Causes and Consequences of Low Interest Rates: Are Savers Are Being Expropriated?

The European Central Bank has dropped the base rate to zero and is now demanding negative interest rates from banks for taking their deposits. The world of finance seems to be out of joint. Who is responsible for the low interest rates and what are the implications of the low-interest policy for savers and insurance fund customers? For Gunther Schnabl, University of Leipzig, the result of this monetary policy is negative: “less growth and drastic side-effects.” Monetary policy indirectly means that the burdens created by crisis management are excessively placed on the younger generation. Georg Fahrenschon, Deutscher Sparkassen- und Giroverband, sees great collateral damages caused by the negative interest rate policy. Large numbers of German financial services providers – life insurances, building societies and parts of the credit sector – have been affected. Based on current household survey data, Markus Demary and Judith Niehues, Institut der deutschen Wirtschaft Köln, cannot see any increase in asset inequality since the low-interest phase. Olaf Stotz, Frankfurt School of Finance & Management, indicates that the costs of old age provision have more or less doubled compared to the beginning of 2000 due to the lower interest level. The main cost drivers are the guarantee components, which are very expensive at low interest rates. Hans-Peter Burghof, University of Hohenheim, sees a permanent capital erosion through saving on the one hand, and the danger that the diversity in the volume, business model and legal reforms that have characterised the German banking system to date could be replaced by a uniform model that tends to promote monopolies.