Interest again: expensive inertia of German investors

INMany savers see their risk aversion as vindicated by the debacle of the Silicon Valley bank and worries about Credit Suisse. Leave your own money to casino capitalists to play? No thanks.

General judgments justify inertia, for which one has to pay a high price. For years, people have complained and complained that the ECB has stolen our interest as if it were a natural right to do so, and now that that interest is back, savers remain sluggish. They wait for interest to come to them. But he doesn’t.

Banks had to pay a painful 0.5% interest rate on deposits at the European Central Bank until July last year. Now they get 2.5% per annum on money. This Thursday, the ECB even decided to raise the deposit rate to 3 percent. What do lifeguards do? Nothing. Most banks have not changed their lending rates. In two thirds of cases it is close to zero. Why should banks do something about it if depositors give them money without interest? Each month of waiting brings high profits to banks. The money that savers lose is expensive lethargy.

Adventure is not needed.

With just a little effort, depositors could set the banks in motion. It doesn’t take any adventure. For a long time there have been offers from banks with German deposit insurance that offer 2 percent or more for the money that is available every day. Deposits are at risk of insolvency at every bank, even at your own bank. However, deposit insurance works. During the financial crisis, even the biggest interest gamblers were compensated in Iceland.

Given that ECB interest rates are around 3 percent, the current interest rate proposals are not dubious desperate offers from obscure banks, but appropriate value in this interest rate situation from providers like Wüstenrot or HVB.

Interest rate comparison platforms started working well again after the change in interest rates. However, the big banks and savings banks don’t pay attention to the one or two billion euros that are transferred to high-interest offers every month. Peanuts, bankers in the past might say.

Bundesbank financial asset statistics show that three trillion euros lie in Germany in the form of cash and deposits, mostly without interest. This is a triple with twelve zeros. This is 36,000 euros per inhabitant and much more than a reasonable supply of three months’ salary in case the washing machine breaks down or the car needs new tires.

Of course, this money is distributed unevenly. However, the median is about 60,000 euros. This means that half have fewer financial assets, the other half – and here we are talking about more than 40 million people – have more than 60,000 euros of financial assets. This does not include real estate. Two percent on 60,000 euros will amount to 1,200 euros per year.

If you find it too tedious to open an additional bank account with an interest-bearing bank, you can also lend your money to one of the most solvent borrowers in the world. The private investor exchange in Stuttgart registers only a few dozen trading transactions daily in the best-selling bonds, for which the Federal Republic of Germany promises a return of more than 3% by June 2024.

What more does a keeper’s heart want? Short-term, the highest possible creditworthiness of the debtor, respectable income. The effort to buy such paper takes less time than comparing prices on the Internet for all kinds of goods in search of a discount of a few euros.

It is unfortunate enough that skepticism about stocks, the most profitable form of investment in the long run, is very pronounced in this country. However, if the change in interest rates shows that Germans are also avoiding solid bonds and interest-bearing savings accounts, then it should come as no surprise to anyone that private pensions are not moving forward, which, given Germany’s demographics and 8.7 percent inflation, is a disaster.

In a number of other countries, banks have passed on higher interest rates to their customers to a much greater extent. This is not because of their generosity, but because of pressure from customers whose money would otherwise go anywhere. It’s called competition. But this only works if there is a critical buyer who not only compares washing machine prices and reads test booklets, but also looks at possible interest rates and returns. An ECB interest rate of around 3 percent is a good benchmark. Waiting for the mercy of the brownie bank is expensive laziness.