While most of us complain about low savings interest, imagine how it would feel if all of a sudden we were told that we have to lose money (pay interest to the banks) just so that we can have a “save” place to store our money? This might seem shocking, because we know from the  time value of money concept that a dollar today always worth more than what it will be the future, thus a negative interest rate does not make that much sense in normal circumstances. However, this is exactly what the European Central Bank had imposed earlier this year to encourage people to save less and invest more.

For instance, currently, a depositor with over €500,000 savings in Germany will have to deal an interest rate of. As a result, the bank savings in Germany have significantly declined in recent figures, and many Germans are forced to look for other alternative ways to store or use their money for investment. However, it is interesting to note that rather than investing the money (which many Europeans are still speculating with a lack of confidence) in the market, an alternative solution is to convert their savings into other currencies and deposit their money in banks overseas.

Clearly, we cans see that although governments and central banks try to influence the market by imposing policies that will affect consumer and investors’ behaviours, it may not always turn out as the intended outcome. Nonetheless, economies have their own recurring cycles, which will eventually balance out the rise and falls. Meanwhile, policy-makers can attempt to encourage or discourage economic activities, but the results will vary so they will have to see whether the policy will achieve the desired effects.

Works Cited

Walker, Andrew. “ECB Imposes Negative Interest Rate.” BBC News. BBC, 05 June 2014. Web. 09 Nov. 2014.

“Worse than Nothing.” The Economist. The Economist Newspaper, 08 Nov. 2014. Web. 09 Nov. 2014.

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