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TWTR

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Re: TWTR

#341
post #267

Earlier quoted context omitted.

If you print some more money is that wealth?

Yes, because it could be exchanged for other goods and services. You could buy gold or land (if you printed enough money). Is that not "wealth" to you?

You're not creating anything though. If you print money, you're just devaluing all the current money, and stealing from people who already have money.

I'm not convinced twitter has created anything really valuable. Or anything that will be around in 5/10 years time.

Re: TWTR

#342

Earlier quoted context omitted.

According to investopedia[1] - An investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As suc…

>According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices... ...on average. Which is what makes "beating" the market, over enough time, impossible. But we know there are pricing discrepancies and information asymmetries in finite periods of time because we see them every day.

[deleted]

Re: TWTR

#343

Earlier quoted context omitted.

And the SV/VC/Tech startup culture is just brimming with altruistic, wonderful people? Sociopathy isn't restricted to finance. Silicon Valley has seen its share.

So because there are some corrupt people in Silicon Valley, one is simply not allowed to distrust bankers who have proven to not be trustworthy? Life must go well with logic like that.

>So because there are some corrupt people in Silicon Valley

So because there are some corrupt bankers, one is simply best served to dismiss an entire occupation as "proven to not be trustworthy"?

Your lessons in logic are laughable.

Re: TWTR

#344

Earlier quoted context omitted.

The rules say that amount of reserves held by a bank must be at least r * X, where r is the reserve ratio and X is the amount of deposits owed by the bank. That is, there is absolutely no link between loans and reserves in the rules (laws and regulations). As long as the amount of reserves is close to the legally required minimum amount, there is an indirect link between loans and reserves, but its causality goes in…

So say I have $100 of deposits, reserve ratio 0.1, lend out $90. My reserves are $10. Now say the government increases my reserves by $5. Can't I now lend out an additional $5 that I wasn't able to before?

Again, that's not how it works. You don't need the reserves at all (if you're a bank; if you're not a bank, then you have never in your life held reserves, and the way you may or may not be able to make loans is qualitatively different).

When a bank makes a loan, they simply create a new deposit, say worth 100#. If the reserve ratio is 0.1, and assuming that bank had exactly the required reserves before this operation, then they will have to acquire 10# in additional reserves within a week or two (yes, you read that correctly; reserve requirements are after-the-fact requirement that can be fulfilled with some delay).

More likely, though, the person or company that the loan was made to will use these 100# to pay somebody else, and in doing so, the newly created deposit is transfered to another bank B.

To balance this transfer, bank A must transfer 100# in reserves to bank B. Usually, it will simply borrow those reserves from bank B against an appropriate collateral such as the loan it has made. The profit of bank A from the loan is the different in interest between the interest owed by their customer, and the interest they have to pay in the interbank market to bank B.

At the same time, bank B now has an increased reserve requirement, and they need to get those 10# from somewhere.

As I explained previously, this will lead to the interbank rate being bid up if there are no excess reserves in the system. When that happens, the central bank buys assets from banks in exchange for new reserves (instead of outright buying, a repurchase agreement may be made).

However, banks also have the option to directly borrow reserves from the central bank, at a fixed interest rate.

Re: TWTR

#345
post #267

Earlier quoted context omitted.

If you print some more money is that wealth?

Yes, because it could be exchanged for other goods and services. You could buy gold or land (if you printed enough money). Is that not "wealth" to you?

Just printing money in the absence of a reason is generally regarded as a bad idea. More money in the system casing the same quantity of things to buy just causes prices to go up to compensate. In short, inflation. this is very basic economics.

So the short short answer to "If you print some more money is that wealth?" is "No".

https://www.google.co.uk/search?q=printing+money+inflation http://economics.about.com/cs/money/a/print_money.htm

Re: TWTR

#346
post #318

Earlier quoted context omitted.

It's not your specific opinion here that amuses me, but that there is certainly an anti-twitter-ipo vibe here. Across several stories. I've been a regular here for 5 years or so and I've seen many IPOs come and go and few have been treated with this level of derision. You're obviously entitled to your own opinion, and certainly IPOs carry much risk. That "insiders" get made liquid is not, IMO, one of them. Somebody w…

If it is not the job of the capital markets to facilitate economic growth then what are they there for?

facilitate != drive/deliver

Re: TWTR

#347

Earlier quoted context omitted.

So say I have $100 of deposits, reserve ratio 0.1, lend out $90. My reserves are $10. Now say the government increases my reserves by $5. Can't I now lend out an additional $5 that I wasn't able to before?

Again, that's not how it works. You don't need the reserves at all (if you're a bank; if you're not a bank, then you have never in your life held reserves, and the way you may or may not be able to make loans is qualitatively different). When a bank makes a loan, they simply create a new deposit, say worth 100#. If the reserve ratio is 0.1, and assuming that bank had exactly the required reserves before this operatio…

Thanks for taking the time to reply, it was informative. To summarize: banks aren't constrained by reserve ratios because they can borrow reserves from other banks or, if total reserves are low, from the central bank whose policy is not to let total reserves get low due to the impact on interbank rates.

Is that correct?

Do you work in finance? Can you recommend any books on money?

Re: TWTR

#348

Earlier quoted context omitted.

Again, that's not how it works. You don't need the reserves at all (if you're a bank; if you're not a bank, then you have never in your life held reserves, and the way you may or may not be able to make loans is qualitatively different). When a bank makes a loan, they simply create a new deposit, say worth 100#. If the reserve ratio is 0.1, and assuming that bank had exactly the required reserves before this operatio…

Thanks for taking the time to reply, it was informative. To summarize: banks aren't constrained by reserve ratios because they can borrow reserves from other banks or, if total reserves are low, from the central bank whose policy is not to let total reserves get low due to the impact on interbank rates. Is that correct? Do you work in finance? Can you recommend any books on money?

That is correct as far as my understanding is concerned. And again, I think it's important to point out that this doesn't mean that banks are unconstrained, it just means that the constraints are somewhere else (capital requirements and internal risk calculations mostly).

I do not work in finance, but I became curious about such things when the financial crisis hit. I ended up reading (among other things) Understanding Modern Money by the economist Randall Wray and the more populist 7 Deadly Innocent Frauds by the former trader Warren Mosler. Those books were the first time that I glimpsed a coherent view of what "reserves" and related topics are (seriously, almost every traditional media mention of the word "reserves" is a bit confused in some way - this really should be a topic in school curricula).

Since then I've just been piecing more things together by following blogs and tracing their statements back to original papers, including things like the actual text of the Basel regulation agreements and corresponding national laws (of Germany, where I'm from) and central bank publications.

Re: TWTR

#349

Earlier quoted context omitted.

Thanks for taking the time to reply, it was informative. To summarize: banks aren't constrained by reserve ratios because they can borrow reserves from other banks or, if total reserves are low, from the central bank whose policy is not to let total reserves get low due to the impact on interbank rates. Is that correct? Do you work in finance? Can you recommend any books on money?

That is correct as far as my understanding is concerned. And again, I think it's important to point out that this doesn't mean that banks are unconstrained, it just means that the constraints are somewhere else (capital requirements and internal risk calculations mostly). I do not work in finance, but I became curious about such things when the financial crisis hit. I ended up reading (among other things) Understandi…

Thanks again
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