So practically, that means banks need to pay more if they'd lend money to the ECB?

That is correct.

Yet since the rate already had gone negative previously, how much money have banks deposited since then anyway?

Quite a lot actually, going by the fact that the overnight rate is still closer to the deposit rate than the main refinancing rate, and spiking up on the end-of-month reporting days instead of spiking randomly up and down. That indicates that there is plenty of liquidity in the banks which can access the interbank market, which must mean that there's a high load on the deposit facility.

Remember that there are some non-trivial costs, both direct and reputational, associated with cashing out your excess reserves. So the support rate can go some way below zero before this becomes more attractive than the convenience of keeping your excess liquidity with the central bank's deposit facility.

The rate which can't go below zero without risking arbitrage against the central bank itself is the main refinancing rate - the rate at which banks borrow from the CB against sound collateral - and that one is still above zero.

- Jake

Friends come and go. Enemies accumulate.

But on your actual question, will this matter?

No. Ten basis points on the overnight rate doesn't matter to anybody who generates cash flow for the real economy.

There may be some expectations effect buried somewhere on the fifth decimal place, but as a rule of thumb "expectations" is what economists say when they want to distract you from the fact that they have no plausible causal story.

- Jake

Friends come and go. Enemies accumulate.

There is thus only so much motivation on offer for the most productive to contribute anything productive.

Fun to check Zero Hedge on this occasion.

The problem is fiscal. So it's probably more accurate to say that the ECB is trying to do the right thing without having the right tools for the job.

But yes, at least Draghi sees the problem.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

The ECB is doing the right thing on the overnight end of the yield curve. It's still Mr. Not Appearing In This Show on the ten-year treasury yields.

- Jake

Friends come and go. Enemies accumulate.

The problem is fiscal.

Correct. But if the ECB is fine and the problem is fiscal, then the Growth and Stability Pact (and the European Semester, and the Six Pack, and the Two Pack) is a problem. And the prohibition of monetary financing of fiscal spending is also a problem.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

I am not an economist, but can generally follow the debates very easily. Not in this case.

1. So, with MarioD money has been made cheaper. Would this mean that the state crisis (Greece, Ireland, and Portugal) would not have happened if it were so during that time? Even if it was via lending to private banks that would then buy public debt?

2. Where do we go from here? With Trichet it seemed very clear: Hell. But things are a bit blurry now. Are the state crisis repeatable at this stage? If not then what?

3. Assuming that fiscal policy does not change much, is the ECB change enough to save the day? Or it is just slowing the inevitable crisis down the line?

Genuinely puzzled here...

Probably gives you access to FTL travel, which is handy because then you can go back in time and fix this almighty fuckup.

Shouldn't the question be whether it can have a negative number of dimensions?

eurogreen: "if you keep pushing on a piece of string, can it have negative length?" - Perhaps in economics.

"It is not necessary to have hope in order to persevere."