Of course, according to their reasoning, only bad people who engage in criminal activity, tax evasion, and terror financing use 500 euro notes.
All of us law-abiding little people have no need for such high denomination cash.
That’s a very convenient view for the ECB to take given that they’ve led the crusade to make interest rates negative.
Right now the ECB’s negative interest rates predominantly apply to the wholesale banking system.
In other words, commercial banks are charged interest on the reserves they hold with the ECB.
This is an absolutely insane practice.
As a depositor, you WANT your bank to hold plenty of reserves with the central bank instead of gambling away your deposits on risky loans and investments.
But now if any bank in the Eurozone does choose to act conservatively, they have to pay penalty interest to the ECB.
Many banks in Europe are starting to pass on these negative interest rates to their customers, and it’s beginning to cause a breakdown in the financial system.
Think about it– who would willingly PAY for the privilege of depositing their funds in an extremely illiquid and potentially insolvent bank?
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