Switzerland and Denmark go negative

Negative nominal interest rates arrive.

Government interest rates have, in real terms, been negative for quite some time. Britain, the US, and Germany are all in the position where they are being paid to borrow money. This creates some rather interesting incentives for governments: they can fund massive investment programs at minuscule expense, they can use money which would be spent on interest payments on more valuable projects, or they could even just stop collecting taxes entirely.

Unfortunately, political considerations have meant that most governments have been unwilling to show even the slightest innovation when responding to a situation in which the most basic rules of the game no longer hold. And, when negative interest rates came to business, the same thing happened.

Unilever and Texas Instruments are also borrowing below the rate of inflation, but when presented with free money, businesses – even ones like Google, supposedly staffed with the world's greatest blue-sky thinkers – don't do anything other than sit on monstrous cash piles waiting for a more favourable investment environment.

Now the trend has spread in a different direction. Two banks – State Street Corp. and Bank of New York Mellon – have announced that customers holding accounts in Swiss Francs or Danish Crone will be subject to a negative interest rate. That's negative in nominal terms, so in real terms it's an even sharper penalisation of savers.

These two currencies are experiencing some of the tightest squeezes because they are both pegged closely to the euro (Denmark is in ERM II and Switzerland has enacted a ceiling on how much it can appreciate relative to the currency), while also being in strong demand because they are not actually the euro – making them the star choice for investors who want to hold european assets without taking the risk that the eurozone will messily implode.

Conventional wisdom says that nominal negative interest rates can't happen. Savers will merely withdraw their money and keep it in cash to avoid the "fee". This doesn't seem to be happening, probably because the value of having a bank account in another countries currency is high enough that it's worth paying for the benefit. Conventional wisdom, yet again, is apparently wrong.

The Matterhorn, Swiss icon. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
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The rise of the green mayor – Sadiq Khan and the politics of clean energy

At an event at Tate Modern, Sadiq Khan pledged to clean up London's act.

On Thursday night, deep in the bowls of Tate Modern’s turbine hall, London Mayor Sadiq Khan renewed his promise to make the capital a world leader in clean energy and air. Yet his focus was as much on people as power plants – in particular, the need for local authorities to lead where central governments will not.

Khan was there to introduce the screening of a new documentary, From the Ashes, about the demise of the American coal industry. As he noted, Britain continues to battle against the legacy of fossil fuels: “In London today we burn very little coal but we are facing new air pollution challenges brought about for different reasons." 

At a time when the world's leaders are struggling to keep international agreements on climate change afloat, what can mayors do? Khan has pledged to buy only hybrid and zero-emissions buses from next year, and is working towards London becoming a zero carbon city.

Khan has, of course, also gained heroic status for being a bête noire of climate-change-denier-in-chief Donald Trump. On the US president's withdrawal from the Paris Agreement, Khan quipped: “If only he had withdrawn from Twitter.” He had more favourable things to say about the former mayor of New York and climate change activist Michael Bloomberg, who Khan said hailed from “the second greatest city in the world.”

Yet behind his humour was a serious point. Local authorities are having to pick up where both countries' central governments are leaving a void – in improving our air and supporting renewable technology and jobs. Most concerning of all, perhaps, is the way that interest groups representing business are slashing away at the regulations which protect public health, and claiming it as a virtue.

In the UK, documents leaked to Greenpeace’s energy desk show that a government-backed initiative considered proposals for reducing EU rules on fire-safety on the very day of the Grenfell Tower fire. The director of this Red Tape Initiative, Nick Tyrone, told the Guardian that these proposals were rejected. Yet government attempts to water down other EU regulations, such as the energy efficiency directive, still stand.

In America, this blame-game is even more highly charged. Republicans have sworn to replace what they describe as Obama’s “war on coal” with a war on regulation. “I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations,” Trump announced in March. While he has vowed “to promote clean air and clear water,” he has almost simultaneously signed an order to unravel the Clean Water Rule.

This rhetoric is hurting the very people it claims to protect: miners. From the Ashes shows the many ways that the industry harms wider public health, from water contamination, to air pollution. It also makes a strong case that the American coal industry is in terminal decline, regardless of possibile interventions from government or carbon capture.

Charities like Bloomberg can only do so much to pick up the pieces. The foundation, which helped fund the film, now not only helps support job training programs in coal communities after the Trump administration pulled their funding, but in recent weeks it also promised $15m to UN efforts to tackle climate change – again to help cover Trump's withdrawal from Paris Agreement. “I'm a bit worried about how many cards we're going to have to keep adding to the end of the film”, joked Antha Williams, a Bloomberg representative at the screening, with gallows humour.

Hope also lies with local governments and mayors. The publication of the mayor’s own environment strategy is coming “soon”. Speaking in panel discussion after the film, his deputy mayor for environment and energy, Shirley Rodrigues, described the move to a cleaner future as "an inevitable transition".

Confronting the troubled legacies of our fossil fuel past will not be easy. "We have our own experiences here of our coal mining communities being devastated by the closure of their mines," said Khan. But clean air begins with clean politics; maintaining old ways at the price of health is not one any government must pay. 

'From The Ashes' will premiere on National Geograhpic in the United Kingdom at 9pm on Tuesday, June 27th.

India Bourke is an environment writer and editorial assistant at the New Statesman.

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