131–140 of 307 posts
Earlier quoted context omitted.
That is not what banks do, its the modern banking system. That's what bitcoin was all about..
Bitcoin isn't solvent either, good luck getting your money out in case there is a bank run there.
So, I'm curious - what do you think this means, when you say it?
Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…
Ok, I'm starting a new bank and everyone will be able to withdraw all at once, bank runs will be a thing of the past, your interest rate will be 0.00000000000000000000000000000000000000000000000125%
I don't think I agree with this as a mark of "shame". Were these companies wrong to pull money out of SVB when they (correctly) thought the bank might be insolvent or headed for trouble? Are we celebrating those who left their money in, despite the warnings, when they could have potentially lost it all if the government didn't step in and make an unprecedented promise to honor the deposits? Would that have been "hero…
In a slightly different reality… “Sorry team, our main VC advised us to keep our money in SVB because it’s the right thing to do. We can’t make payroll. Our VC, true to their ideals, kept their cash in SVB too. They can’t help us. Kindly cast your blame on the thousands of startup peers that withdrew and remain unscathed. Their blatant self-interest may have killed us, but we are the true moral victors.”
Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…
To be pedantic, I'm pretty sure a big enough bank run could topple your banks too. Where do you think they get the cash to lend out from?
Even if a run lasts longer than the period above they're backed mostly by mortgages that are priced significantly higher than their borrowing costs and LVRs that average lower than 80% and the way AU banks price interest rates will always cost significantly less than their borrowing costs. They're never going to have trouble raising money on prime, variable interest (average fixed terms are always less than 5 years here) debt.
APRA standards all but eliminate a sub-prime problem here. Loan affordability has been a very hot topic here over the last decade.
Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…
The most basic commercial bank today makes car and home and small business loans using the funds deposited by its clients, and it holds those funds 'for free' (in the 1980s in the USA, one could make 5% interest by depositing one's cash in a bank savings account, with perhaps some penalties for withdrawal, IIRC). The bank charges a greater interest rate to those who take loans from the bank and pays out a lower interest rate to those who deposit funds with the bank, and that difference is where it earns its profit margin.
People tell me this little fairy tale has very little to do with the majority of the profits 'earned' in the modern banking system, however. It seems to have something to do with the merger of investment and commercial banking post repeal of Glass-Steagall laws separating those two sectors.
Curiously, nobody seems to want to talk about the strength of the dollar being backed up by petrodollar recycling since it went off the gold standard... but hey, who cares, we're fighting a war with Russia in Ukraine over access to the European gas market for just that reason, and the expenditures in Ukraine ($100 billion) seem comparable to the expenditures looming to make good the depositors in SVB and co. ($100 billion?) and these two things must be completely unrelated... I guess.
Earlier quoted context omitted.
As individuals they couldn’t stop the bank run happening, so pulling out their money was the rational thing to do. If all the depositors could have got together in a room, they could all have agreed to keep their money in. That coordination wasn’t possible though.
This is incorrect. such coordination was possible and did happen, only in the opposite direction. A relatively small group of VC firms effectively did coordinate the depositors very effectively to organize except it was to take money out Saying coordination wasn’t possible is therefore incorrect. And had it not occurred, getting people to keep their money in would have been a moot point, the whole thing a non issue.
Call me naïve, but if I put money in a bank I should be able to get it back whenever I want. If I didn't want it to be liquid, I'd buy something less liquid. The very concept of a bank run is ridiculous. If all a bank's customers want their cash back, they should be able to get it back without affecting the liquidity of the bank. Transaction accounts don't earn me anything and have fees of their own. There's little i…
> Australian banks make their money through mortgages Where do you think your banks get the money to loan out for mortgages? I’ll give you a hint: your deposits. This is how banks work.
Earlier quoted context omitted.
> Australian banks make their money through mortgages Where do you think your banks get the money to loan out for mortgages? I’ll give you a hint: your deposits. This is how banks work.
Since they can loan out much more than they get in deposits that’s not strictly true right? You can have 10 house loans for every house sized deposit (or something similar).
The 10x multiplier is on the bank's equity. For every dollar of home loan there is a dollar or more of deposits.
The multiplier effect of fraction reserve occurs over iterated loans and depositing. The fraction term comes in because the bank can lend out a fraction, less than 1, of deposits.