[HN Gopher] German banks are hoarding so many euros they need mo...
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German banks are hoarding so many euros they need more vaults
Author : prostoalex
Score : 116 points
Date : 2020-02-03 16:10 UTC (6 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| Despegar wrote:
| The crazy thing is that Germany is killing their own banks. They
| refuse to run fiscal deficits while at the same time they
| criticize the ECB for lowering rates and hurting the German
| Saver, when the German Saver is who would benefit if they decided
| tomorrow to run deficits for the next 10 years.
| aazaa wrote:
| > ... when the German Saver is who would benefit if they
| decided tomorrow to run deficits for the next 10 years.
|
| The German Saver knows better than most that inflation destroys
| savings.
|
| Inflation benefits _debtors_ by allowing them to pay back their
| loans in depreciated currency. Germany isn 't exactly a nation
| of debtors, although most of Europe is.
|
| This is a looming political issue that's only just beginning.
| Despegar wrote:
| >The German Saver knows better than most that inflation
| destroys savings.
|
| Yeah this is not the outcome Germany or the EU needs to worry
| about. It's experiencing Japanese deflation for 20 years.
|
| >This is a looming political issue that's only just
| beginning.
|
| Yes there's been plenty of hard money cranks that have said
| this for 10 years since the Great Financial Crisis in the US.
| Zero Hedge, gold bugs, hedge fund managers, etc have all been
| sounding the alarm about "money printing" and the deficit.
| There's no inflation in sight.
| samsonradu wrote:
| Japanese deflation is brought up a lot. However it didn't
| really strike me as a troubled economy when visiting - on
| the contrary, things looked quite well.
|
| Can someone elaborate on why deflation is so bad?
| toss1 wrote:
| Deflation is bad because it is a self-reinforcing
| slowdown in the economy.
|
| The money gets more valuable and the assets get cheaper.
| so the incentive in every micro-decision is to hoard
| money and not spend. Why spend when the same thing will
| get cheaper tomorrow/next week/month/year...?
|
| So, the key factor of the Velocity of Money declines, and
| the entire economy either grinds or crashes to a
| (relative) halt.
|
| My understanding is that deflation is also very hard to
| get out of. Requires massive liquidity injections, and
| doing that without creating a crisis of confidence by
| overshooting is tough.
|
| For the current situation, my working conjecture (w/o
| running hard numbers/models) is that the Great Recession
| 11yrs ago destroyed so much wealth/value, and was so
| deflationary, that the central banks may never soon fill
| the hole with new liquidity. The evidence is that despite
| nearly continuous quantitative easing and other CB
| programs, over a decade later, we're still seeing this
| kind of phenomena - they just can't create & maintain
| even minimal inflation. Not sure what to do about it, but
| that's what I see...
|
| (edit: typos)
| [deleted]
| yorwba wrote:
| > It's experiencing Japanese deflation for 20 years.
|
| GDP per capita (PPP) in Japan has more than doubled over
| the past 30 years. https://data.worldbank.org/indicator/NY.
| GDP.PCAP.PP.CD?locat...
|
| Slow growth is only a problem if you rely on investing to
| generate your income. Otherwise, even no growth at all is
| fine.
| AWildC182 wrote:
| Have there been any major issues with declining QOL in
| Japan? It might be a cultural barrier but aside from the
| deflation stories making the rounds, I don't hear much
| about them suffering because of it.
| LeoTinnitus wrote:
| I'd normally agree but I think I just have more faith in
| Keysnian economics. You basically pay for today with the
| future. If you no longer can afford the future, you still
| have the infrastructure or asset that exists. Normally it
| isn't a 0 valued item (unless we're talking bankrupt
| securities, worthless commodities, or education) so even in
| an economic crisis, there is something tangible that came be
| used as collateral.
| wefarrell wrote:
| What good is the EU if its wealthier members are unwilling to
| subsidize the poorer ones? Germans want the benefits of
| federation without the drawbacks.
| petre wrote:
| The EMU is about the federalisation of Europe through the
| back door.
|
| https://m.youtube.com/watch?v=5TPpuIslzG4
| mamon wrote:
| EU isn't really subisidizing anyone - the actual flow of
| money is from poor towards the wealthy:
|
| https://www.politico.eu/article/what-rich-countries-get-
| wron...
| luckylion wrote:
| This confuses public subsidies with private money flows.
| mamon wrote:
| Not confuses, just gives fuller picture - the whole deal
| between old and new EU members was: open up your markets,
| and we'll give you access to our "cohesion funds" from EU
| budget. Now you can see who won and who lost on this
| deal.
| rusk wrote:
| It allows DE to have an artificially devalued currency
| which benefits their exports.
| eecc wrote:
| Exactly. It seems that we have unfortunately fixated on over-
| protecting winners, those that can take their rewards and
| reinvest them in something that is increasingly reducing to a
| financial scheme, debt in fact; over-protected, "low risk"
| and ethically enshrined.
|
| Which is metaphorically like rewarding couch-potatoes.
|
| Rather that letting the winners enjoy their success, while
| wiping it out in the long term if it's not funneled towards
| material investments that can benefit also the "non winners",
| with jobs and quality of life improvement.
|
| Seems like the narcissistic Randians are at the steering
| wheel, and no stepping down in sight
| blazespin wrote:
| Savers are bad for the economy at large though because they
| don't invest in high risk businesses, but rather in low risk
| assets (RE, bonds, etc) that do nothing for no one. They're
| like scrooge mcduck swimming in their pile of gold.
| ksdale wrote:
| Savers may not invest in high risk businesses, but the
| opposite of saving is not investing, it's spending,
| generally on consumer goods rather than on anything
| "productive". There's a different conversation to be had
| about how much consumer spending benefits those high risk
| businesses, but only a fraction of income earned by a
| business gets reinvested into plant and equipment in any
| case.
