| Subject: | Re: [socialcredit] U.S. Economics Test | | Date: | Tuesday, August 14, 2007 21:31:38 (-0400) | | From: | Richard Cook <rickycook21 @.......com>
|
| In reply to: | Message 4973 (written by John G Rawson) |
I don't know how relevant this is to the discussion, but they have done
almost everything they possibly can to assure that an individual bank cannot
fail. So much so, that there is hardly anything any more that can be called
a "bank" in the old-fashioned sense of the word. In other words, the
bail-out is a way of life. However, the one thing that cannot be protected
against is when the entire national or even international system is so
overextended on credit that it makes no difference in shifting reserves from
one bank to another or from the central bank to individual banks. Currently
there are differences of opinion as to whether the financial crisis is going
to reach this level, whether just in the U.S. or farther afield due to the
role of the U.S. as the worldwide "consumer of last resort." We are
obviously already in a recession in the U.S. as far the producing economy is
concerned. It is pulling down the financial economy because the parasites
are running out of nutritious morsels (consumers, businesses, government) to
swallow up and digest. I think we can expect a stock market decline of 40%
because that is what we have had typically when recessions begin; i.e.,
there is a credit bubble that deflates to that extent. If the Dow-Jones in
the U.S. goes below a 40% decline; i.e., below around 850 over the next year
or two, look out. That means we're heading toward a depression which can be
defined as an 80% decline in the producing economy. The only question in my
mind right now is where it stops on that continuum. At 40% they can produce
another bubble in 2-3 years. The one time in the last 100 years where it hit
80%--1929-33, it took a decade and a world war to recover. That war, of
course, was monetary in its origins and results as Douglas foresaw and
warned about.
>From: "John G Rawson" <johngrawson@hotmail.com>
>Reply-To: socialcredit@elistas.com
>To: socialcredit@elistas.com
>Subject: Re: [socialcredit] U.S. Economics Test
>Date: Tue, 14 Aug 2007 22:31:49 +0000
>
>
>Two comments:
>
>1. Our Royal Commission pointed out that, if there were only one bank
>operating, there would be no limit to its lending apart from possible
>shortage of willing borrowers. They thus pointed out that reserves
>concerned only interbank operations, when one outstripped the others in
>lending, as Bill commented.
>
>2. They regarded reserve ratios as a "blunt instrument", i.e. ineffective.
>Whether because of that or for other reasons as well, reserve ratios were
>dropped and our only means of trying to control the volume of money is per
>changes in the "Official Cash Rate" (Res. Bank to trading banks) which
>trigger changes in general interest rates. (I am not suggesting that this
>method is fully effective either.
>
>Regards. John R.
>
>
>From: John Hermann <hermann@picknowl.com.au>
>Reply-To: socialcredit@elistas.com
>To: socialcredit@elistas.com
>Subject: Re: [socialcredit] U.S. Economics Test
>Date: Tue, 14 Aug 2007 09:59:48 +0930
>
>At 11:15 PM 13/08/2007, William Ryan wrote:
>
> ... 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.
>Conventional banking wisdom (dogma) holds that a depository needs reserves
>to "cover" deposits by its own customers. And that any newly-created
>deposits (i.e., arising from new loans advanced by the depository) require
>additional reserves.
>
>
>A perfectly coordinated banking system has no need whatsoever for reserves,
>Yes it does. The reason being that the real purpose of reserves is not to
>provide backing for deposits (because deposits already perform all of the
>functions of money and do not need backing), but rather to provide the
>central bank with additional means (apart from interest rates) of adjusting
>the overall volume of bank lending, and also the means to adjust the volume
>of legal tender - according to society's need for cash at every point in
>time.
>
>
>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.
>This is a thoroughly confused statement. All coins and notes held by a bank
>ARE reserves. And as such are entirely interchangeable with creditary
>deposits in the bank's account with the central bank.
>
>- John Hermann
>
>
>
> >> By Mr. McMaster: Q. So they pay three per cent and invite the public to
>deposit by advertisements just to 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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