For years, governments have been trying to introduce negative interest rates on bank deposits but now they discovered how to do it effectively. In this video I explain how they could do it and why it is good for the crypto world.
I refer to this video in this film:
WARNING: The Future of Money
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E-Book: https://www.amazon.com/Ready-Set-Special-Entrepreneurs-Professionals-ebook/dp/B078WZXJDW/
Hardcover: https://www.amazon.com/Ready-Set-Go-Nick-Nanton/dp/0999171402/
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VIDEO TRANSCRIPTION
Hi guys, today from Berin in Germany. Today we will be talking about the negative interest rates and why hey are good for crypto.
See you in the next part.
[Music]
Negative interest rates. Governments around the world want to introduce negative interest rates on your bank deposits.
Right now the interest rates on bank deposit is around 0% and this is caused by the flawed Keynes theory of economy
And governments follow these theories, these Keynesian theories and want to stimulate economy by forcing people to spend money
By forcing people to invest money and of course, first of all, they keep people from saving money
They keep people from consciously investing their money, they force people to invest money, no matter what.
They force people to spend money on whatever want and they force people into debt.
I'm standing here in the very center of Berlin, close to Brandenburger Tor.
Behind me this is the hallmark of Berlin and you can see here who rules in Germany. And this is in every other country. You see banks over here.
There is Commerzbank and there is DZ Bank and on the other side you see Allianz. This is an insurance company.
So, financial companies rule in every country but governments have the keys to money in their hands and then they want to take your money
They want to control you through the means of money. I was talking about the future of money and why it is this way in the video "Future of money"
I will connect it here and you'll find it in the description below. So, watch this video first.
But today I want to tell you how the negative interest rates on bank deposits could be implemented by governments around the world
And why they couldn't be implemented until now. And what changed now.
So, generally governmetns want to punish you for keeping cash, for not spending your money.
If you have money in the bank right now, you get around 0% interest rates on your money.
But in the future it will be even worse. When you keep, let's say, $100 on your bank account, the government will cut let's say 1%, maybe 2% of your money
So, after a year you would have let's say $98 on your account only. After 2 years you'd have let's say $96 only, and so on and so on...
So, your money on your bank account will be melting additionally to the lowering the purchasing power of your money through the means of inflation
Governments are printing money nevertheless! So, the value of the money you hold is decreasing
And on top of that the governments want to punish you for keeping your money by decreasing the amount of money you have.
But there is 1 problem with this, because when bank deposits have negative interest rates, people can just withdraw the money from the bank
And keep them in cash and this way they can at least avoid that banks or the government will just take it or punish them with negative rates on their money
For keeping the money.
And the problem with that is of course that the banking system is highly unstable and it may come to bankrupcies
Because the bank has only... depending on the country... between 2 and maybe 10% of deposited money really in the ownership.
The rest of that is given away as loans to other bank customers. So, it is highly unstable
And introducing negative interest rates would lead to a failure or to colapse of banking system.
So, that is why governments like so much the idea of cashless society; of reducing or let's say eliminating cash altogether.
So, everybody would need to keep their money in the bank. It'd be the only money and it'd of course mean a total control over the people / population
Through the means of the money because all the money would be in the banking system, so everybody's accound could be frozen
The money could be manipulated, decreased, whatever. Because there would be no escape from that system anymore.
But the problem with that is the following.
The government would give away the control over the money to the banks. Completely.
And it would make itself dependent on the commercial banks. This is the first problem with that. And of course the governments don't want to do that.
They want to have the power and the control over the system, over the citizens, over the society
And they don't want to give private institutions control over the citizens and the second problem with that is this could really lead to a social revolution
I mean a real revolution when people would say "No, we don't allow that. We want our cash and they would maybe switch to other curencies
That are non governmental currencies like maybe gold, maybe cigarettes, maybe some other items that they would use insted of government money
And they would make themselves independent from the government money or on the other side the so called grey sector
The grey economy, the non official or illegal economy would skyrocket and a lot of economic activity would take place in that grey zone.
And this is what governments, of course, don't want to.
So, they want to introduce negative interest rates but they can't really eliminate cash altogether
Because this would lead to a revolution. So, what are the other 2 options?
One option is and some governments are starting to think about that, is to introduce their own cryptocurrency
They would call it cryptocurrency, but it is of course not a real cryptocurrency
Because this would be completely controlled by the government and the government would be able to inflate that "cryptocurrency"
And this would be also a state-owned currency meaning currency will be issued and controlled by state.
