flow5's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/79825/comments http://seekingalpha.com/article/173782-bernanke-blames-banks-for-slow-recovery-while-patting-them-on-the-back?source=feed#comment-770878 770878 Latest Observations:

2009-11-12 2009-11-13 2009-11-16 2009-11-17 2009-11-18
0.07% 0.06% 0.07% 0.06% 0.04%

The remuneration rate @.25% is a GROSS ERROR. Lower the rate & plug the economy, NOW. Better yet, eliminate IORs. Better yet, get the member banks out of the savings business. ]]> Sat, 21 Nov 2009 17:34:14 -0500 Latest Observations:

2009-11-12 2009-11-13 2009-11-16 2009-11-17 2009-11-18
0.07% 0.06% 0.07% 0.06% 0.04%

The remuneration rate @.25% is a GROSS ERROR. Lower the rate & plug the economy, NOW. Better yet, eliminate IORs. Better yet, get the member banks out of the savings business. ]]> http://seekingalpha.com/article/174461-if-u-s-stopped-issuing-treasuries-would-it-go-broke?source=feed#comment-770874 770874 Sat, 21 Nov 2009 17:24:35 -0500 http://seekingalpha.com/article/174461-if-u-s-stopped-issuing-treasuries-would-it-go-broke?source=feed#comment-770610 770610 Sat, 21 Nov 2009 14:06:48 -0500 http://seekingalpha.com/article/173782-bernanke-blames-banks-for-slow-recovery-while-patting-them-on-the-back?source=feed#comment-769447 769447
Money Market Accounts = non-banks, shadow banks, or financial intermediaries (intermediaries between saver & borrower). I.e., the FED's technical staff is inducing disintermediation and forcing the economy to contract.]]> Fri, 20 Nov 2009 14:22:26 -0500
Money Market Accounts = non-banks, shadow banks, or financial intermediaries (intermediaries between saver & borrower). I.e., the FED's technical staff is inducing disintermediation and forcing the economy to contract.]]> http://seekingalpha.com/article/174461-if-u-s-stopped-issuing-treasuries-would-it-go-broke?source=feed#comment-769425 769425 Fri, 20 Nov 2009 14:11:47 -0500 http://seekingalpha.com/article/174423-bill-gross-anything-but-0-01?source=feed#comment-769401 769401 Fri, 20 Nov 2009 13:56:20 -0500 http://seekingalpha.com/article/174445-comparing-debt-to-gdp-ratios-with-presidential-terms?source=feed#comment-769376 769376 Fri, 20 Nov 2009 13:46:12 -0500 http://seekingalpha.com/article/174486-velocity-of-u-s-money-supply-is-finally-edging-up?source=feed#comment-769370 769370 Fri, 20 Nov 2009 13:42:49 -0500 http://seekingalpha.com/article/174461-if-u-s-stopped-issuing-treasuries-would-it-go-broke?source=feed#comment-769336 769336
I.e., the supply & demand for loan-funds, our protracted foreign trade deficits, our entitlement programs, etc., will impact inflation expectations, and the expectations of future economic activity. And it is proper that these projections are pointing to debt repudiation, and the issuance of a new currency (as France did in 1960).]]> Fri, 20 Nov 2009 13:32:02 -0500
I.e., the supply & demand for loan-funds, our protracted foreign trade deficits, our entitlement programs, etc., will impact inflation expectations, and the expectations of future economic activity. And it is proper that these projections are pointing to debt repudiation, and the issuance of a new currency (as France did in 1960).]]> http://seekingalpha.com/article/174461-if-u-s-stopped-issuing-treasuries-would-it-go-broke?source=feed#comment-769281 769281
In a managed-currency system (our current system), the volume of currency in circulation is determined by the public's desire to hold whatever volume of currency it needs for the exchange of goods & services. This is the cash-drain factor, or the process by which the volume of currency put into circulation, or taken out of circulation, through our banking system.

I.e., the volume the money stock remains the same, but it's composition changes (e.g, currency or demand deposits), depending upon the needs of trade. The currency-deposit ratio typically rises during recessions (it was .73% in June 06 & .85% in November 09). And there is no expansion coefficient associated with an increase in the volume of currency held by the non-bank public, (it is dollar for dollar).

