Safes Sell
Out In Japan, 1,000 Franc Note Demand Soars As NIRP Triggers Cash Hoarding, by Tyler
Durden, 2/22/16
Negative rates may not have found
their way to bank deposits in most locales (yet), but that doesn’t mean the
public isn’t starting to see the writing on the wall.
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...
Perhaps "palpable sense of panic," better describes the
situation.
In response
to Suzuki Finance Minister Taro Aso could only muster the following:
"There is money, but there is no demand.
That is the biggest problem."
Comments
Maybe the
“old Japanese” don’t mind biking to the utility companies every month with cash
in hand, but that won’t work in America.
We are dependent on our computers, our bank accounts and our credit
cards.
Norb
Leahy, Dunwoody GA Tea Party Leader
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