In Lieu of Negative Rates, Institutions Begin to Store Cash in Vaults

This is deflation. This is the very thing these negative rates were supposed to stop, the explicit hoarding of cash, a wanton perversion of finance through the reduction of the money supply. It has been widely reported in Japan that negative rates have caused a surge in vault sales, especially amongst the elderly.

Now I’m reading news that some institutions are locking cash away in vaults, in order to avoid paying some asshole bank the pleasure for holding it for them.

“Storing physical cash as an alternative to paying negative interest rates does look increasingly attractive,” Chief Financial Officer Immo Querner said in an interview.

“The negative-yield terrain now spreads toward 10-year maturities,” Querner said. “So at some point, one may also be talking about the incentives of storing cash for medium-term euro-assets.”

Talanx had 102 billion euros ($113 billion) of investments at the end of March, with 90 percent in fixed-income assets such as government, covered and corporate bonds. Investment income is being squeezed by low interest rates and to help cushion the impact, the Hanover, Germany-based insurer has invested in alternative assets such as renewable energy and infrastructure where returns are typically higher.

Other financial institutions have also tested or considered storing physical cash as an alternative to paying negative interest rates. Nikolaus von Bomhard, Munich Re’s chief executive officer, said in March that the reinsurer will store at least 10 million euros in two currencies so it won’t have to pay for the right to access the money at short notice. Allianz SE, Europe’s biggest insurer, considered the move but so far has decided against it.

Soon enough, the Pinkertons will make a comeback, protecting large cash transports making its way across the country, via horse and wagon.