| vraivroo wrote:
| investing is a type of spending
| rusk wrote:
| All well and good when youve strong economic growth, but
| all that stored capital comes in handy when there's a
| shock. It provides a way to make money from your less well
| prepared neighbours ...
|
| But seriously, there's no harm damping things a bit.
| Runaway growth can have its issues too. I reckon best is to
| keep your inflation just ahead of population growth.
| nonconvergent wrote:
| Don't banks require "savers" as their source of capital for
| lending?
| redis_mlc wrote:
| In the 1940s and 1950s. Not now, at least for large US
| banks.
| ahakki wrote:
| not really tbh https://www.bankofengland.co.uk/quarterly-
| bulletin/2014/q1/m...
| jldugger wrote:
| What an absurd position. First off, risk isn't the goal,
| reward is. Risk is just the price of increasing rewards.
| But we shouldn't mistake the two, or valorize risk itself.
| Any high risk business not taking risk mitigations
| available to it is a poor one. And any investor who isn't
| using low risk, uncorrelated assets to juice their returns
| is missing out!
|
| Secondly. Bonds are not assets that "do nothing for no
| one;" they don't sit there in a vault. They are a loan to
| busineses, and they allow businesses and governments to
| build factories, bridges, and even other companies. They
| invite additional capital into the market, which can be
| used to make more high risk / high reward investments, for
| a small cut of the rewards. Even savings is a loan to the
| bank, which recirculates the money with their own loan
| desk. Negative interest rates in Germany aside, very little
| money in the system sits in an idle 'pile of gold.'
|
| And that's really the problem here -- electronic deposits
| with the ECB cost banks money, so they're not using the
| central bank. The money still exists, and economy is still
| moving, but the normal holder of cash deposits is charging
| instead of paying for it. This is why it was theorized that
| 0 percent was the lower bound on interest rates, so it
| would be a more surprising outcome if this sort of thing
| didn't happen.
| blazespin wrote:
| Not true. The government sells bonds to suck money out of
| the economy, and buys them back to add more. How the fed
| operates.
|
| Inflation is like ante at a poker game. Without the ante,
| everybody would just keep folding until they get the nuts
| and there would be no action.
| jldugger wrote:
| > The government sells bonds
|
| Well, it's how the FOMC operates. There's plenty of state
| and local bonds issued that match the model. But if you
| want to play the #notallbonds card, be my guest.
| Aperocky wrote:
| Savers are bad for business because liquidity stops when
| money hits them.
|
| US has such a strong economy because barely anyone save.
| Japan had so much savings that they literally need exports
| to survive, there's no home market to speak of because
| everyone save so much. Once export tanks, their economy
| tank.
| denzil_correa wrote:
| > They refuse to run fiscal deficits
|
| Germany has a debt brake law (Schuldenbremse) that limits
| structural net borrowing to 0.35% of the GDP.
| cwperkins wrote:
| Be careful what you wish for. I agree with Stieglitz that the
| Troika has historically not chosen the best path for crisis
| countries by implementing austerity. My fear with using Fiscal
| Policy and running deficits is that it is hard for a politician
| to win a campaign fighting for austerity if and when the debt
| binge becomes to great. From my own understanding, that is why
| monetary policy is strongly preferred because it's easier to
| roll back but Europe is at their end of Monetary policy. I wish
| I understood MMT better, it's something discussed in the
| circles of parliament and congress but I don't think the
| average joe is aware.
| Gustomaximus wrote:
| Very generally, my gripe with MMT is maybe it could work if
| well run. I'm not convinced but let's say it's possible. Next
| step, can we trust politicions to run the program
| effectively? I suspect they would always try to squeeze more
| out than practical that would lead to issues... And that's if
| it would work in the first place.
|
| I'd like to see some countries try it and prove/disprove,
| just not mine first.
| marriedWpt wrote:
| Hasn't Japan already gone through the course?
| Despegar wrote:
| This is absurd in the context of Germany. They have a fetish
| with "fiscal responsibility". It'd be the natural inclination
| of every politician to cut back on deficits (and I imagine
| within a few years there'd be pressure to).
|
| Germany is a country with a broken military and
| infrastructure. They should spend money on that. They should
| cut taxes for workers. There's plenty of shit for Germany to
| spend money on, and it would cause yields to finally rise.
|
| The ECB has no choice because rich countries refuse to spend
| money.
| cwperkins wrote:
| I want to be clear that I think the Germans, Dutch and
| Swedes can afford to do more for the benefits of their own
| economies and of Europe's. Germany needs to ween itself off
| of lignite coal and get better broadband infrastructure as
| well as contribute more to NATO.
|
| On the other hand in a place like Argentina, I'm not sure
| what the exit strategy.
| bilekas wrote:
| I really hate this idea that everyone needs to just
| constantly be spending. It's useful but there is nothing
| wrong with having a slow stable fincal conscious ecconomy.
| Analemma_ wrote:
| National economies are not households. My spending is
| your income, and your spending is my income. You can talk
| about "investment" all you want but without consumer
| spending there's never any return on that investment and
| so no one will bother.
|
| Having household savings is good but at a certain point
| it bottlenecks the economy.
| AWildC182 wrote:
| True, but it doesn't seem to really be the problem right
| now. The overwhelming majority of people don't need to be
| told to spend money. If they have it, they'll spend it on
| stuff, for better or worse.
|
| Looking back at the past half century the big variables
| that have changed to get us here seem to be A) lack of
| world wars to devastate Europe B) rising automation
| leading to skyrocketing worker productivity C) society's
| wealth becoming increasingly concentrated within a
| billionaire class and D) relatively flat wage growth to
| spite B. There are also probably a few other's I'm
| missing too.
