A report on the website Zero Hedge today states that a borrower has been offered negative interest rates on a mortgage. The writer states:
“Yesterday I called my bank in Denmark, Nordea, and couldn’t believe what they told me…
They offered to lend me money at MINUS 0.12% for a ten-year mortgage.
In other words, the bank would PAY ME to take out a loan.”
Whilst negative interest rates have been used in Europe in the past they have always been the preserve of big banks and financial institutions. However, now the common Dane can be paid to borrow.
This will surely lead to a vast increase in borrowing and a subsequent housing bubble. It runs contrary to common sense and will erode the value of existing money significantly. Making those who cannot afford a home suffer.
Governments and banks across Europe are increasingly incentivizing people to consume instead of saving. Does this make sense in such a debt-ridden continent?
At the same time, the best performing stock market investments are ones that are not profitable, such as Netflix, Telsa and Uber.
Governments that would normally be considered insolvent are able to borrow at negative yields with little consideration of the potential consequences.
The Swiss government even advised its citizens to delay making their tax payments in 2016 as they didn’t want to pay negative interest on the tax collected.
Globally countries like Argentina are being allowed to borrow at minimal cost with 100-year terms even though Argentina has gone bankrupt twice in the last thirty years.
We have failed to learn lessons from the financial crisis and are now heading very fast into another one. This time it might not be possible to rescue the financial system. Maybe it is time for a new financial paradigm?
Bitcoin is by nature deflationary and protects its users from inflation eroding its value. Crypto still has a long way to go until it can be considered stable enough to be used in everyday transactions. However, as the existing system begins to falter. It is becoming increasingly likely a crypto-based alternative will replace fiat. Whether that will be Bitcoin or not we do not know yet.