The volume of our money stock is determined by monetary policy objectives, but the level of currency held by the non-bank public is lawfully, and properly, left unregulated.

All currency gets into circulation, directly or indirectly, through the liquidation of time deposits, by the cashing of demand deposits. There is one exception in demand deposit creation; those rare instances when the U.S. Treasury borrows from the Federal Reserve Banks. However it cannot be said, as of time deposits, that increases in the public’s holdings of currency reflect prior commercial bank credit creation. It is more appropriate to say that expansions of currency are accompanied by concurrent expansions of reserve bank credit.

And any expansion or contraction of the monetary base [sic], is neither proof that the Fed intends to follow an expansive, nor a contractive monetary policy. Furthermore any expansion of the non-bank public’s holdings of currency merely changes the composition, (but not the total volume), of the money supply. There is a shift out of demand deposits, NOW or ATS accounts, into currency. But this shift does reduce member bank legal (required), reserves by an equal, or approximately equal, amount.

An expansion of the non-bank public’s holdings of currency will cause a MULTIPLE CONTRACTION OF BANK CREDIT and checking accounts (relative to the increase in currency outflows from the banks) ceteris paribus.

To avoid such a contraction the Fed typically offsets currency withdrawals by open market operations of the buying type (e.g., purchases of governments for the portfolios of the Reserve Banks). The reverse is true if there is a return flow of currency to the banks. Since the trend of the non-bank public’s holdings of currency is up (ever since 1930), return flows are purely seasonal and cannot therefore provide a permanent basis for bank credit and money expansion....&more]]> Fri, 20 Nov 2009 13:14:22 -0500
In a managed-currency system (our current system), the volume of currency in circulation is determined by the public's desire to hold whatever volume of currency it needs for the exchange of goods & services. This is the cash-drain factor, or the process by which the volume of currency put into circulation, or taken out of circulation, through our banking system.

I.e., the volume the money stock remains the same, but it's composition changes (e.g, currency or demand deposits), depending upon the needs of trade. The currency-deposit ratio typically rises during recessions (it was .73% in June 06 & .85% in November 09). And there is no expansion coefficient associated with an increase in the volume of currency held by the non-bank public, (it is dollar for dollar).

The volume of our money stock is determined by monetary policy objectives, but the level of currency held by the non-bank public is lawfully, and properly, left unregulated.

All currency gets into circulation, directly or indirectly, through the liquidation of time deposits, by the cashing of demand deposits. There is one exception in demand deposit creation; those rare instances when the U.S. Treasury borrows from the Federal Reserve Banks. However it cannot be said, as of time deposits, that increases in the public’s holdings of currency reflect prior commercial bank credit creation. It is more appropriate to say that expansions of currency are accompanied by concurrent expansions of reserve bank credit.

And any expansion or contraction of the monetary base [sic], is neither proof that the Fed intends to follow an expansive, nor a contractive monetary policy. Furthermore any expansion of the non-bank public’s holdings of currency merely changes the composition, (but not the total volume), of the money supply. There is a shift out of demand deposits, NOW or ATS accounts, into currency. But this shift does reduce member bank legal (required), reserves by an equal, or approximately equal, amount.

An expansion of the non-bank public’s holdings of currency will cause a MULTIPLE CONTRACTION OF BANK CREDIT and checking accounts (relative to the increase in currency outflows from the banks) ceteris paribus.

To avoid such a contraction the Fed typically offsets currency withdrawals by open market operations of the buying type (e.g., purchases of governments for the portfolios of the Reserve Banks). The reverse is true if there is a return flow of currency to the banks. Since the trend of the non-bank public’s holdings of currency is up (ever since 1930), return flows are purely seasonal and cannot therefore provide a permanent basis for bank credit and money expansion....&more]]> http://seekingalpha.com/article/174067-short-term-economic-boost-from-fiscal-stimulus-outweighed-by-long-term-output-loss?source=feed#comment-767027 767027 Thu, 19 Nov 2009 08:51:00 -0500 http://seekingalpha.com/article/174188-still-the-worst-deflation-in-u-s-history?source=feed#comment-767012 767012 Thu, 19 Nov 2009 08:46:25 -0500 http://seekingalpha.com/article/173989-why-does-the-fed-feel-powerless-to-identify-bubbles-in-real-time?source=feed#comment-765538 765538
MACRO MAN: Of course you can identify bubbles. It's mathematically impossible to miss economic projections (MVt=PT). MVt = bank debits, PT = nominal GDP.

