Earlier this year, a story broke about thousands of Japanese rushing out to purchase home safes to store their cash in since trust in their banking system fell off a cliff with the advent of negative interest rates. Now on Aug. 30, this same phenomenon is occurring thousands of miles away in Germany, where the people in the largest EU nation are making their own ‘run against the banks’ in the wake of two financial institutions beginning the use of negative interest rate charges on depositors.
It is no secret that one of the most admirable qualities of the German public – in addition to its striking propensity for thrift in the aftermath of Weimar – is its stoic patience and pragmatism when dealing with adversity. However, over the past month, we grew increasingly confident that said patience would be tested, if only when it comes to matters of monetary trust vis-a-vis the local, neighborhood bank. First it was the news that Raiffeisen Gmund am Tegernsee, a German cooperative savings bank in the Bavarian village of Gmund am Tegernsee, with a population 5,767, finally gave in to the ECB’s monetary repression, and announced it’ll start charging retail customers to hold their cash. Then, just last week, Deutsche Bank’s CEO came about as close to shouting fire in a crowded negative rate theater, when, in a Handelsblatt Op-Ed, he warned of “fatal consequences” for savers in Germany and Europe – to be sure, being the CEO of the world’s most systemically risky bank did not help his cause.
That was the last straw, and having been patient long enough, the German public has started to move. According to the WSJ, German savers are leaving the “security of savings banks” for what many now consider an even safer place to park their cash: home safes.
Indeed, as even the WSJ now admits, for years, “Germans kept socking money away in savings accounts despite plunging interest rates. Savers deemed the accounts secure, and they still offered easy cash access. But recently, many have lost faith.” We wondered how many “fatal” warnings from the CEO of DB it would take, before this shift would finally take place. As it turns out, one was enough.
To be sure, the Germans are merely catching up to where the Japanese were over half a year ago. As we wrote in February, “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. 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. – Zerohedge
Even 80 years after the hyperinflation of the Weimar Republic, the German people have a long memory on what happens to their livelihoods when their governments embark on a policy of printing money, and currency debasement.
However, even the act of pulling cash out of their banking system does not fully protect oneself from the evils of negative interest rates, or the potential of a banking collapse, and one wonders how long it will take for the German people to realize that the Euro is a dying debt instrument and change course to make a rush into truly protecting their wealth through the buying of physical gold and silver.
As we move into the most critical time of the year for the markets, central banks stand of the precipice of having to either admit failure, or double down on policies that have indebted their country’s to the point of no return. And unfortunately for most nations, negative interest rates could be just the start with bank bail-ins soon to be coming around the corner to save financial institutions from an oncoming insolvency.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com,Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.