ShackledNation
Libertarian
I don't think yo understand time deposits. You cannot withdraw time deposits on demand. The entire purpose of time deposits is to loan them and then return the funds to the bank customer. Of course the reserve requirement is 0%. Time deposits are loanable funds.Time deposits. You would have to pay to have demand deposits, but you would get interest for the time deposits. This is when you agree to give the bank ownership of your money for a certain amount of time. (This is done today as well). The banks then pay back the money with interest. Basically, you loan your money to the bank, and then the bank loans that same money out rather than printing new receipts that represent no new wealth.How would that work? Banks have to hold your entire deposit in reserve? How would anyone get a loan?
Currently, the reserve requirement on time deposits is 0%. Is the problem that current reserve requirements are too high?
Not sure what your point is about "new receipts". Banks don't print FRNs, so I guess you mean account statement, which would be the case for demand or time deposits
My god no. Time deposits do not increase the money supply at all. They can't be withdrawn on demand. If I loan money to someone, I am not increasing the money supply. A time deposit is simply a loan to the bank. The bank then loans that loan to someone else, and pays back the depositor with part of the interest.Since loans from time deposits increase the money supply just like loans from demand deposits do, I'm not sure how prices will stop rising under your plan.
Do you know what a bank run is? A bank run is when all the customers try to withdraw their funds from the bank at a same time. But since demand deposits can be loaned out, they do not have the funds. This is not possible with time deposits because you cannot withdraw time deposits on demand.Banks didn't lose money because they lent demand deposits, they lost money because their borrowers failed to repay them. How is that changed under your plan? You would outlaw bad loans? Besides, the bank portion of TARP was paid back in full and then some. It actually made a profit.
You aren't thinking this through. Banks may use the funds from shareholders to make more loans. When you buy stocks from the company, the company uses the funds to try and improve the company. That is the whole point of investment. Banks can make more money by making more loans, so it makes complete sense they would loan invested money.Shareholders do not contribute to loanable funds when they buy stock.
That is not true at all unless you have a fractional reserve banking system that allows for the creation of new money. If you have an economy with $100, and $30 is put in time deposits to be loaned, you still have $100 in the economy. All of what I am saying is simply basic economics regarding banking and the two types of deposit accounts. You fail to make the distinction between the two, which obviously has led to your confusion.Every time you take out or pay back a loan, the money supply changes. Nature of the beast. Thanks for the reply.
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