Guest article by Thomas Fischer, Managing Director of our German subsidiary Wydler Asset Management (Deutschland) GmbH:
Negative interest rates – what now – what to do?
The unpleasant situation of negative interest rates, sometimes called penalty interest rates, is simply that your account is a few Euros or CHF less every quarter. Gone are the days when your money more or less increased by itself year after year. Gone too are the days when purchases, vacations and gifts to children and grandchildren were simply financed by lavish interest payments.
And unfortunately, the trend is unbroken: In March 2021, PSD Bank Rhein-Ruhr set a new negative record with -1% from 500,000 euros.
When the Volksbank in Bremen was one of the first banks in Germany to introduce negative interest rates, there was a big outcry -- and an alternative was quickly found: Greensill Bank. Conveniently, just a few corners away. However, after Greensill’s bankruptcy, savers had to painfully learn that positive interest rates in 2021 harbor unprecedented risks. So please think carefully about who you trust with your money. Your money deserves it; after all, you worked for it for years.
As a conservative saver, however, you not only have to contend with the banking landscape and the current interest rate environment, you may also be facing trouble from the political arena. According to opinion polls, the upcoming federal election in September could produce results that do not in any way reward saving assets and thus safeguarding your standard of living in old age. On the contrary, political developments in Germany may take a direction that seemed unimaginable just a few months ago. And so in September, after the elections, the influence of the state on your assets may very quickly develop very unpleasant features.
But money is like a shy deer. If you get too close to it, it disappears as quickly as possible. In other words, capital also takes flight when it feels cornered, wherever.
From an economic point of view, it is therefore necessary to consider where money can be invested in a sensible, future-proof and crisis-proof manner.
Central banks play an essential role in this. The European Central Bank (ECB) has long since fired up the money press and never tires of affirming that the bond-buying programs it has launched will be continued for as long as necessary, not to mention the 750-million-euro Corona Fund. The latter has not yet been waved through, but there are concerns about entering into a debt union.
A European debt union will do little for the stability of the euro. If the countries in the southern euro zone can rely on “the north” to be liable and pay in the event that they can no longer finance themselves, the euro is likely to lose significant value in the medium term.
A further weakening of the common currency should not come as a surprise. Against the Swiss franc, the euro has already lost over 30% since 2008.
The Swiss National Bank (SNB) also prints money and inflates its balance sheet to historic levels in a similar way to the ECB. The big difference, however, is how the SNB invests the available capital. Compared to the ECB, about 70% is in government bonds, which are considered safe, and the share of equities is about one-fifth.
The fact that the SNB closed 2020 with a higher profit than the ECB, even though the latter has a balance sheet total that is almost eight times higher, should give more than pause for thought.
Are you worried about increasing government control of assets and wondering whether you can invest your money soundly even in times of negative interest rates?
Yes, you can, and we can help you do it.
Invest in quality. We advise you to broadly diversify your assets in order to reduce risks of any kind. We will show you solutions and explain the various options in detail.
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