I understand that this is designed to stop deflation, but what does it mean practically speaking?
In: Economics
In a normal system, the bank borrows your money to buy a lot of government bonds and a bit of shares/investments or lend it to people at the rate of goverment bonds + some extra called *spread* and pays you back a small fraction of the money deposited they borrowed.
In a deflationary system, the government either doesn’t issue government bonds or simply issue bonds at a very low “interest” rate such as that the bank cannot cover their operational costs without charging their clients in some way.
Japanese banks do it with both extremely high banking fees for services as well as having negative interest rates – they charge people for storing their money instead of paying people for storing their money.
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