out and even with security costs, it’s better returns than your negative interest rates. It’s crazy, crazy behavior.”
It is a matter of controversy whether negative interest rates work, do people spend or do they just look for other ways to save and protect their money. As the global financial problems continue, negative interest rates are becoming a common tool in the arsenal of governments looking to kick-start their economies. In Europe Denmark, Switzerland and Sweden have all experimented with the policy,
Whatever the rights and wrong of negative interest rates, at least we can all agree a safe is better than granny keeping her cash under the mattress. For every winner, there is a loser and while people are worried about their savings being diminished, at least the safe makers are having a god time of things.