One of the more confusing terms in the world of economics and finance is something called “Negative interest rate”. If a bank were to loan you money, why would they agree to terms on the loan that paid them back less than they initially agreed to lend? In the individual, consumer sphere, this is a rare phenomenon. It’s practically inconceivable. However, when it comes to monetary policies, this is something that governments often utilize to their advantage.
As Richard Meyer Cayne of Meyer International Ltd in Bangkok, Thailand explains: “The concept of negative interest rates is a phenomenon that does indeed exist, but only in regards to institutional finance and central banks”. However, it nevertheless does ultimately have an impact on individual investors”.
Indeed, negative interest rates are exactly what they sound like they would be. While paying interest on a savings account you accrue interest on a loan. It is essentially the opposite of interest.
For all intents and purposes, we will keep it as simple as that for now. It certainly does get more complicated, however. When central banks need to encourage commercial banks to lend and spend more, that is when the implementation of negative interest rates is generally executed. Should these smaller banks decide to hold their reserves at any of the central banks, they would be charged interest, thus losing money. Commercial institutions keep their interest rates low, in turn, to compel individuals and businesses to borrow. So, provided everything stays hunky dory, the cash flow continues and, in turn, we have a healthier economy.
Presently, countries like Sweden, Denmark, Japan and the Eurozone have implemented negative interest rate policies into their monetary programs with varying degrees of success.
A great opportunity for businesses and individuals planning to make larger investments is the ability to borrow loans at low interest rates (and hopefully getting a better return than the interest on the loan). However, even if you live in a country that doesn’t implement negative interest rate policies, the effect of such policies may still be felt. Because we live in a globalized economy, the cash flowing in one country doesn’t always stay in that country. It is not uncommon for a company to invest in other countries with borrowed capital. Or they may choose to improve their operational structure and increase overall production, thus perking the intrigue of outside investors.
On the flip side, however, it should be noted that government bond returns can be affected by negative interest rates. In this instance, you will find that oftentimes yields will begin to drop. As a result, the private sector may or may not be impacted negatively, because of the fact that certain corporate bonds are congruent with government debt.
While negative interest rates are certainly a facet of the globalized economy, that doesn’t make them a fundamental component of it. However, if your portfolio contains an international element (which many do in this day and age), it’s important that you be well aware of what negative interest rates are and how they can impact you.
If you believe negative interest rates may have an impact on your portfolio and you feel that possible adjustments should be made, it’s important that you get in touch with a trusted financial expert such as Richard Meyer Cayne. He can help analyze your investments and discuss with you what your best options are.
Richard Meyer Cayne of Asia Wealth Group Holdings, the Meyer Group, Meyer Asset Management and Meyer International Ltd has been involved in wealth management planning for decades. Originally born in Montreal Quebec, Canada, he later relocated to Tokyo, Japan for over 15 years and now resides in Bangkok, Thailand. While he runs the Meyer Group and serves as the high credibility CEO of Asia Wealth Group Holdings Ltd, a London, UK Stock Exchange-listed Financial Holdings Company, as well as the Managing Director of the Meyer Group of Companies www.meyerjapan.com. and has additionally been the managing director of multiple organizations that specialize in helping high net worth individuals with succession planning . Having worked with clients all over the globe with everything from portfolios to bonds to mutual funds to offshore investing to investing in retirement for your golden years, Richard Cayne of Meyer International can help you invest the right way and protect your cash.
Richard has been a financial advisor involved in wealth management planning solutions and asset management in Asia for over 25 years and while living in Tokyo, Japan, he assisted many high net-worth Japanese families create innovative international tax and wealth management planning solutions. The financial holding public company of which he is CEO can be seen at Asia Wealth Group Holdings Ltd or the stock exchange link: https://www.aquis.eu/aquis- stock exchange/member?securityidaqse=AWLP Asia Wealth Group Holdings Ltd – Richard Cayne Thailand. Meyer Asset Management Ltd has been in the wealth management space since March 2000 and uses fundamental analysis along with modern portfolio theory. His image worldwide as a professional advisor has been sterling and he maintains a firm command and understanding of all things finance-related.