Weird things are happening in Japan and Germany. People buying safes and stuffing them with cash taken from bank deposits. A deposit that yields nothing or melts with negative rates is the ultimate saver’s punishment.
So the effect is that there is less liquidity (money that the banks can lend). There is an economic term, called a multiplicator, which is correlated with a reserve rate and speed of money (how fast money changes hands).
Under normal circumstances a reserve rate that banks keep their money in the central bank is a tool to increase liquidity and speed of money. If savers withdraw, new loans cannot be made without liquidity injections from a central bank. Meaning, forget about investment activity, funded by loans.
What it means? Global developed markets, plagued by negative rates might actually be poisoning growth, by decreasing the speed of money, since deposits decrease and can’t be matched with loans, since they became cash in safe!
We’re in for an interesting decade in these markets, when considering demographics too…
I’m staying away from these.