I.e, the lag for nominal GDP varies widely, but the lags for both real growth & inflation are always exactly the same length. ]]> Wed, 18 Nov 2009 11:56:55 -0500
MACRO MAN: Of course you can identify bubbles. It's mathematically impossible to miss economic projections (MVt=PT). MVt = bank debits, PT = nominal GDP.

I.e, the lag for nominal GDP varies widely, but the lags for both real growth & inflation are always exactly the same length. ]]> http://seekingalpha.com/article/173782-bernanke-blames-banks-for-slow-recovery-while-patting-them-on-the-back?source=feed#comment-765497 765497
The non-banks lost upwards of one trillion dollars in deposits (as evidenced by the growth in excess reserves). I.e., interest-bearing deposits at the financial intermediares were siphoned out of the non-banks (via redemptions), and siphoned out of the economy (in the form of loans and investments at the non-banks (mortgages, etc.). I.e., net debt (or velocity), has contracted (but not net new money).

Non-banks (contrary to Lord Keynes), are not in competition with member commercial banks. Savers never transfer their savings out of the banking system (unless they are hoarding currency). This applies to all investments made directly or indirectly through intermediaries.

Shifts from time/savings deposits to other deposit types within the CBs (and the transfer of the ownership of these deposits to the thrifts/non-banks), involves a shift in the form of bank liabilities (and a shift in the ownership of (existing) deposits (from savers to thrifts, et al).

The utilization of these savings by the thrifts has no effect on the volume of deposits held by the CBs, or the volume of their earnings assets. I.e., the non-banks are customers of the member, money creating, depository banks.

Second point: The BOG increased reserve-deposit ratios by increasing the volume of inter-bank deposits held in the District Reserve Banks, owned by the member banks (in the form of IORs).

I.e., the FED has followed a downward spiraling contractionary policy in the midst of a recession/depression.]]> Wed, 18 Nov 2009 11:34:24 -0500
The non-banks lost upwards of one trillion dollars in deposits (as evidenced by the growth in excess reserves). I.e., interest-bearing deposits at the financial intermediares were siphoned out of the non-banks (via redemptions), and siphoned out of the economy (in the form of loans and investments at the non-banks (mortgages, etc.). I.e., net debt (or velocity), has contracted (but not net new money).

Non-banks (contrary to Lord Keynes), are not in competition with member commercial banks. Savers never transfer their savings out of the banking system (unless they are hoarding currency). This applies to all investments made directly or indirectly through intermediaries.

Shifts from time/savings deposits to other deposit types within the CBs (and the transfer of the ownership of these deposits to the thrifts/non-banks), involves a shift in the form of bank liabilities (and a shift in the ownership of (existing) deposits (from savers to thrifts, et al).

The utilization of these savings by the thrifts has no effect on the volume of deposits held by the CBs, or the volume of their earnings assets. I.e., the non-banks are customers of the member, money creating, depository banks.

Second point: The BOG increased reserve-deposit ratios by increasing the volume of inter-bank deposits held in the District Reserve Banks, owned by the member banks (in the form of IORs).

I.e., the FED has followed a downward spiraling contractionary policy in the midst of a recession/depression.]]> http://seekingalpha.com/article/174009-fed-reduction-of-loans-term-is-beginning-of-support-withdrawal-northern-trust?source=feed#comment-765291 765291 Wed, 18 Nov 2009 09:49:41 -0500 http://seekingalpha.com/article/173618-quantitative-easing-a-critique?source=feed#comment-764803 764803
The non-banks are financial intermediaries - intermediaries between saver & borrower. The member banks are new money and credit creators (they always create new money in the lending process, member banks do not loan out existing deposits).

