tag:blogger.com,1999:blog-6704573462403312459.post7879351030167824469..comments2024-03-29T02:53:03.321-04:00Comments on Moneyness: Banks are slow to increase rates on savings accounts, but quick to reduce themJP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-6704573462403312459.post-42797381212760070442020-07-18T16:05:25.412-04:002020-07-18T16:05:25.412-04:00Like Dr. William Barnett said (a former NSA Rocket...Like Dr. William Barnett said (a former NSA Rocket Scientist).<br />“the Fed should establish a “Bureau of Financial Statistics”. You can't duplicate this accounting today.<br /><br />1979: Double-entry Bookkeeping on a National Scale<br />--------------------------<br />Loans and investments 1229.8<br />Cash and Due from Banks 169.5<br />Total Assets—Total Liabilities and Net Worth 1480.3<br />Demand Deposits 400.5<br />Time deposits 675.8<br />Borrowings 180.5 (principally e-$s since 1969)<br />Currency outside the banks 106.1<br />Reserve Bank Credit 128.3<br /><br />MONETARY AND BANKING CHANGES End of 1939 to end of 1979 (figures in billions of dollars)<br /><br />(1) Net effect on the volume of time and demand deposits and borrowing of all factors, except commercial bank credit (principally capital accounts) 13.5<br />(2) Net expansion of commercial bank credit 1189.1<br />(3) Net increased in time and demand deposits and borrowings 1202.6<br /><br />Source: Computed from data reported in All-Bank Statistics, U.S. 1896-1955<br />Federal Reserve; and the Federal Reserve Bulletin<br /><br />The fact is that from a systems' standpoint the banks pay for their earning assets with new money not existing deposits. This drastically changes everything in macro. For instance, the source of time deposits is demand deposits, i.e., the bank collectively pay for what they already own (very stupid and less profitable). So the domestic banks could undercut offshore lending, FX.<br /><br />M1 = currency outside the banks plus DD, including U.S. Treasury General Fund Account<br />M2 = M1 plus all time deposits in the DFIs<br />Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-83405722759113323082020-07-18T16:02:06.464-04:002020-07-18T16:02:06.464-04:00All monetary savings originate within the payment’...All monetary savings originate within the payment’s system. But a growth in time deposits depletes demand deposits by the same amount. <br /><br />Savers never transfer their savings out of the payments system in the first place, savings never leave the payment's system unless holders hoard currency or convert to other national currencies, e.g., FDI.<br /><br />In the context of their lending operations it is only possible to reduce bank assets, and deposits, by retiring bank-held loans, e.g., for the saver-holder to use his funds for the payment of a bank loan, interest on a bank loan for the payment of a bank service, or for the purchase from their banks of any type of commercial bank security obligation, e.g., banks stocks, debentures, etc.<br /><br />The NBFIs, e.g., hedge funds, insurance companies, pension funds and shadow banks are the DFI’s (regulated member banks), customers. The DFIs process all of the NBFI’s underlying payment transactions, both clearings, and settlements. The prosperity of the DFIs is dependent upon the prosperity of the NBFIs.<br />Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-34805883529210100852020-07-18T16:00:18.013-04:002020-07-18T16:00:18.013-04:00NSA N-gDp’s growth rates by decade, percent ∆:
19...NSA N-gDp’s growth rates by decade, percent ∆:<br /><br />1970’s growth = 1.76<br />1980’s growth = 1.15<br />1990’s growth = 0.76<br />2000’s growth = 0.52<br />2010’s growth = 0.43<br /><br />Unless savings are activated, put back to work, a dampening economic impact, a deceleration in money velocity, is engendered and metastases, resulting in secular strangulation (not because of robotics, not because of demographics, not because of globalization).<br /><br />As the economic syllogism posits:<br /><br />#1) “Savings require prompt utilization if the circuit flow of funds is to be maintained and deflationary effects avoided”…<br />#2) ”The growth of commercial bank-held time “savings” deposits shrinks aggregate demand and therefore produces adverse effects on gDp”…<br />#3) ”The stoppage in the flow of funds, which is an inexorable part of time-deposit banking, would tend to have a longer-term debilitating effect on demands, particularly the demands for capital goods.” Circa 1959<br /><br />The answer to increased velocity, increased AD, increased incomes (the ingredient from which debt is paid), is to gradually drive the commercial banks out of the savings business. This will not reduce the size of the payment's system. It will make the banks more profitable.<br />Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-10381244457492020622020-07-18T15:57:33.609-04:002020-07-18T15:57:33.609-04:00Prima Facie Evidence. The 2018 pivot:
As Dr. Phili...Prima Facie Evidence. The 2018 pivot:<br />As Dr. Philip George says: “When interest rates go up, flows into savings and time deposits increase.” (thereby destroying money velocity)<br />The interest-bearing character of the DFI’s deposits which result in any sudden larger proportion of commercial bank deposits in the interest-bearing category destroys money velocity.<br />2018-11-05 0.49<br />2018-11-12 0.49<br />2018-11-19 0.56 [spike]<br />2018-11-26 0.57<br />This is also an excellent device for the banking system to reduce its aggregate profits (as all savings originate within the confines of the payment's system, and an individual bank's primary deposit is a derivative deposit - from a system's perspective).<br />It is hard for the average person to believe that banks do not loan out savings or existing deposits – demand or time. But the DFIs always create money by making loans to, or buying securities from, the non-bank public.<br />This results in a double-bind for the Fed (FOMC schizophrenia: Do I stop because inflation is increasing? Or do I go because R-gDp is falling?). If it pursues a rather restrictive monetary policy, e.g., QT, interest rates tend to rise. <br />This places a damper on the creation of new money but, paradoxically drives existing money (savings) out of circulation into frozen deposits (un-used and un-spent, lost to both consumption and investment). In a twinkling, the economy begins to suffer.<br />% Deposits vs. large CDs on "Assets and Liabilities of Commercial Banks in the United States - H.8"<br />Jul ,,,,, 12227 ,,,,, 1638.6 ,,,,, 7.46<br />Aug ,,,,, 12236 ,,,,, 1629.4 ,,,,, 7.51 <br />Sep ,,,,, 12268 ,,,,, 1662.4 ,,,,, 7.38<br />Oct ,,,,, 12318 ,,,,, 1685.8 ,,,,, 7.31 (twinkling)<br />Nov ,,,,, 12313 ,,,,, 1680.1 ,,,,, 7.33<br />Dec ,,,,, 12425 ,,,,, 1698.6 ,,,,, 7.31 <br />Jan ,,,,, 12465 ,,,,, 1732.9 ,,,,, 7.19<br />Feb ,,,,, 12494 ,,,,, 1744.6 ,,,,, 7.16<br />--------------------|<br />See: Dr. Philip George - October 9, 2018: “At the moment, one can safely say that the Fed's plan for three more rate hikes in 2019 will not materialise. The US economy will go into a tailspin much before that.”<br />Or you could look at the Calafia Beach Pundit: “money demand fell from mid-2017 to mid-2018 as confidence soared and the economy strengthened”<br />Link: September 25, 2018: “An Emerging And Important Secular Trend”<br /><br />Link: “Demand for money; what went up will soon come down”<br /><br />Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-679204552128121942020-07-18T15:55:32.137-04:002020-07-18T15:55:32.137-04:00re: "an interest rate that is linked to the F...re: "an interest rate that is linked to the Federal Reserve's interest rate"<br /><br />LOL. The source of time deposits is other bank deposits, directly or indirectly via the currency route (never more than a short-term situation), or through the banks undivided profits accounts. Ergo, the banks collectively pay for what they already own. But that's not the worst of it. All 15 trillion dollars in bank held savings are un-used, un-spent, lost to both consumption and investment, indeed to any type of payment or expenditure. From the standpoint of the economy, the banks pay for their earning assets with new money - not existing deposits. <br /><br />The upshot is that money velocity falls, aggregate monetary purchasing power falls, AD, and thus N-gDp. That has been the case even before rates started falling due to the end of gate-keeping restrictions on savings accounts. That alone is responsible for Secular Stagnation, not robotics, not globalization, not demographics.Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-89643549260543724532020-07-04T13:32:21.728-04:002020-07-04T13:32:21.728-04:00Does this article have a point? Banks are evil bec...Does this article have a point? Banks are evil because they offer interest rates that are too low? And people are too dumb to know the options for seeking a higher return on their cash? Think you’ve been reading a bit too much Karl Marx. Love the solution is to offer savings rates linked to the Fed policy rate LoL. Pretty soon, the zero percent earnings these ppl have in their savings accounts will look pretty damn good relative to the “all knowing” Federal Reserve. What a joke. Nicholashttps://www.blogger.com/profile/09618287265451374504noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-43033992678355101122020-06-29T12:26:21.953-04:002020-06-29T12:26:21.953-04:00. I read that according to the results of the meet.... I read that according to the results of the meeting of the Federal Committee for Open Markets, the Fed kept interest rates at the current level near zero, saying that it “doesn’t even think” about the increase. The central bank gave its cautious forecasts for GDP growth, employment and inflation. But the largest stock indexes at the close of trading on did not show a unified dynamics against the background of news about the Fed's interest rates at the same level.Andre Surkishttp://www.baltic-legal.com/banking-in-latvia-eng.htmnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-12548238698826814162020-06-25T07:15:24.228-04:002020-06-25T07:15:24.228-04:00Whoops, thanks.
Here is a paper that finds the sa...Whoops, thanks.<br /><br />Here is a paper that finds the same asymmetry in interest rate passthrough for Europe:<br /><br />https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp714.pdfJP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-50704082009451949172020-06-24T18:57:02.963-04:002020-06-24T18:57:02.963-04:00Tx JPK, how does it compare with European banks ? ...Tx JPK, how does it compare with European banks ? p.d: Marcus is Goldman’s not JP Anonymousnoreply@blogger.com