|
| TLDR seems like there's a bigger picture to the
| macroeconomic situation than just spending and saving at
| the moment. I'm really curious to see how this will shake
| out going forward.
| OscarCunningham wrote:
| Spending does't necessarily mean wasting money on short-
| term consumption. They could also spend on sustainability
| and infrastructure.
| Despegar wrote:
| And I really hate the moralizing as if the national
| economy needs to be run like a household budget.
| growlist wrote:
| I think the moralizing is useful if it means future
| generations aren't going to pay the price for today's
| profligacy.
| Despegar wrote:
| This extremely poor misunderstanding of macroeconomics is
| likely to lead to the outcome you're supposedly trying to
| avoid.
| yokaze wrote:
| Instead future generations are going to pay for today's
| economic ideology
| barrkel wrote:
| Do you object to people being employed, being productive,
| and creating value?
|
| Because the way you get that is by spending on it.
| hocuspocus wrote:
| > Europe is at their end of Monetary policy
|
| I genuinely wonder why you believe that? Everything points to
| the status quo.
| cwperkins wrote:
| The ECB is currently at a -0.5% deposit rate. The SNB is at
| -0.75%. Perhaps there is room to go down, but the banks are
| struggling and pushing back.
| stefano wrote:
| There's always helicopter money, but yeah, the ECB is
| pretty much near the end of what they can do.
| hocuspocus wrote:
| And on top of that, property prices (both in absolute terms and
| relative to rent) climbed to stratospheric levels in major
| cities.
| hackeraccount wrote:
| Germany is obsesed with having a trade surplus in good &
| services. Every Euro that ends up in a bank is one less euro
| that might be used to buy foreign goods. So they repress
| spending and the money having no where else to go ends up
| sitting in a vault or paying for US securities.
| Fishysoup wrote:
| Germany is obsessed with keeping the value of the Euro low to
| maximize their exports. That's one of the reasons they've been
| pushing austerity after the economic crisis, as keeping
| countries like Greece, Portugal etc. in a rut depreciates the
| currency (the other reason is a weird sense that countries in
| debt have committed some moral failing and should be punished).
|
| Their trade surplus has been a subject of intense criticism by
| economists and other EU states, but Germany calls the shots in
| the eurozone economy.
|
| https://www.economist.com/leaders/2017/07/08/why-germanys-cu...
| pergadad wrote:
| That's nonsense. The reason for low interest rates is so that
| Italy won't collapse. It's widely hated in Germany as bank
| accounts have basically zero interest nowadays.
| Fishysoup wrote:
| They also blamed Greece for the bailout, which was a
| bailout of German banks. Yes the situation obviously isn't
| completely one-sided and there's more than one actor here,
| but don't pretend Germany is doing everything out of the
| goodness of its heart and to protect the EU. They're as
| selfish as any other country.
| MrBuddyCasino wrote:
| This kind of talk is irresponsible. Debt isn't free, you pay
| interest on it, you children might have to pay interest on it.
| Debt introduces systemic fragility. If the only way to grow
| your economy is rising public debt, something is fishy.
| H8crilA wrote:
| Negative interest rates are long time lethal to financial
| institutions such as banks and insurance companies. Hoarding
| printed paper is just a hilarious side effect, but the reality is
| that under negative rates the financial institutions are, at
| best, delaying their inevitable bankruptcy.
|
| https://moneyandmarkets.com/jeffrey-gundlach-negative-intere...
| [deleted]
| marriedWpt wrote:
| This makes sense to me, but I don't see democratic countries
| able to stop themselves before it's too late.
|
| What comes after?
|
| This exact problem is why I liked Bitcoin a few years ago.
| Although with the scaling issues, it seems less useful than I
| expected.
| companyhen wrote:
| Do you think raising the block size would create more issues?
| Although it seems BTC is committed to layer 2 scaling
| solutions.
| listsfrin wrote:
| Democratic in what sense? I don't think any country asks
| their citizens what about their financial issues.
| IanDrake wrote:
| Money is a commodity, but you don't want it to behave like one.
| That's where fiat currency comes in.
|
| Inflation, or at least the threat of it, prevents hoarding. It
| has a realistic and useful effect on value in that it makes money
| decay over time.
| BenoitEssiambre wrote:
| This is a sure sign that government paper is crowding out private
| investment and destroying the eurozone economy. This is solvable
| through higher inflation.
|
| https://medium.com/@b.essiambre/the-world-deserves-a-pay-rai...
| mrsun wrote:
| Additionally, the cash limit to anonymously buy gold is now 2.000
| Euros (since Jan 2020). https://news.bitcoin.com/germans-rush-to-
| buy-gold-as-draft-b... You need a lot more space to store 10.000
| EUR in cash than in gold.
| metalliqaz wrote:
| why would banks care if it is anonymous?
| mrsun wrote:
| banks don't care but the cash owners do. If you have 10.000
| euros in cash and buy gold (in order to save space in the
| vault) the transaction will be registered. The government
| gets all details (name, date, amount etc). Instead if you put
| the 10.000 euros directly in the vault nothing will be
| tracked.
| brokensegue wrote:
| you seem confused, did you read the article? I don't know
| about German laws but if you deposit $10k in a US bank you
| are definitely tracked and not anonymous. Also, no "cash
| owner" would buy gold to save vault space. The incentives
| don't make sense.
| mrsun wrote:
| One of the main points is mentioned in the article:
|
| > Germans were already well known for their love of
| physical money and data privacy.
|
| I think the most important point here is privacy. If you
| deposit $10k into a bank account, of course you are
| tracked. But if you put the $10k into a bank vault you
| are not tracked.
|
| > Also, no "cash owner" would buy gold to save vault
| space.
|
| Saving vault space is only one of the reasons. Gold is
| more stable than cash.