A trillion dollars + in monetary savings (if you count just the verifiable portion in excess reserves), was siphoned out of the non-banks (e.g., hedge funds, investment banks, finance companies, insurance companies, mortgage companies, pension funds).

The financial press has attributed this to deleveraging. However, the member banks (20% of the lending market), has suffered no dis-intermediation.

Monetary savings (savings held beyond the income period), are impounded within the banking system. They are lost to investment, consumption, or to any type of payment (if held in this form). I.e., savings held within the monetary system have a transactions velocity of zero, and are a leakage in the Keynesian national income concept of savings.

Such a "cessation of circuit income" has adverse effects on production and employment, and requires large dosages of money to counter-act.

Thus under one view, the quantitative easing performed by the FED (an increase in legal reserves), has been substantially erased. But we are not done.

If the FOMC raised the average reserve ratios on member bank deposits, the volume of required reserves would increase (which if large enough, could induce bank credit contraction), ceteris paribus.

This process is the same as if the FOMC raised the remuneration rate on excess & required reserves, vis a’ vis other competitive instruments and yields. It would also increase the volume of legal reserves, ceteris paribus (which also acts to reduce the monetary system's lending capacity).

Quantitative easing was tried, but there were opposing forces that rendered it immeasurable.

The solution is to redirect savings to the non-banks, and velocity (consumption & investment), will rebound, without unnecessarily forcing prices (stagflation), higher. This re-routing was successful in the housing crisis of 1966 (such targeted redirection is used in a command economy). In 66, both the member bank's and non-bank's profits were revived, and the housing market (and the economy along side it), recovered thereafter.]]> Wed, 18 Nov 2009 01:03:31 -0500
The non-banks are financial intermediaries - intermediaries between saver & borrower. The member banks are new money and credit creators (they always create new money in the lending process, member banks do not loan out existing deposits).

A trillion dollars + in monetary savings (if you count just the verifiable portion in excess reserves), was siphoned out of the non-banks (e.g., hedge funds, investment banks, finance companies, insurance companies, mortgage companies, pension funds).

The financial press has attributed this to deleveraging. However, the member banks (20% of the lending market), has suffered no dis-intermediation.

Monetary savings (savings held beyond the income period), are impounded within the banking system. They are lost to investment, consumption, or to any type of payment (if held in this form). I.e., savings held within the monetary system have a transactions velocity of zero, and are a leakage in the Keynesian national income concept of savings.

Such a "cessation of circuit income" has adverse effects on production and employment, and requires large dosages of money to counter-act.

Thus under one view, the quantitative easing performed by the FED (an increase in legal reserves), has been substantially erased. But we are not done.

If the FOMC raised the average reserve ratios on member bank deposits, the volume of required reserves would increase (which if large enough, could induce bank credit contraction), ceteris paribus.

This process is the same as if the FOMC raised the remuneration rate on excess & required reserves, vis a’ vis other competitive instruments and yields. It would also increase the volume of legal reserves, ceteris paribus (which also acts to reduce the monetary system's lending capacity).

Quantitative easing was tried, but there were opposing forces that rendered it immeasurable.

The solution is to redirect savings to the non-banks, and velocity (consumption & investment), will rebound, without unnecessarily forcing prices (stagflation), higher. This re-routing was successful in the housing crisis of 1966 (such targeted redirection is used in a command economy). In 66, both the member bank's and non-bank's profits were revived, and the housing market (and the economy along side it), recovered thereafter.]]> http://seekingalpha.com/article/173479-should-the-federal-reserve-be-doing-more?source=feed#comment-763907 763907 Tue, 17 Nov 2009 12:32:45 -0500 http://seekingalpha.com/article/173479-should-the-federal-reserve-be-doing-more?source=feed#comment-762736 762736
I.e., disintermediation is an outflow of funds, or a negative cash flow from the non-banks. Disintermediation for the member CBs can only exist in a situation in which there is both a massive loss of faith in the credit of the banks, and an inability on the part of the Federal Reserve to prevent bank credit contraction, as a consequence of its depositor’s withdrawals.

