People in Sweden are hiding cash in their microwaves as it gets closer to being the first cashless society with negative interest rates

Sweden is shaping up to be the first country to plunge its citizens into a fascinating - and terrifying - economic experiment: negative interest rates in a cashless society.

The Swedish central bank held its benchmark interest rate at -0.35% today, the level it has been at since July.

Although retail banks have yet to pass on that negative to rate to Swedish consumers, the longer it's held there the more financial pressure there is for banks to pass the costs onto their customers. That's a problem because Sweden is the closest country on the planet to becoming an all-electronic cashless society.

Remember, Sweden is the place where, if you use too much cash, banks call the police because they think you might be a terrorist or a criminal. Swedish banks have started removing cash ATM machines from rural areas, annoying old people and farmers. Credit Suisse says the rule of thumb in Scandinavia is: "If you have to pay in cash, something is wrong."

Here's a chart from Quartz demonstrating how serious the Swedes are about getting rid of cash:

If banks charge customers negative rates of interest in a cashless society, those customers are not able to withdraw their money as cash to shield it, under their putative mattresses. Consumers' only choice in such a scenario is to spend it or let the bank take it. (The theory is that by forcing people to spend cash rather than save it, you can spur economic growth.)

Rather than going further into negative territory - a move that carries political risks the more negative it becomes - the Riksbank chose instead to do another round of quantitative easing (a forced bond buying program that flushes more central bank cash into the economy).

But the pressure for negative interest rates to drive cash out of bank deposits and into the economy is building. Switzerland, for instance, has negative central policy rates that cost its banks $1 billion a year. Those costs haven't yet been passed down to consumers. But how much longer will banks eat that before adding fees and charges to Swiss accounts to defray the cost?

We reported at the weekend how central bankers and investment bank analysts are increasingly discussing when this might happen. And yesterday, Italy sold a two-year bond at an interest rate of -0.023%, which means investors have to pay to lend Italy money rather than receive interest on their loans. (Why would you buy such a bond? Well, if you believe that you'll get even worse terms in the future from other creditors - hello, Sweden! - then suddenly -0.023% starts to look pretty good.)

So two trends are converging on Sweden at the same time:

• Sweden is using less and less cash.
• Sweden is a negative interest rate environment.

And that means many Swedes have no way to "hide" their money.

So Sweden may become the first country where its citizens may have to accept negative interest rates (probably in the form of higher bank charges or fees) or be forced to spend their money in order to "save" it from those rates.

A resistance is forming, and some people are protesting the impending extinction of cash. Björn Eriksson, former head of Sweden's national police and now head of Säkerhetsbranschen, a lobbying group for the security industry, told The Local, "I've heard of people keeping cash in their microwaves because banks won't accept it."