This wouldn't be like international, global currency and any doubt of that.
The mining would be also probably provided by the states, it wouldn't be free mining by individual actors or commercial actors.
So, generally this would be something... a contradiction of cryptocurrency. The only thing would be that it will allow peer-to-peer payments
Without banks. So, the advantage from the viewpoint of the government would be that governments would control that money without need of banks
Of course, you would be able to deposit that money in banks but banks wouldn't create any money.
And just recently another option was proposed. This solution was proposed by 2 scientists from the International Monetary Fund
By mr. Ruchir Agarwal and mr. Signe Krogstrup.
These 2 guys came up with the following idea that will allow governments to introduce negative interest rates on bank deposits
Without eliminating cash altogether.
And the idea is as follows. The would introduce two currencies. Let's work here with dollar.
The first currency - the banking dollar and the other currency would be the cash dollar.
The banking dollars would be the dollars in the bank deposits and they would have the negative interest rates.
This is what I explained before. Your deposit of $100 would let's say lose $2 after one year.
So, negative interest - after one year your would have $98 on your bank account, after 2 years you would have $96, and so on, and so on...
So, the amount of dollars would decrease on your bank account.
But if you withdraw the money. Let's say, in the first year you want to avoid that, you would withdraw the money in cash.
Then you would get another currency called cash dollars.
And all the prices would be given in the shops, and so on... in dollars.
If you pay from your bank account via wire transfer or card payment. You would pay the amonut that is written on the merchandise
Let's say for a t-shirt you would pay $10. When you pay with the card it is $10.
But cash would be devalued over time.
So, every day it would be worthless and the exchange rate to the real dollars or the bank dollars would decrease.
Let's say after one year you would get for one cash dollar 97 cents of bank dollars.
And this exchange rate would be controled by the state. And this exchange rate would be an official exchange rate that all the shops would have to use
So, let's say a t-shirt that costs $10 after a year it would already cost $10 but the exchange rate would be, let's say $0.97
That means after a year you would need to pay 10.30 cash dollars or after 2 years 10.60 cash dollars but the price would be the same
Let's say $10.
So, if you want to pay cash, they would ask you at the cantor "Do you want to pay cash or do you want to pay card?"
If you want to pay card, the price is $10. If you want to pay cash, the price is also $10, but the exchange rate may be different to cash dollars
So, $10 would mean, after several years, eleven cash dollars and that's why you'd be punished by the exchange rate for keeping cash.
So, it wouldn't make any sense to withdraw money from your bank account because it'd lose the value faster than the money that you keep in the bank account
This is a solution these 2 ecnomists came up with and I think these are the only 2 solutions that the governments can use.
Of course, the other solution would be to eliminate cash altogether but this is very risky
But if they don't want to be completely dependent on the banks they would introduce either their own cryptocurrencies
Or they would introduce 2 currencies meaning one of them would be the bank dollar, the other one cash dollar or with any other currency
Bank euro and cash euro. And then, devalue the cash euro consistently contrilling the exchange rate between cash euro and bank euro
So, and now why I think that generally negative interest rates are good for crypto?
Because independently which solution they choose it will be of advantage of cryptocurrencies.
If they choose to use the solution of state-owned cryptocurrency it will mean that people will get use to usage of cryptocurrencies
To have electronic money in their wallets, on their mobile phones, and so on..
And this would mean also better adoption for the real cryptocurrencies like Bitcoin. People will accept Bitcoin much more.
And they will want to invest in Bitcoin much more. So, this is one solution and if they choose the other solution with these 2 currencies
Then people will see with their own eyes that governments want to take money from them. They want to devalue their money.
They want to take away their money and this means they would flee in other investments that keep value. One of these investments may be gold
The other would be Bitcoin or maybe other cryptocurrencies. So, people would see much more tangibly or would feel much more tangibly
The necessity of getting rid of cash or maybe opting out from the banking system or keeping their capital in the state on either banking system
Or cash currency. So, they would then invest in other assets like gold or like Bitcoin.
This is what I wanted to tell you today from Germany, from Brandenburger Tor. If you liked this video, give me a thumb up, if not of course thumb down
I invite you to comment. What is your pesrpective? What are your thoughts? What is your experience? Share this video with your loved ones and friends
I talk here a lot about economy, about money, business, entrepreneurship. I talk about how the best entrepreneurs in the world think and act.
So, if you liked this video, you will surely like my other videos. I invite you to watch them. I wish you a fantastic day today.
Let's do something extraordinary today!
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