The last period of disintermediation for the member CBs occurred during the Great Depression, which had its most force in March 1933. Ever since 1933, the Federal Reserve has had the capacity to take unified action, through its "open market power", to prevent any outflow of currency from the banking system.]]> Mon, 16 Nov 2009 17:32:56 -0500
I.e., disintermediation is an outflow of funds, or a negative cash flow from the non-banks. Disintermediation for the member CBs can only exist in a situation in which there is both a massive loss of faith in the credit of the banks, and an inability on the part of the Federal Reserve to prevent bank credit contraction, as a consequence of its depositor’s withdrawals.

The last period of disintermediation for the member CBs occurred during the Great Depression, which had its most force in March 1933. Ever since 1933, the Federal Reserve has had the capacity to take unified action, through its "open market power", to prevent any outflow of currency from the banking system.]]> http://seekingalpha.com/article/173479-should-the-federal-reserve-be-doing-more?source=feed#comment-762387 762387
In 66, lowering ceilings had the beneficial effect of increasing the profits of the commercial banks and at the same time gave an infusion of lower cost funds into housing (which allowed the housing market to gradually recover).

I would be glad to debate the opposition. The opposition has never ever examined these banking statistics. ]]> Mon, 16 Nov 2009 14:05:44 -0500
In 66, lowering ceilings had the beneficial effect of increasing the profits of the commercial banks and at the same time gave an infusion of lower cost funds into housing (which allowed the housing market to gradually recover).

I would be glad to debate the opposition. The opposition has never ever examined these banking statistics. ]]> http://seekingalpha.com/article/173479-should-the-federal-reserve-be-doing-more?source=feed#comment-762366 762366
When member banks make loans to or buy securities from the non-bank public they create new money & credit. From the standpoint of the monetary system, the member banks do not loan out existing savings period. John Maynard Keynes had dyslexia?

Monetary savings are impounded within the banking system. I.e., savings held within the monetary system have a velocity of zero and are a leakage in the Keynesian national income concept of savings. I.e., redirect savings to the non-banks, and velocity (consumption & investment), will rebound, without unnecessarily forcing prices (stagflation), higher.]]> Mon, 16 Nov 2009 13:55:28 -0500
When member banks make loans to or buy securities from the non-bank public they create new money & credit. From the standpoint of the monetary system, the member banks do not loan out existing savings period. John Maynard Keynes had dyslexia?

Monetary savings are impounded within the banking system. I.e., savings held within the monetary system have a velocity of zero and are a leakage in the Keynesian national income concept of savings. I.e., redirect savings to the non-banks, and velocity (consumption & investment), will rebound, without unnecessarily forcing prices (stagflation), higher.]]> http://seekingalpha.com/article/173390-time-for-the-u-s-economy-to-reindustrialize?source=feed#comment-761177 761177 Sun, 15 Nov 2009 15:43:51 -0500 http://seekingalpha.com/article/173390-time-for-the-u-s-economy-to-reindustrialize?source=feed#comment-761159 761159 Sun, 15 Nov 2009 15:26:26 -0500 http://seekingalpha.com/article/173390-time-for-the-u-s-economy-to-reindustrialize?source=feed#comment-761146 761146 Sun, 15 Nov 2009 15:07:19 -0500 http://seekingalpha.com/article/173390-time-for-the-u-s-economy-to-reindustrialize?source=feed#comment-761139 761139
We need real economic business investment to be targeted in new technology (in machinery, equipment, & software). We need the Federal Government as the “playing field” has been historically, increasingly competitive, and even more imbalanced (because of dumping, subsidies, tariffs, currency pegs, etc.).

E.g., the “idiosyncratic” Corporate Income Tax (gathered from “Corporate financial statements”), in China is 25%, in Hong Kong is 16%, in Japan is 30%, in Mexico is 25%, in Russia is 20%, but it is a combined Federal & State 39.1% in the U.S. (2nd highest among OCED countries).