| brokensegue wrote:
| the cash in bank vaults mentioned in the headline come
| from cash deposited into accounts. nobody in this
| situation is putting cash into a safety deposit box.
|
| banks can't just convert their cash to gold because if
| gold were to drop in price then they wouldn't be able to
| cover the money they owe their account holders.
| [deleted]
| Turing_Machine wrote:
| There's also a long-standing rumor that the Germans have
| warehouses full of Deutschmark notes all printed up and ready to
| roll out, in the event of a currency Armageddon with the Euro.
| ginko wrote:
| Surely the banks have to declare how much cash they're holding.
| Couldn't they just be forced to pay negative interest on that?
|
| ..or give the money to someone else for a while so they can do
| something with it.
| TheSoftwareGuy wrote:
| >Surely the banks have to declare how much cash they're
| holding. Couldn't they just be forced to pay negative interest
| on that?
|
| Could they? With appropriate legislation/government action, of
| course.
|
| >..or give the money to someone else for a while so they can do
| something with it.
|
| You are talking about forcing them to invest the money. And
| what happens if that person cannot pay back what was lent to
| them? If there were any available investments that were safe
| enough, the banks would be tripping over each other to make
| that investment, believe me. Hoarding money _costs_ the bank
| money. Investing it is not only free, but it turns their money
| into more money. If you were to force them to make unsafe
| investments, then that risk is essentially passed onto the
| people who deposited their money in that bank, in the form of
| potentially not being able to withdraw their money.
| linuxlizard wrote:
| I have plenty of space in my basement. Call me. Low rates!
| OscarCunningham wrote:
| Can someone explain to me why central banks find it so hard to
| create inflation? It seems to me that the difficult direction
| should be convincing people that your currency is worth
| something. Making your currency lose value should be easy,
| shouldn't it? If Google wanted to tank their share price they
| would have no problems.
| mullen wrote:
| Inflation can spiral out of control and be very difficult to
| control if it does.
|
| It's a tiger that you don't want to let out of the cage.
| muthas wrote:
| I don't know if I'd agree its something you can't make
| useful, but trying to _use_ inflation as a means of
| macroeconomic policy - rather than an indicator of the
| success /health of the overall economy - seems utterly
| dangerous.
| 300bps wrote:
| There are many factors and others have pointed out some of
| them. Here's another one:
|
| The dollar's relative value to goods and services isn't
| rising... and it's because of countries like China that make
| goods and services for so few dollars.
|
| Think about it - I can go to oldnavy.com and buy a shirt for
| $9. That shirt was made literally on the other side of the
| world, shipped, marketed, sold, packaged and delivered for $9.
|
| The disparity in incomes and environmental protections between
| the U.S. and other countries makes it very difficult to trigger
| price inflation. And things just keep getting cheaper. Prices
| don't rise when supply of goods and services keeps pace with
| the demand from dollars.
| jfengel wrote:
| Usually, fear. People hoard cash when they're afraid of a
| crash. When a crash happens, money becomes more valuable, so
| they can buy things more cheaply. People who anticipate a crash
| risk provoking one by removing money from the supply.
|
| So central banks try to counter that: "Your money will be worth
| less in the future, so spend it now. Or make an investment that
| will produce returns greater than the rate of inflation." So
| they spend their money, creating demand, and jobs materialize
| (hopefully) to fill that demand.
|
| For the last decade-plus we've had a combination of
| anticipation of disaster, and banks flooding the system with
| cash to assuage that fear. That's like pressing both the
| accelerator and the brake as hard as you can -- you don't go
| anywhere until suddenly something gives, and then the entire
| thing goes to hell in a handbasket right quick.
|
| When? If I knew that, I'd be rich. The general advice is that
| the market can remain irrational longer than you can remain
| solvent.
| Bombthecat wrote:
| My tip is 5 to 6 years.
|
| But who knows?
| jfengel wrote:
| That's what I said... ten years ago. So we all know what my
| opinion is worth.
| muthas wrote:
| I heard an interesting podcast a little while back that
| conjectured the typical way to get inflation going (so-called
| "helicopter money" to the spending population) is far and away
| the least predictable way to do things. Specifically, the
| speaker argued that compared to large banks and investing
| entities, people might do things like pay off debt or save the
| cash for a rainy day... neither of which are inflationary.
|
| That isn't to say that handing out wads of cash wouldn't
| eventually lead to inflation, but that the systemic lag and
| second-/third-order effects might make the process so
| unpredictable that by the time inflation begins to tick up, the
| central bank would have no way to provide effective control.
| notahacker wrote:
| It's not difficult to create inflation, if that's your
| objective, though it's not quite as simple as increasing the
| money supply by a fixed percentage and is obviously
| _politically_ difficult.
|
| It's much more difficult to create economic growth by
| persuading banks to lend more.
| Analemma_ wrote:
| Inflation isn't just about money supply (no matter what certain
| people on the internet tell you), it's about money velocity. If
| the central bank prints a hundred billion dollars but it
| immediately gets stashed in vaults or under people's beds or in
| international tax havens, it might as well not exist and
| there's no inflation. The "pushing rope" metaphor for inability
| to create inflation is a good one.
| dontbenebby wrote:
| Well in Germany's case they believe the economic conditions
| (inflation) were a cause of Hitler's rise to power, and are
| understandably _extremely_ skittish about triggering similar
| conditions
|
| https://en.wikipedia.org/wiki/Hyperinflation#Germany_(Weimar...
| ahakki wrote:
| both the weimar era hyperinflation and hitlers rise to power
| were caused by the conditions of the versaille treaty.
| rusk wrote:
| Well, the simple answer is that they're actively fighting
| inflation for political reasons.
