With negative interest rates, what happens to money in an offset account?

I don't think that's how negative rates work...

 

That’s a dream situation for the aggregated economy.

The way our democracy works however means the big influence comes from the big money, and it’s in their best interests to keep the low income earners “forced to work”.

why help the people that need it most and improve the economy at a grassroots level from the ground up, when you can just inflate assets and make the gap between living off your wage and living off investments bigger and harder to bridge.

 

I'm pretty the lending rate to the final customer does not turn negative so it would still cost the borrower interest (not become income).

The saver would pay interest on thier deposit, but at say a -0.25% deposit rate I doubt people are going to start withdrawing cash enmass. At that end of the day that's roughly what... $20 a month to keep 100k in the bank.

 

That easy done with inflation anything above zero, in fact, if wages lift and inflation takes off, fixed term debt will be eroded and things will recover without needing to drop rates.Surely this is what is being banked on.

 

Your loan rate will probably still be positive and the offset would work the same.

 

There are some misconceptions here.

1. Negative interest rate in general term (most of news or articles) is interbank. In this specific chat topic, you refer to the term between lenders and retail customers. Retail customers are very unlikely to get the official interest rate (now is 0.25%) from lenders because lenders have their costs and also need to make (Great?) money from their customers.

2. Negative interest rate is poisonous to every parties in the game (RBA/FED/BOJ, Lenders, investors and most importantly, general public like you and me), because it almost definitely one-way route and it is very difficult to get out. Look at Eurozone, those poor bastxrds are already in negative for quite a while now, but those banks ECB try very hard to save are close to death by a thousand cuts.

3. Because the example in Eurozone, I reckon they will use other methods like dual-interest-rate or yield-curve-control. For the RBA, the choices are actually very limited but just follow the FED even the RBA knows they are taking the poisonous pill and will nuke the bathroom in the future.

 

And they don't even have to physically print banknotes.
They'll just make some additional entries in electronic accounts.