These figures are not strictly comparable (equally weighted); but the results are corroborated using the tax revenue as a % of GDP metric):SEE: www.taxfoundation.org/...
SEE also PriceWaterHouseCoopers study where the U.S. is higher than 101 other countries, out of 178: www.doingbusiness.org/...]]> Sun, 15 Nov 2009 14:55:17 -0500
We need real economic business investment to be targeted in new technology (in machinery, equipment, & software). We need the Federal Government as the “playing field” has been historically, increasingly competitive, and even more imbalanced (because of dumping, subsidies, tariffs, currency pegs, etc.).

E.g., the “idiosyncratic” Corporate Income Tax (gathered from “Corporate financial statements”), in China is 25%, in Hong Kong is 16%, in Japan is 30%, in Mexico is 25%, in Russia is 20%, but it is a combined Federal & State 39.1% in the U.S. (2nd highest among OCED countries).

These figures are not strictly comparable (equally weighted); but the results are corroborated using the tax revenue as a % of GDP metric):SEE: www.taxfoundation.org/...
SEE also PriceWaterHouseCoopers study where the U.S. is higher than 101 other countries, out of 178: www.doingbusiness.org/...]]> http://seekingalpha.com/article/173134-falling-credit-unless-lending-can-increase-crisis-will-continue?source=feed#comment-760473 760473
Money flowing "to" these intermediaries (non-banks) actually never leaves the commercial banking system, as anybody who has applied double-entry bookkeeping on a national scale should know. The growth of these intermediaries/non-banks, cannot be at the expense of the member banks. And why should the commercial banks pay for something they already have? I.e., interest on time deposits.

Savings impounded within the commercial banking system are lost to investment, indeed to any type of expenditure (i.e., both consumption & investment has a velocity of zero). If monetary savings are not invested, then prices, production, employment, & incomes will contract (along with the production of goods & services).

This is the depressing effect perpetrated by pseudo-economists (the Keynesian macro-economic persuasion that maintains commercial banks are financial intermediaries).]]> Sat, 14 Nov 2009 18:12:51 -0500
Money flowing "to" these intermediaries (non-banks) actually never leaves the commercial banking system, as anybody who has applied double-entry bookkeeping on a national scale should know. The growth of these intermediaries/non-banks, cannot be at the expense of the member banks. And why should the commercial banks pay for something they already have? I.e., interest on time deposits.

Savings impounded within the commercial banking system are lost to investment, indeed to any type of expenditure (i.e., both consumption & investment has a velocity of zero). If monetary savings are not invested, then prices, production, employment, & incomes will contract (along with the production of goods & services).

This is the depressing effect perpetrated by pseudo-economists (the Keynesian macro-economic persuasion that maintains commercial banks are financial intermediaries).]]> http://seekingalpha.com/article/173134-falling-credit-unless-lending-can-increase-crisis-will-continue?source=feed#comment-760376 760376
However (in the rates-of-change), of the FLOW-OF-FUNDS, the hardest hit sectors are the financial intermediaries (non-banks). Why? Because an increase in intermediary lending activates existing money (increases the transactions velocity of money), by matching savings with investment. I.e., Average Prices*Transactions (or nominal-gdp)=M*V (aggregate-demand). I.e., money has no significant impact on prices unless it is actually being exchanged.

The volume of savings is only a leakage ("wastage" as you say), when savings are held within the member banking system, or hidden under mattresses (because it is impossible from the standpoint of the monetary system, for the member banks to loan out savings).

The rate-of-change in the flow-of-funds to the credit markets can be increased in two ways. Lower the FOMC's remuneration rate on excess reserves at the CBs so the bankers would have to search for competing instruments and yields. And if you follow that logic further you will see that the proper public policy with regard to our money creating depository institutions is to get them completely out of the savings business. Why? because the banks would be more much more profitable and the economy would vastly expand without needlessly increasing prices.]]> Sat, 14 Nov 2009 14:34:20 -0500
However (in the rates-of-change), of the FLOW-OF-FUNDS, the hardest hit sectors are the financial intermediaries (non-banks). Why? Because an increase in intermediary lending activates existing money (increases the transactions velocity of money), by matching savings with investment. I.e., Average Prices*Transactions (or nominal-gdp)=M*V (aggregate-demand). I.e., money has no significant impact on prices unless it is actually being exchanged.