| 40acres wrote:
| Because central banks don't direct how the money is spent. The
| central bank puts money into the system but it's up to fiscal
| policy makers to determine flows -- in the US laws lead to
| inflation in asset prices.
| jajag wrote:
| Central banks are creating inflation, problem is it's in all
| the wrong places - e.g. asset inflation - instead of a rising
| CPI. (There is a bit of a debate taking place in central
| banking circles at the moment about whether CPI is an
| adequately measure, and whether it should better reflect things
| like rent increases; FT's Alphaville blog has had a number of
| interesting articles on the topic over the past week).
| vidanay wrote:
| I'm not so sure about that RE Google share price.
|
| Even if they were to magically slice 20% of the share price, it
| would immediately start a buying rally. Anything that would
| have a permanent effect on the share price would probably have
| to threaten the very existence of the company.
| Tenoke wrote:
| It's not hard doing it in an absolute sense. E.g. drop a bomb
| on yourself. It's hard doing it without messing everything else
| so much as to not be worth it.
| jldugger wrote:
| I suspect the problem is creating only a little bit of
| inflation. Hyperinflation is easy, just ask the Weimar
| republic.
| ahakki wrote:
| what simple mistake did the weimar republic do that caused a
| hyperinflation? I thought it was primarily caused by a
| massive reduction in the supply of goods following the
| versaille treaty without a corresponding reduction in
| monetary supply. At that point there really wasn't a lot the
| government could do to stop it.
|
| Zimbabwe faced similar problems after disowning their most
| productive agricultural providers, reducing supply.
| rusk wrote:
| Or Zimbabwe or Argentina even ... but I think these extremes
| are absurd. They are blunders. What we are talking about here
| is why EU isn't taking prudent steps to provoke growth, and
| that's all down to keeping certain dominant nationa happy.
| njarboe wrote:
| This problem has probably been exacerbated by the fact the the
| $500 euro note has not been issued since 27 April 2019[1]. I
| wonder if making storing euros in cash 2.5 times harder (500
| versus 200 euro notes) was part of the reason the 500 euro was
| retired.
|
| [Edit] The legal storing of cash. The stated reason was the
| criminal use of cash.
|
| [1]https://en.wikipedia.org/wiki/500_euro_note
| H8crilA wrote:
| 500 euro was (and is) essentially not used for any day to day
| payments - i.e. the most important reason for having printed
| paper as money.
| njarboe wrote:
| True. But it is nice to have large bills when buying
| something that costs a lot, like a used car. I recently did
| that in the US and if I had some $500 or $1000 bill things
| would have went a bit smoother at that nervous time in the
| transaction when you are handing over to a person a big chunk
| of money.
| MrRadar wrote:
| Why couldn't you use a cashier's check?
| eb0la wrote:
| In Spain the bank charges you for this service (you can
| negotiate the amount). There is no commision for cash,
| but you must fill a form to tell the taxman that you are
| getting a more than given amount (3000EUR if I remember
| well)
| Daniel_sk wrote:
| I have never seen a check in my life :-) (EU), they are
| not used or supported (maybe in some special cases, but
| 99% of people never used a check here). Larger sums are
| always paid with bank-wire transfer which is free and
| usually fast (instant or 24 hour), smaller payments are
| done with debit (or credit) cards, and then small
| payments can be done with cash.
| espinchi wrote:
| That's not a thing in (most countries of) Europe any
| more. I was shocked when I came to the US and saw that
| checks are still in use
| redis_mlc wrote:
| Check and cashier's check are different things.
|
| A cashier's check is like a domestic SWIFT.
| raverbashing wrote:
| Exactly why it is not needed, the banking system supports
| transfers between banks in SEPA for free or very cheaply.
|
| Some people/business will still ask for a cashier's check
| though.
| kjaftaedi wrote:
| The point the person you are replying to is making is
| that to Europeans, checks are a thing that only exist in
| Hollywood movies.
|
| It's difficult to imagine in a modern world, people or
| institutions writing or printing something on a piece of
| paper, and saying, "here, this is money".
| njarboe wrote:
| People in the US don't trust cashier's checks. For good
| reason. They are easily forged.
| firebird84 wrote:
| Some people would balk at the idea since they have bad
| credit and no bank account, and hence have to fork over a
| fee to walmart/publix/your local check cashing place in
| order to make it liquid. Cash works for everyone.
|
| I agree, cashiers checks are safer, but some people have
| reasons to prefer cash.
| tiku wrote:
| We don't really use checks in Europe, at least not in the
| Netherlands..
| mamon wrote:
| Because they are not used here since 19th century :)
| astura wrote:
| The best way to pay for a used cari the US (assuming you
| mean from an unknown private seller, not a dealer or
| family) is probably for the buyer and seller to go to the
| buyer's bank together and have the buyer get a cashier's
| check in front of the seller and exchange title/keys for
| cashier's check right then and there. It eliminates the
| risk of a forged cashier's check and the need to carry
| large amounts of cash.
| VBprogrammer wrote:
| You tend to run into the problem that forging large notes
| has a much greater return on investment. People get nervous
| about accepting them. In the UK this definitely kicks in
| around the PS50 mark.
| tinus_hn wrote:
| The most forged notes are the smaller ones because
| everyone checks the large notes. You can just hand people
| a photocopy of a EUR20 euro bill with a hologram sticker
| and if it's in a dark bar you'll probably get to keep the
| change.
| Mirioron wrote:
| Don't they run all the notes through the checker?
| tinus_hn wrote:
| No, that takes way too much time. If you check using a UV
| light you'll notice most simple forgeries but I guess
| most people just don't expect small bills to be forged.
| eigenvector wrote:
| Signs stating "$100 notes not accepted" used to be seen
| in many shops Canada about 15-20 years ago, when cash was
| much more commonly used. Since the switchover to polymer
| bank notes around 2011, counterfeiting has become almost
| non-existent but cash payments in general are much less
| common too.
