Article found here

What’s the time value of money? It varies depending on interest rates, sometimes high, sometimes low, and sometimes, apparently, negative.

It’s not news that the European economy has been slow for some time, but Germany’s lack of spending and cautious tendencies regarding savings has caused Deutsche Skatbank to introduce negative interest as a means of generating cash flow out of the bank account and into the economy. Put into the context of our financial accounting class, it seems that a few of the higher class citizens are walking around with oxygen tanks in an environment where it is not needed.

The pressure to generate riskier behaviour reflects Germany’s cultural tendencies, which have presented themselves as an inherent problem and a possible indicator of what’s to come. The problems within the German economy could easily manifest on a larger, international scale where an aversion to risk and reward oriented behaviour could mean missed opportunities for not only Germany but it’s potential trading partners. Perhaps the caution is an important and notable cultural aspect, but it also seems to currently be doing more harm than good.

The recession gains speed.

The idea behind this negative interest rate is to have Germany see the time value of money measured in other investments than a simple savings account. While safety is important and oftentimes tempting, there is also value to be found in other means of investment, such as bonds, stocks, and property. As well, if the time value has become a negative number, choosing ‘safety’ only means guaranteeing loss.