The volume of savings is only a leakage ("wastage" as you say), when savings are held within the member banking system, or hidden under mattresses (because it is impossible from the standpoint of the monetary system, for the member banks to loan out savings).

The rate-of-change in the flow-of-funds to the credit markets can be increased in two ways. Lower the FOMC's remuneration rate on excess reserves at the CBs so the bankers would have to search for competing instruments and yields. And if you follow that logic further you will see that the proper public policy with regard to our money creating depository institutions is to get them completely out of the savings business. Why? because the banks would be more much more profitable and the economy would vastly expand without needlessly increasing prices.]]> http://seekingalpha.com/article/173315-the-fha-is-broke?source=feed#comment-760266 760266 Sat, 14 Nov 2009 12:37:48 -0500 http://seekingalpha.com/article/172536-erosion-in-the-m2-m1-relationship-and-the-burgeoning-eurodollar-bubble?source=feed#comment-758506 758506 Fri, 13 Nov 2009 09:46:39 -0500 http://seekingalpha.com/article/172681-interest-rates-don-t-equalize-savings-and-investment?source=feed#comment-758491 758491
In The General Theory of Interest, Employment & Money, John Maynard Keynes gives the impression that a commercial bank is an intermediary type of financial institution serving to join the saver with the borrower when he states that it is an “optical illusion” to assume that “a depositor and his bank can somehow contrive between them to perform an operation by which savings can disappear into the banking system so that they are lost to investment, or, contrariwise, that the banking system can make it possible for investment to occur, to which no savings corresponds.”

I.e., In almost every instance in which Keynes wrote the term bank in the General Theory, it is necessary to substitute the term financial intermediary in order to make the statement correct. This is the source of the pervasive error that characterizes the Keynesian economics, the Gurley-Shaw thesis, Reg Q, the DIDMCA of March 31st, 1980, the Garn-St. Germain Depository Institutions Act of 1982, etc.

I.e., "the utilization of bank credit to finance real investment or government deficits does not constitute a utilization of savings, since bank financing is accomplished through the creation of new money" see: LELAND J. PRITCHARD, Ph.D, Economics, Chicago, 1933, MS Statistics, Syracuse.

I.e., the collapse of the non-banks (financial intermediaries) is primarily responsible for the collapse in real-gdp & the high rates of unemployment and underemployment.]]> Fri, 13 Nov 2009 09:37:57 -0500
In The General Theory of Interest, Employment & Money, John Maynard Keynes gives the impression that a commercial bank is an intermediary type of financial institution serving to join the saver with the borrower when he states that it is an “optical illusion” to assume that “a depositor and his bank can somehow contrive between them to perform an operation by which savings can disappear into the banking system so that they are lost to investment, or, contrariwise, that the banking system can make it possible for investment to occur, to which no savings corresponds.”

I.e., In almost every instance in which Keynes wrote the term bank in the General Theory, it is necessary to substitute the term financial intermediary in order to make the statement correct. This is the source of the pervasive error that characterizes the Keynesian economics, the Gurley-Shaw thesis, Reg Q, the DIDMCA of March 31st, 1980, the Garn-St. Germain Depository Institutions Act of 1982, etc.

I.e., "the utilization of bank credit to finance real investment or government deficits does not constitute a utilization of savings, since bank financing is accomplished through the creation of new money" see: LELAND J. PRITCHARD, Ph.D, Economics, Chicago, 1933, MS Statistics, Syracuse.

I.e., the collapse of the non-banks (financial intermediaries) is primarily responsible for the collapse in real-gdp & the high rates of unemployment and underemployment.]]> http://seekingalpha.com/article/172206-the-consequences-of-the-u-s-monetary-base-bubble?source=feed#comment-754666 754666
It is an indisputable fact that the "monetary base" is not a base for the expansion of new money & credit. Milton Friedman just defaulted to such contrivance.

The basic "expansion coefficient" for the banking system as a whole (the correct source base), is obtained by dividing commercial bank credit, (or the H.8), by the sum of the member bank’s (1) required reserves, plus (2) contractual clearing balances.