| raverbashing wrote:
| There's no denomination larger than PS50 in England,
| right? Scotland and NI have PS100 which probably adds to
| the confusion.
| timthorn wrote:
| In general circulation, that's right - but the Bank of
| England does have PS100,000,000 notes:
| https://www.bbc.co.uk/news/magazine-21145103
| SilasX wrote:
| Heh, yep, like to joke that $100 feels like a lot of
| money whenever you try to spend a $100 bill. I can barely
| fathom what it's like trying to pass a 500 EUR note.
| njarboe wrote:
| If you spend time in casinos, $100 notes flow around like
| water.
| Iwan-Zotow wrote:
| Bugsy Siegel look at this with the note of approval
| vkou wrote:
| Casinos are also a hotbed of money laundering.
| idiocratic wrote:
| In many countries in Europe you can't use cash for large
| sums. We generally use bank transfers to buy cars.
| timlin wrote:
| I'm genuinely curious. Do you need to go to a physical
| bank location to do this? How do you buy a car in the
| evening or a Saturday afternoon, when a bank is closed?
| bradknowles wrote:
| Even if the bank branch is closed, they usually have
| private ATMs available that are much more capable than
| your average US-style ATM. You can do just about anything
| at those ATMs that you could do inside the branch.
|
| At least, that's the way it was back in 2006, when my
| wife and I moved from Brussels, Belgium back to the US.
|
| I remember many long hours sat at one of those ATMs (yes,
| they had private seating for most of them), paying
| various bills electronically using the bank account
| number given to us by the company that sent us the bill.
| jacquesm wrote:
| Direct account-to-account transfer is supported between
| all major EU banks. It takes a couple of seconds at most,
| and it's free.
| aianus wrote:
| Are they irreversible?
|
| I've always bought and sold vehicles (or anything private
| sale) in cash in Canada because I am extremely leery of
| reversible payment methods where the payment account
| owner can claim 'fraud' and I'm out the item and the
| money.
|
| Craigslist and Kijiji (the most popular online
| classifieds platforms) explicitly warn people to deal
| only in cash because of this problem.
| kgwgk wrote:
| If you mean SEPA instant credit transfers I think they
| are available only in some countries and they are not
| free in my experience.
| kjaftaedi wrote:
| In my country bank to bank transfers are free and
| instant.
|
| It's extremely convenient to be able to pay anyone any
| amount at any time with nothing more than your phone.
| pornel wrote:
| In the UK online bank transfers work 24/7 and clear in
| seconds (all banks are required by law to have APIs for
| fast inter-bank transfers).
| tialaramex wrote:
| They're not legally required to be instant, but they
| usually are. The "ambition" set out legally was half a
| day, if your transaction is initiated in the morning it
| should clear that afternoon. It's just that in practice
| instantly is the realisation of this ambition when things
| work. And I don't think there's any API requirement, the
| regulation just explains the consumer experience, that
| you can transfer relatively small amounts of money
| (enough for a nice car, not enough for most houses) fast
| ("Faster Payments" is the name given to this feature),
| and doesn't dictate how.
|
| For large transactions transfer for a fee already
| existed. CHAPS will move much larger sums of money (it's
| typically used to buy property so certainly millions but
| perhaps more) for a modest fee. You wouldn't want that
| fee on your weekly groceries, but when you just bought a
| house who cares?
|
| Last I looked the backend for Faster Payments wasn't
| actually built. The big banks decided instead
| "temporarily" to just trust each other. If Bank A says
| Cathy sent Mike PS5000 then Bank B where Mike's account
| is will credit Mike PS5000 (probably instantly),
| presumably Bank A will reduce Cathy's account by PS5000
| and the two banks agree they'll settle things at the end
| of the day. This is only scary if Bank A might not
| actually have that PS5000 to give Bank B at the end of
| the day when it's settled, which in principle should
| never happen under current financial regulations.
| Symbiote wrote:
| In the UK, and probably most places in Europe, with a
| debit card.
| ur-whale wrote:
| > and probably most places in Europe
|
| Incorrect. I tried to buy a new car in France with a
| credit card. That was an extremely awkward moment. I was
| kindly told that this was a very weird thing to ask.
| detaro wrote:
| Debit cards and credit cards are quite different things
| in most of Europe.
| virgilp wrote:
| To be fair, in Romania I was refused too, ~5years ago.
| All cards have a percentage fee - when you spend tens of
| thousands on something, even a small percentage adds up.
| Thus the car dealers require a bank transfer, which is
| generally free of charge for both parties.
| Symbiote wrote:
| It looks like the change in 2015/2016 to reduce card
| fees, while enabling us to buy a single bottle of milk by
| card with a 0.2% fee for the merchant, has made things
| worse for people selling cars.
|
| Instead of a small, fixed fee (e.g. PS0.10) it's now also
| 0.2%.
|
| https://www.am-online.com/opinion/2016/12/06/opinion-
| debit-c...
|
| (The article does at least tell us that "many" customers
| pay for the full price of the car with a debit card.)
| ur-whale wrote:
| Buying a car in Europe is a complicated affair, and
| certainly not something that can be concluded in an
| afternoon.
| corford wrote:
| What? You go to a car dealer, sign, pay and drive away.
| kgwgk wrote:
| Don't you need to register the car in the DMV and get an
| insurance before you can drive away? That's definitely
| the case in the parts of Europe I'm familiar with.
| petschge wrote:
| Getting insurance can be done online in about 5 minutes
| and the registration at the DMV equivalent is your
| problem (as the buyer) afterwards and can be done anytime
| in the next 2 weeks.
