Drop In Bank Lending Does Not Mean There Is A Problem In Banks

[mash107]

Why can't they get savings because the Govt lowers interest rates to 0%? Buy a T-Bill and get 0% or put it with a bank and get more.

How many more people would be willing to save if interest rates were at their normal, market levels? The fact that you don't get anything for saving is a huge discouragement to for people to save their capital.

Well I don't know. I don't many more really. Because I don't think many are really not saving at the moment, and in fact are saving more -- too much because they aren't spending.

Is savings really a problem with the banks? I don't think so. I think the problem is the asset side of their balance sheet is full of crap and that is what is driving down their equity, not a flight of savers.

Yes it is. It's absolutely why our economy is hinged on allowing banks to conjure money up out of nowhere. That's why inflation gets so high during booms and deflation gets so severe during recessions (i.e. now). Because banks conjure up so much money to feed into the misallocation and lose so much money when those misallocations are rectified.

Imagine if this fraud was eliminated, and banks could loan only what it had? Think of how severe the recession to rebalance our economy would be. That's how out of whack our economy is... when we're forced to live on artificial creation of money.

 

[Iriemon]

How many more people would be willing to save if interest rates were at their normal, market levels? The fact that you don't get anything for saving is a huge discouragement to for people to save their capital.

Well I don't know. I don't many more really. Because I don't think many are really not saving at the moment, and in fact are saving more -- too much because they aren't spending.

Is savings really a problem with the banks? I don't think so. I think the problem is the asset side of their balance sheet is full of crap and that is what is driving down their equity, not a flight of savers.

Yes it is. It's absolutely why our economy is hinged on allowing banks to conjure money up out of nowhere.

A bank can't do that.

That's why inflation gets so high during booms and deflation gets so severe during recessions (i.e. now). Because banks conjure up so much money to feed into the misallocation and lose so much money when those misallocations are rectified.

What was the high inflation in the boom of the 90s? Or low during the recession of the 00s?

To the extent there is an effect it is because general demand is high in a boom and low in a bust.

Imagine if this fraud was eliminated, and banks could loan only what it had?

What fraud? Banks can only loan what they have now. In fact they can only lend 90% of what they have.

 

[mash107]

Well I don't know. I don't many more really. Because I don't think many are really not saving at the moment, and in fact are saving more -- too much because they aren't spending.

Is savings really a problem with the banks? I don't think so. I think the problem is the asset side of their balance sheet is full of crap and that is what is driving down their equity, not a flight of savers.

Yes it is. It's absolutely why our economy is hinged on allowing banks to conjure money up out of nowhere.

A bank can't do that.

That's why inflation gets so high during booms and deflation gets so severe during recessions (i.e. now). Because banks conjure up so much money to feed into the misallocation and lose so much money when those misallocations are rectified.

What was the high inflation in the boom of the 90s? Or low during the recession of the 00s?

To the extent there is an effect it is because general demand is high in a boom and low in a bust.

Imagine if this fraud was eliminated, and banks could loan only what it had?

What fraud? Banks can only loan what they have now. In fact they can only lend 90% of what they have.

Fractional-reserve banking - Wikipedia, the free encyclopedia ?

They're only required to have $1 for every $9 loaned out.

 

[Iriemon]

Yes it is. It's absolutely why our economy is hinged on allowing banks to conjure money up out of nowhere.

A bank can't do that.

What was the high inflation in the boom of the 90s? Or low during the recession of the 00s?

To the extent there is an effect it is because general demand is high in a boom and low in a bust.

Imagine if this fraud was eliminated, and banks could loan only what it had?

What fraud? Banks can only loan what they have now. In fact they can only lend 90% of what they have.

Fractional-reserve banking - Wikipedia, the free encyclopedia ?

They're only required to have $1 for every $9 loaned out.

Right. A bank can't just conjure up money out of nowhere. They have to have $10 in assets to start with, and then they can only lend out $9.

Only the Fed can create money.

 

[mash107]

A bank can't do that.

What was the high inflation in the boom of the 90s? Or low during the recession of the 00s?

To the extent there is an effect it is because general demand is high in a boom and low in a bust.



What fraud? Banks can only loan what they have now. In fact they can only lend 90% of what they have.

Fractional-reserve banking - Wikipedia, the free encyclopedia ?

They're only required to have $1 for every $9 loaned out.

Right. A bank can't just conjure up money out of nowhere. They have to have $10 in assets to start with, and then they can only lend out $9.

Only the Fed can create money.

That is out of nowhere.

You have $100 in your wallet. You girlfriend/wife asks you for $100 to borrow to shop. You fork over $100 to her.

Now updated for banks:

You have $10 in your wallet. Your girlfriend/wife asks you for $100 to borrow to shop. You somehow come up with $90, because rules don't apply to you, and you fork over $100.

 

[Iriemon]

Fractional-reserve banking - Wikipedia, the free encyclopedia ?

They're only required to have $1 for every $9 loaned out.

Right. A bank can't just conjure up money out of nowhere. They have to have $10 in assets to start with, and then they can only lend out $9.

Only the Fed can create money.

That is out of nowhere.

You have $100 in your wallet. You girlfriend/wife asks you for $100 to borrow to shop. You fork over $100 to her.

Now updated for banks:

You have $10 in your wallet. Your girlfriend/wife asks you for $100 to borrow to shop. You somehow come up with $90, because rules don't apply to you, and you fork over $100.

Where on earth are you getting this idea from?

No bank can lend out money it doesn't have. Banks cannot just print up money. Their officers would be locked away for forgery if they did that.

If it was that easy, everyone would open a bank and start printing money.

In your example, how exactly does the bank "somehow" come up with $90?