|Subject:||Re: [socialcredit] U.S. Economics Test|
|Date:||Tuesday, August 14, 2007 07:12:43 (+1200)|
|From:||Peter <cymric @.......nz>
|In reply to:||Message 4966 (written by william_b_ryan)|
I would also expect that if one compared bank fees etc of today with what
they were charging in Douglas' day that it no longer is a 'cost' they bear.
----- Original Message -----
Sent: Tuesday, August 14, 2007 1:45 AM
Subject: Re: [socialcredit] U.S. Economics Test
> John, Douglas' point is correct. Beyond regulatory
> requirements, a bank needs reserves only to cover
> deposits lost to other banks, as they are lost.*
> Banks of course individually gain and lose deposits to
> other banks, but if a bank has no net loss of deposits
> as it is granting loans, it has no need for reserves
> to cover them. A perfectly coordinated banking system
> has no need whatsoever for reserves, exactly as if it
> were one large monopoly bank with many branches. As
> the banking system becomes increasingly coordinated,
> the need for reserves is diminishing.
> * Simple withdrawals are similar. Individual banks
> do not issue their own banknotes and coins, but must
> purchase them from the central bank. If deposits of
> banknotes and coins equal withdrawals of banknotes and
> coins, there is no need for reserves to purchase them.
> Regardless of the volume of transactions.
> --- John Hermann <email@example.com> wrote:
>>> By Mr. McMaster: Q. So they pay three per cent and
>>> invite the public to deposit by advertisements just
>>> get a smoke screen?-
>>> A. I should say that.
> That is not correct. Banks and other depositories
> invite the public to transfer their deposits from
> transaction accounts to interest-bearing accounts
> because the latter generally have a reduced reserve
> requirement (in the U.S. we find that term deposits
> have zero mandatory reserve requirement). This action
> effectively frees up reserves, which may be used by
> commercial banks in support of additional lending to
> the public.
> In regard to this method of acquiring excess reserves,
> the interest paid to depositors is generally a lower
> cost to a bank than is the cost of borrowing the same
> quantity of reserves from within the financial system.
> This explains the incentive for banks to offer
> interest-bearing deposits to the public.
> John Hermann
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