You don't need to make things so complicated by asking the man on the street to tell the bank what they can do with your money. These things can all be dealt with through proper regulation e.g. Restrictions on bank's leverage. Be careful what you wish for though. There are consequences. Bring in rules like the programme suggests and you will have small businesses complaining that they can't get credit.
Small businesses can't get credit as it stands.
Yeah but the crisis isn't going to last forever. Forcing banks to potentially keep 100% of deposits in cash that they can't lend isn't going to solve it any quicker.
It strikes me that we often consider money to be a physical thing that could be locked up in a bank. But increasingly it's just an electronic number. Apparently when the BOE engaged in quantative easing during the crisis they merely added a few 0's( and moved a decimal place or two!) to the money supply rather than physically printing notes. The idea of holding actual money increasingly seems anachronistic and will be increasingly out-dated. Yet this is one of the scary things about the banking problem. There are products (derivatives of incredible complexity) that few people including many bankers interviewed last night even understand. If banks are taking actual money and converting it into these product types rather than just lending it per se to normal busineses as credit, few people including the central bankers have any idea what they are and therefore they are nearly impossible to value.
Having checked with Wiki, your description of QE seems about right.I know Duke,but even the Zimbaweans produced a note of some kind. The idea that you can increase the money supply by billions at the click of a mouse is scary. As it happens I have ZAR $ note for 1 million so technically I am a ZAR millionaire! It's amazing to think that at one time the US $ and the ZAR $ were par.
Yes indeed, and this is how things worked before fractional reserve banking, i.e. you paid a bank to store your money just like you would pay a warehouse to store some goods.Surely the net result would be that depositors would have to pay banks to keep deposits and lose money as inflation kicks in?
Very good point, however you have to remember that deposit insurance, even for small amounts, makes the depositor oblivious or ignorant of what is actually done with his/her money. If there was no deposit insurance people would be a lot more careful where they deposited their money, and you would see banks advertising based on risk.According to Adam Smith, if there was a market for a bank whose business was restricted to taking deposits and only using them to invest in certain types of products (I am assuming you mean product with a low risk of failure and thus with only small gains), then such a bank would be setup - the absence of such banks, implies that there is no such demand.
In fact, such banks did exist in the recent past - Building societies, but over the years they all changed themselves into more risky institutions.
But this is the underlying problem with fractional reserve banking. Demand deposits, as their name suggests, should be available on demand. Fixed term deposits, as in the true meaning of the word (not the way most term deposits can be cashed in early), would only be available on completion of the term. Forcing banks to keep 100% reserves on demand deposits does not mean that there will be no money to lend out. Those people that wish to have their money available on demand would have to accept no interest and a "storage" fee, while varying term deposit products would try and attract customers with interest rates.Yeah but the crisis isn't going to last forever. Forcing banks to potentially keep 100% of deposits in cash that they can't lend isn't going to solve it any quicker.
I was given a Weimar Republic Reichsmark note when I was a kid (1 billion, trillion, can't remember what it was) to teach me the evils fiat money. You are rightfully scared about the effects of money expansion at the click of a button, especially when the action is declared to be beneficial. Ask yourself this, if increasing the money supply is such a good idea, then why not decriminalise counterfeiting?I know Duke,but even the Zimbaweans produced a note of some kind. The idea that you can increase the money supply by billions at the click of a mouse is scary. As it happens I have ZAR $ note for 1 million so technically I am a ZAR millionaire! It's amazing to think that at one time the US $ and the ZAR $ were par.
You don't see any difference between the monetary authorities printing money as part of its management of the economy and private citizens having a free hand at printing as much they want?Ask yourself this, if increasing the money supply is such a good idea, then why not decriminalise counterfeiting?
Well I have posted in other threads about my opinion on gold. I own a substantial amount and will continue adding to my holdings. I also own equities in industrial, mining, and agricultural companies, I have very little euros, no sterling and no US$ exposure at all.Excellent points Chris. I'm more scared now than when I started this topic. What's your long-term assessment viz a viz inflation , alternatives to holding $'s £'s €'s ? Some posters elsewhere on AAM are talking about gold - any thoughts ?
You don't see any difference between the monetary authorities printing money as part of its management of the economy and private citizens having a free hand at printing as much they want?
I was hoping you were goign to ask that question ;-)Chris I don't think anyone believes that printing money creates wealth, certainly not I. You are clearly of the view that printing money is the root of all evil. What about the biggest bubble of them all, the Wall Street crash on 1929. Did we not have the gold standard then?
Not really true. Over millenia, gold became currency through human choice, and not through human design or government enforcement. And this happened independently in societies and cultures that never met.Gold is just another arbitrary currency at the base of it.
HahahaThe way forward is the magic bean of which the value will be held on your RFID chip lodged in your skull.
Four legs good two legs bad....
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