| kgwgk wrote:
| I can see that happening for second-hand cars but not for
| new cars that have to be issued new plates. But maybe
| things work differently in other countries. "Europe" is
| not really one place.
| ryanlol wrote:
| You can usually immediately get temporary transfer plates
| that'll be valid for a month everywhere(?) in the EU.
| ryanlol wrote:
| The "pay" part really depends on the value of the car and
| if you have a big pile of cash handy.
|
| Recently instant SEPA transfers have made this easier,
| but not available between all banks.
| MereInterest wrote:
| Not necessarily, but safer to do so. I recently bought a
| used car from a private party, and we went to a lobby of
| a bank to close the final transaction. I got a cashier's
| check from the bank, signed it over to the seller, and
| exchanged the keys/title for the car.
|
| This way, neither the buyer nor the seller needs to carry
| large amounts of cash with them. The cashier's check is
| not given unless the buyer's account has enough funds to
| cover it, so the seller doesn't need to worry about a
| bounced check.
| marcoseliziario wrote:
| The same thing here in Brasil since 2002. The only
| difference that there is an artificial restriction that
| online transfer between banks outside of banking hours
| will only clear when the banks open again. Other than
| that most transfer between banks clear in seconds and can
| be made from your phone. This artificial restriction is
| probably going to be lifted this year. And of course, if
| seller and buyer have accounts in the same bank, there's
| no business hours requirement, it will clear in seconds
| not matter what the time of the day. Also, depending on
| the american bank, I usually am able to cash wire
| transfers coming from the US in the same day, if the
| american bank sent the wire during brazilian business
| hours. Everytime I deal with the American banking system
| I get appaled by its primitiveness. ACH is basically how
| banking technology worked on the early 90's in Brasil.
| beojan wrote:
| You can do it from your phone.
| ur-whale wrote:
| >We generally use bank transfers to buy cars.
|
| It's actually the _only_ possible way to buy a new car.
|
| If you don't believe me, go try and buy a car with a
| credit card in the EU, see what happens.
| rjsw wrote:
| You may technically be correct, as the UK is no longer in
| the EU. You can buy cars with a debit card in the UK,
| haven't tried using a credit card.
| zodiac wrote:
| Is it possible to buy with cash?
| Daniel_sk wrote:
| It's probably not possible in most of EU because there is
| a limit for cash transaction which is I think 15 000 Euro
| (not sure if EU wide, but definitely here in Slovakia),
| over that you need to do a bank-wire transfer. All new
| cars are paid this way - or you purchase it with a loan /
| lease and don't need to put down this amount of money at
| once. Most new car dealers don't even have a cash
| register and would not take such an amount of money from
| you in cash. This is due to prevent money-laundering.
| narag wrote:
| Not sure about other countries, but in Spain you can't
| pay anything above three thousand euros (IIRC) in cash.
|
| People downvoting others in disbelief should try to find
| a source by themselves before.
| martin8412 wrote:
| 2500 EUR if you live in Spain
|
| https://www.agenciatributaria.es/AEAT.internet/Inicio/_Se
| gme...
| Melting_Harps wrote:
| > In many countries in Europe you can't use cash for
| large sums. We generally use bank transfers to buy cars.
|
| Some, like Sweden and Italy, going to extremes to phase
| cash out of existence, the latter making 'large' cash
| transaction punishable by jail/fine.
|
| I lived in EU during the financial crisis, and when cash
| got scarce prompting places in Greece to issue their own
| local currency [1] to do basic transactions (kids in
| school were passing out due to a lack of food, hospitals
| were running out of medicine and basic supplies in
| general) many were confident you would see something like
| this: Germany hoarding cash while the PIIGS were left to
| their own devices.
|
| Its sad, the problems paper fiat currencies beget: be
| they the promises of utilitarianism or the illusions of
| prosperity its one I wish we can finally overcome soon.
|
| [1]: https://www.nytimes.com/2011/10/02/world/europe/in-
| greece-ba...
| jotm wrote:
| I used one at Real, think I bought like 30 Euros worth of
| stuff. They did look at it for a bit, but accepted it without
| complaint. Amazing compared to a 50 pound note in England :D
| reaperducer wrote:
| _This problem has probably been exacerbated by the fact the the
| $500 euro note has not been issued since 27 April 2019_
|
| The United States used to print $100,000 notes. They were only
| available to banks for moving from bank to bank, I believe, and
| so were useful for reducing the number of notes that needed to
| be stored by banks, while keeping them out of the hands of
| criminals.
| njarboe wrote:
| The US also had lower denomination bills like the $500 and
| $1000 until 1969. They were not in much use then but I think
| that they could have useful legal uses today considering all
| of the inflation that happened since 1969. The $500 now would
| be about like $75 in the 1960's.
| ianlevesque wrote:
| > They were only available to banks [...] while keeping them
| out of the hands of criminals.
|
| So they were discontinued when they couldn't find any non-
| criminal bankers?
| TremendousJudge wrote:
| According to that same article, the reason for retiring the
| note was because the people who benefited the most from its
| existence are criminals, who need to do their business in cash
| -- the fewer notes, the easier for them. That includes storage,
| I guess.
|
| Still, I'm personally not in the eurozone, but in general terms
| for the end user high-denomination notes are not very useful
| unless you're gonna store them under your bed (and governments
| don't like this, they'd rather everybody be bancarized).
| Actually using them to buy things is a pain, since most
| businesses won't accept them. Having one in your wallet is a
| problem that you have to take care of, instead of just money
| throwawaybbb wrote:
| The same people who benefit from encryption if govts are to
| be believed. If cash keeps being as unwieldy as it has
| become, a $100 note today is worth about what a $10 note was
| worth in 1920, people will just stop using govt back cash and
| use gold or art instead. Monero looks like it's the first
| large scale crypto to get inflation and anonymity at least
| partly right.
