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Bank failures come in waves

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Re: Bank failures come in waves

#211

Post by mech987 »

sethd wrote: post #209
endtime wrote: post #207

Earlier quoted context omitted.

> the prevalent wisdom was that the average consumer has too much money because of low rates I'm sure it was all the low rates, and not at all due to printing 40% of the money supply in two years and mailing people checks.

FYI, this part didn't happen: > printing 40% of the money supply in two years

Here's the data on M2 money supply in billions of dollars, for those curious, in billions of dollars:

Feb 2020: 15,457.9 Feb 2022: 21,699.2

This is a 40.3% increase.

To be charitable, this money isn't all on printed physical cash dollar bills, but nowadays there is no need for it to be. (I'm tempted not to be charitable though.)

https://fred.stlouisfed.org/series/M2SL

Re: Bank failures come in waves

#212

Post by padobson »

fedeb95 wrote: post #92

Interestingly enough, the graph of bank failures looks like the ones Mandelbrot shows in his works about transmission errors if I recall correctly (can't check right now). My conjecture is that markets encode information rather than other things like value etc. Failures are just transmission errors.

This makes sense. Prices are literally encoding information - first the demand for the item being priced and then the cost of supplying the item. The price of beef is signaling a lot of phenomena including consumer tastes, weather, costs for feed, slaughter, and transportation, etc.

You could argue that central banks putting non-market pricing on the money supply distorts the information that a market-priced money supply would transmit effectively - and that's why all these crises seem to originate in the finance sector.

Re: Bank failures come in waves

#213

Post by bubbleRefuge »

acjohnson55 wrote: post #59
bubbleRefuge wrote: post #24

Earlier quoted context omitted.

agree with all except your last sentence . whats the issue ?

Concentration of deposits leads to less competition in the banking sector and more concentrated risk in global systemically important banks, i.e. the ones that are too big to fail. But maybe that's no the end of the world, and maybe the deposit limit isn't the best way to create competition. And if banks aren't allowed to make risky investments with deposits (good policy, IMO), then I believe we want people and busin…

banks don not lend deposits per say. this is an anachronism. banks make loans and loans create deposits. there is not a dependency on deposit funding loans. banks create loans on demand so long as they meet capital requirements. deposits are not capital. they are liabilities. (there as a thread last week about all this which you can read that is probably helpfull)

Re: Bank failures come in waves

#214

Post by shagymoe »

AlexandrB wrote: post #198
shagymoe wrote: post #195

Earlier quoted context omitted.

Undeniably, in the beginning, yes. Eventually it would be distributed more evenly as those people spend or die. We already have billionaires and the difference is that, with the current system, their money will not become distributed. They fail and then the government prints more to rescue them or they just print it and give it to them directly to "prime the economy". i.e. The Cantillion effect. The people should con…

> Undeniably, in the beginning, yes. Eventually it would be distributed more evenly as those people spend or die. We already have billionaires and the difference is that, with the current system, their money will not become distributed. Why would a bitcoin billionaire's money be distributed more than a traditional billionaire's? At least a traditional billionaire will invest his fortune in assets like stocks and thus…

Econ 101 seems to have a failing end game. Bitcoin gets distributed because, since you can't make more, you don't get anything for free. You spend it and it goes somewhere else. Maybe you get it back if you add value, but you don't get it back just because you're part of a ruling class that gets free money printed by the government and handed to you because "you will add value to the world". That last assertion is demonstrably untrue in many cases. They fail, we bail them out. Again.

Edit: Modern economics seems to require more mental gymnastics than a Bitcoin standard. We invent things no one really understands until the rug gets pulled one day and the scam become clear. Then we move on to the next scam. Financial instruments seem to be designed to fool the common man into believing we need these complications while what's really happening is that someone is simply stealing money until something breaks and we bail them out.

Re: Bank failures come in waves

#215

Post by bubbleRefuge »

enriquec wrote: post #177
bubbleRefuge wrote: post #26

Earlier quoted context omitted.

risk = 0 with unlimited deposit insurance. what am I missing.

"incentives matter" - you're missing Econ 101

matter how in this context? deposits should be 100% sound in order to have a payments system. this is for public good.

Re: Bank failures come in waves

#216

Post by scottiebarnes »

AlexandrB wrote: post #197
shagymoe wrote: post #176

Earlier quoted context omitted.

Continuing this charade of "the government and banks are competent at monetary control" is more stupid. Inflation is theft.

If we define "theft" this broadly then employment is theft, taxes are theft, interest on loans is theft, etc. Meanwhile deflation favours early adopters forever, and while you could chide me for "missing the boat" that doesn't really work, morally, for people not yet born.

> Meanwhile deflation favours early adopters forever, and while you could chide me for "missing the boat" that doesn't really work, morally, for people not yet born.

The deflationary model favors savers over consumers, giving benefit back to people who are willing be patient by forgoing immediate consumption.

You seem concerned that early adopters stand to gain disproportionately from mass adoption. Well, what outcome would you prefer and how would we get there?

Re: Bank failures come in waves

#217

Post by keneda7 »

sethd wrote: post #209
endtime wrote: post #207

Earlier quoted context omitted.

> the prevalent wisdom was that the average consumer has too much money because of low rates I'm sure it was all the low rates, and not at all due to printing 40% of the money supply in two years and mailing people checks.

FYI, this part didn't happen: > printing 40% of the money supply in two years

I see this repeated a lot. Are you trying to be technical and say the money wasn't physically printed? If you are doing that, you are being ridiculous. But if you are not trying to be technical could you please provide some proof? Another responder was nice enough to give you the M2 money supply numbers which 100% support what you are saying didn't happen.

Re: Bank failures come in waves

#218

Post by bubbleRefuge »

nonethewiser wrote: post #155
bubbleRefuge wrote: post #30

Earlier quoted context omitted.

upvote! MMT founders think we can eliminate income taxes and get by with state taxes. One has said a national real estate tax would be fair in leu of income taxes. But they all agree taxing is necessary to maitain demand/need for the currency and to slow down the economy if needed.

Many non MMTers think we can get rid of income tax too.

but those others believe taxes fund federal government which MMT has shown to be not exactly true.

Re: Bank failures come in waves

#219

Post by marcosdumay »

bombcar wrote: post #208
marcosdumay wrote: post #206

Earlier quoted context omitted.

It can absolutely be controlled. That's what reserve requirements do. It's just out of fashion for central banks to control it. (For several reasons that exist, but I'm not sure are good ones.)

Reserve requirements (unless they go to 100%, but then you can't loan at all off deposit accounts) don't prevent the bank from "loaning out money already loaned" but they do help reduce the chance of a run.

They don't prevent money multiplication, they control money multiplication.

If a country has reserve requirements that are larger than the banks safety margins, the central bank has complete control on the size of M1.

Re: Bank failures come in waves

#220

Post by nradov »

s_dev wrote: post #122
zizee wrote: post #41

From what I understand, when someone takes out a loan, a bank doesn't lend out depositors' money. Instead money is "created" by the bank (on behalf of the fed), and the bank needs to pay the fed interest. The bank also needs to pay the loan back by an agreed uppn time (which destroys the money). Why can we not have a similar system for deposits? A bank takes a deposit, the fed "destroys" the money, but pays interest…

>The bank also needs to pay the loan back by an agreed uppn time (which destroys the money). Perhaps you can clarify by what you mean by 'destroyed'. To my knowledge once the bank has 'created' the money it will always exist in the system. However it has devalued all other money by a small amount which we understand today as 'inflation'. So it's not clear to me what you mean by destroyed.

When a borrower defaults then some fraction of the outstanding balance is destroyed.
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