A lot of commentators are discussing the drawdowns of storing cash bills. However, who buys bonds by paying with physical cash bills? Most of us have a number in our bank account that reflects some sort of wealth? (Ownership of a security elsewhere or an I Owe You?) People with a salary directly deposited and big companies do not need a bank to store their physical cash bills.
I’m still trying to understand how this all happened.
The ECB charges banks -0.40% to deposit money with them. These bonds are currently yielding -0.14%. Rates are not low enough to the point where physical cash is a thought. Rough estimates are a deposit rate of -0.75% where you would make more by holding physical cash.
OK, so you have a bank balance of $1m, rather than paper bills. Your bank can go bust -- it does happen -- and you'll probably find that the Government only insures/guarantees something like the first $100,000 of that. However, the government here are selling you 30 year storage and guarantee of your balance at a small cost (the negative interest).
I’m still trying to understand how this all happened.