| lixtra wrote:
| > Actually using them to buy things is a pain, since most
| businesses won't accept them.
|
| For me it always went smoothly when buying something that
| exceeded the value of the high note. Your experience may
| differ if you buy a roll in the bakery.
| decentralised wrote:
| I've been in the eurozone since it started.. only ever saw
| 500 euro bills being exchanged in casinos.
| aianus wrote:
| I exchanged cash in Canada before heading to EU for 10
| weeks and the kiosk gave me all EUR500 notes and said it
| was all they had.
| snovv_crash wrote:
| And yet across the border, I've been given a CHF1000 note
| cashing a deposit slip in a post office.
| njarboe wrote:
| Interesting, I don't see any mention retiring the note
| because of criminal use or anything about the 500 note at
| all. Is Bloomberb A/B testing the content of articles now?
| Would not be surprised, but it would be a disturbing trend.
| kfichter wrote:
| Commenter was referring to the Wikipedia article, their
| wording was a little confusing though.
| [deleted]
| hirsin wrote:
| Indeed it was. Even now the 200 Euro note is the best for
| laundering and transportation since it's the highest value bill
| in common circulation (per Fed employee)
| xenonite wrote:
| It seems the CHF 1000 note has the highest value among all.
| hirsin wrote:
| Good luck using one though in Brazil or Vietnam - they're
| illiquid relative to euros or dollars and therefore harder
| to launder.
|
| "widely used currencies" can be read as "usd, eur, jpy,
| cny, gbp, cad", although chf is up there it seems.
| marcoseliziario wrote:
| The really big criminals and tax evaders will ever find a way
| around this kind of restriction. This is useful to control
| the smaller fish. But, also, the cynic in me thinks that the
| big sharks have lots of friends in high places and politics
| and public administration and that those restrictions were
| never intended to catch them on the first place.
| setr wrote:
| I doubt most of these laws are ever intended to catch the
| big fish -- like in business, the big guys always require
| special handling to process. For criminals, the big guys
| should already be so far disassociated with the actual
| activity that you're not going to catch them with normal
| crimes. For example, Al Capone was famously trialed on tax
| evasion, rather than any of the innumerable crimes he
| committed but couldn't be processed for.
|
| The actual law simply isn't that notable in these cases,
| because the big guys have enough money to figure out how to
| navigate it liability-free.
|
| Which is also why the law only really applies to the poor
| -- with enough time and resources, there's always a
| workaround.
| esturk wrote:
| Small net for small fish. Big net for big fish. There's
| also no problem with getting criminals to go through
| extra steps. The more processes, the more room for error.
|
| The point is to not make it convenient for them at all.
| 1337biz wrote:
| Well, I am no expert but let me play the futurist here. After
| they killed the 200 Euro note it is going to be the 100 Euro
| note that is going to be used by those damn criminals!
|
| It is in essence part of the same eradicating rights movement
| that is fighting against anonymity in the internet. "Hey
| look, there are some criminals benefiting from it so let's
| kill it."
| mistrial9 wrote:
| agree
| n0mad01 wrote:
| the real reason why the 500 euro bill has been revoked was that
| for storing physical money (for banks, in those quantities)
| would become more expensive in order for the ECB to lower the
| interest/deposit rate.
|
| next thing will be 200 euro bills revoked, then the base rate
| can go down to around -1%.
| 3fe9a03ccd14ca5 wrote:
| This really is the endgame in ZIRP. Removing the ability to
| store cash is the only way to effectively get rates into
| negative territory.
| rwmj wrote:
| If this was an actual problem, couldn't the ECB issue (eg) EUR1
| million bearer bonds to the banks that have to store cash
| (these notes wouldn't need to go into general circulation). In
| fact, why don't they do that?
| goodcanadian wrote:
| The short answer is that they don't want to make it easy for
| banks to hold cash; they want the banks to loan the money out
| (ideally) or deposit it with the European Central Bank where
| they will have to pay for the privilege in the form of
| negative interest rates (which is what the banks are trying
| to avoid by holding the cash).
| Angostura wrote:
| I don't see why Germany doesn't handle it the same way as the
| Bank of England where the chief cashier signs special notes
| called 'Giants' worth PS1,000,000 and 'Titans' worth
| PS100,000,000. These are obviously only used for inter-bank
| transactions.
| epanchin wrote:
| Wouldn't that undermine the point of negative rates?
|
| Better to just charge interest on cash stored at banks.
| odyssey7 wrote:
| The US has considered doing this for other reasons. It's an
| interesting idea.
|
| https://en.m.wikipedia.org/wiki/Trillion-dollar_coin
| goodcanadian wrote:
| The short answer is that they don't want to make it easy for
| banks to hold cash; they want the banks to loan the money out
| (ideally) or deposit it with the European Central Bank where
| they will have to pay for the privilege in the form of negative
| interest rates (which is what the banks are trying to avoid by
| holding the cash).
| dontbenebby wrote:
| Large notes were used like this in America as well - up until
| 1934 we had up to 10k notes.
|
| It's my understanding the larger ones were mostly used for
| storage or transfer?
|
| https://en.wikipedia.org/wiki/Federal_Reserve_Note#Large-siz...
| jotm wrote:
| Why in the world does Germany not have a decent VC/investment
| industry? Seems like some companies and people are loaded with
| cash but they'd rather keep it in a bank than risk it on a new
| startup. You're not going to get many innovative startups doing
| that...
| ktpsns wrote:
| The standard explanation to this question is that Germans are
| risk-averse. People don't trust stocks but better want to save
| their money in a savings bank book. (That won't cover the whole
| situation, it's rather a two sentence summary)
| Apofis wrote:
| Wait, the Germans are hoarding money again? Should I be alarmed?
| The UK just exited the EU.
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