Central bank rates only directly apply to commercial banks who store money there, but those rates are used as reference points for the rates you and I receive on our bank accounts. As the central banks ease, that is, lower interest rates, our deposits earn less and less.
This is deliberate. It's an attempt to force us to spend whatever money we have to pump up the economy. It also stands traditional standards of behavior on their heads. In the past, you wanted to save for a rainy day, invest in your future, postpone today's pleasures for tomorrow's security. Well screw all that, say the central banks, get out there and buy that jet ski!
|This is a lot more fun then saving your money for the future. Trust us.|
Thrift is out of style, man. At least until this whole thing blows up.
Note: This was something that popped into my head as I was reading about Deutsche Bank. That massive, German financial institution is getting its brains beaten out in a variety of ways and I'm trying to understand what's going on. Loans to energy companies are failing as the price of oil drops, but on top of that, there's some perverse squeeze on bank profits being caused by lower and lower central bank rates. I don't fully grasp it yet.