Note: the past reductions in required reserve balances have predominantly been accompanied by “offsetting increases” in the member bank’s contractual (required), clearing balances (note: both required reserves and vault cash, can be used for deficits in contractual clearing balances (as long as they are quickly replenished)).

Contractual clearing balances are essentially prudential reserves, e.g., (1) reserves necessary for posting debits and credits resulting from both intra & inter-bank transactions, (2) reserves to meet the public’s demand for currency, or (3) reserves to avoid deficits in the bank’s balance of payments, etc. E.g., prudential reserves are the "source base" for the unregulated Euro-dollar, Yen-dollar, etc. Market (e.g., carry trade). See: "The Euro-Dollar Market: Some First Principles -- Milton Friedman"

In theory, contractual clearing balances function as “reserve requirements against debits to deposits”. They are reserve requirements based both upon the turnover of deposits, as well as upon their volume (See: 1931 Committee on Bank Reserves Proposal (by the Board’s Division of Research and Statistics). This study was declassified in March 1983.

Any changes (use of deposits), will trigger automatic adjustments in a bank’s requirement for either additional (1) contractual clearing balances (required), and or in, (2) supplemental reserves (daylight overdraft credit).

Daylight credit is constrained by (1) “net debit caps” and (2) “interest rate charges on daylight overdrafts (net-debit-caps are the bank’s maximum allowable daylight overdraft positions).

Daylight credit figures (legal reserves), should be incorporated in the banking system’s source base (but the data on daylight credit is unavailable on an up-to-date release). Daylight credit & or overdrafts occur when a member bank operates with a negative legal reserve balances (not the same as borrowed reserves).

& if you didn't understand don't worry, the "source base" is irrelevant. Why? Because the "member banks" are unencumbered in their lending operations (legal reserve requirements are no longer binding, i.e., because of ATM networks, sweep accounts, reserve avoidance, etc.).]]> Tue, 10 Nov 2009 20:23:19 -0500
It is an indisputable fact that the "monetary base" is not a base for the expansion of new money & credit. Milton Friedman just defaulted to such contrivance.

The basic "expansion coefficient" for the banking system as a whole (the correct source base), is obtained by dividing commercial bank credit, (or the H.8), by the sum of the member bank’s (1) required reserves, plus (2) contractual clearing balances.

Note: the past reductions in required reserve balances have predominantly been accompanied by “offsetting increases” in the member bank’s contractual (required), clearing balances (note: both required reserves and vault cash, can be used for deficits in contractual clearing balances (as long as they are quickly replenished)).

Contractual clearing balances are essentially prudential reserves, e.g., (1) reserves necessary for posting debits and credits resulting from both intra & inter-bank transactions, (2) reserves to meet the public’s demand for currency, or (3) reserves to avoid deficits in the bank’s balance of payments, etc. E.g., prudential reserves are the "source base" for the unregulated Euro-dollar, Yen-dollar, etc. Market (e.g., carry trade). See: "The Euro-Dollar Market: Some First Principles -- Milton Friedman"

In theory, contractual clearing balances function as “reserve requirements against debits to deposits”. They are reserve requirements based both upon the turnover of deposits, as well as upon their volume (See: 1931 Committee on Bank Reserves Proposal (by the Board’s Division of Research and Statistics). This study was declassified in March 1983.

Any changes (use of deposits), will trigger automatic adjustments in a bank’s requirement for either additional (1) contractual clearing balances (required), and or in, (2) supplemental reserves (daylight overdraft credit).

Daylight credit is constrained by (1) “net debit caps” and (2) “interest rate charges on daylight overdrafts (net-debit-caps are the bank’s maximum allowable daylight overdraft positions).

Daylight credit figures (legal reserves), should be incorporated in the banking system’s source base (but the data on daylight credit is unavailable on an up-to-date release). Daylight credit & or overdrafts occur when a member bank operates with a negative legal reserve balances (not the same as borrowed reserves).

& if you didn't understand don't worry, the "source base" is irrelevant. Why? Because the "member banks" are unencumbered in their lending operations (legal reserve requirements are no longer binding, i.e., because of ATM networks, sweep accounts, reserve avoidance, etc.).]]>