Bitcoin News Outlet Spotlights Sweden’s Central Bank “Negative Interest” Savings Ploy
“Negative Interest” to Deter Savings?
Sweden’s central bank is looking into new measures that will deter the country’s citizens from saving money. The strategy, called “negative savings” may be put in place because the government believes that it will stimulate the economy. The move is controversial because the effect is speculative.
Right now, citizens have an online tax accounts that incentivize citizens to save money. The program enables the citizens to place fiat currency in online accounts and the government maintains the accounts. Over the course of the past several years, citizens have saved over 100 billion Swedish kronor, which is around $11 billion USD. The funds accumulate interest and is a cheap source of capital for the Swedish government.
The new strategy introduces “negative interest.” The rate, set at around 0.5%, removes the incentive to place funds into the tax account because the funds in the account will diminish, rather than benefit because there is no positive interest rate. The government believes that the new policy will stimulate the economy and promote consumer spending. The system was developed due to global obsession with “growth at all costs.” The new strategy also promotes a mindset of “spend now, pay back later.”
The decision is controversial. Many believe that governments should enact fiscal policies that benefit citizens and promote the best for the economy. However, when a policy only factors short term gains, rather than sustainable growth, the best interest of the people isn’t served.
The concept of a negative interest rate isn’t new –Sweden’s central bank has applied a negative interest rate for years and encouraged the central bank to maintain funds in fiat currency. The move has led to less inflation. According to the IMF, the move showed
“Clearer signs that inflation is on sustained uptrend are needed before unwinding monetary accommodation . . . at this stage an accommodation monetary stance remains appropriate.”
However, there have also been accusations that the country’s central bank has been accused of shirking responsibility to maintain financial stability, encouraging spiraling house prices and consumer debt.
Ludwig von Mises, an early 20th century economist, first discussed the trend and wrote that,
“The popularity of inflation and credit expansion, the ultimate source of the repeated attempts to render people prosperous by credit expansion . . . the boom is good business, prosperity, and upswing. Its unavoidable aftermath, the readjustment of conditions to the real data of the market, is called crisis, slump, bad business, depression.”
“People rebel against the insight that the disturbing element is to be seen in the malinvestment and the overconsumption of the boom period and that such an artificially introduced boom is doomed.”
The malinvestment is something that tend to occur in advanced economies. Many governments attempt to monopolize the currency, even if the policies that do so are not advantageous to the people. The question that arises here is whether governments should take such extreme moves to stimulate consumer spending.