Gearing Ratios: Trading Company vs Bank

[Baa_Baa]

It is confusing and takes a while to get ones head around it. The Reserve Bank of England report is also tough reading, which doesn't help.

These people http://www.positivemoney.org.nz are NZ's arm of a worldwide movement that are opposed to the practices that enable banks to literally create money out of thin air, ergo create liquidity in the economy (which many/most think that only the country's Reserve Bank can do), all by creative accounting.

It's a consequence of fractional reserve banking and is endemic worldwide. It is also extremely profitable for banks. It is seen by some to be a root cause of many financial issues.

They put the problem quite succinctly: http://www.positivemoney.org.nz/Site...m/default.aspx

And because they think it is a terrible system that has caused no end of trouble, they also have ideas as to a solution: http://www.positivemoney.org.nz/Site...w/default.aspx which they go into a great more detail if one wishes to understand the finer points.

But here are some easy to understand and very informative other sources here: http://positivemoney.org/our-proposals/

I'm inclined to believe all this is correct. As long as it is not illegal it is not in the interests of the banks to disclose precisely how 'money is created' and how they profit from it, or how it affects liquidity in the economy and indebtedness.

Frankly I'm less interested in how it affects the banks' liquidity. They seem to have it figured out any which way.

[Snoopy]

They put the problem quite succinctly: http://www.positivemoney.org.nz/Site...m/default.aspx

And because they think it is a terrible system that has caused no end of trouble, they also have ideas as to a solution: http://www.positivemoney.org.nz/Site...w/default.aspx which they go into a great more detail if one wishes to understand the finer points.

I didn't expect to propose a solution many of the ills of financial system when I started this thread This thread has exceeded my expectations.

Frankly I'm less interested in how it affects the banks' liquidity. They seem to have it figured out any which way.

Call me small minded Baa-Baa, but I still think liquidity within individual banks is very much a live issue. There haven't been any recent bank collapses in Oceania (don't mention NZ's post GFC finance company sector though). But post GFC there are many overseas banks that only exist now because of the support of their respective countries' government's bail outs. Liquidity issues were only fixed by massive capital injections from those governments.

SNOOPY

[Baa_Baa]

I didn't expect to propose a solution many of the ills of financial system when I started this thread This thread has exceeded my expectations.

Call me small minded Baa-Baa, but I still think liquidity within individual banks is very much a live issue. There haven't been any recent bank collapses in Oceania (don't mention NZ's post GFC finance company sector though). But post GFC there are many overseas banks that only exist now because of the support of their respective countries' government's bail outs. Liquidity issues were only fixed by massive capital injections from those governments.

SNOOPY

Certainly wouldn't call you anything of the sort, apologies if I have shifted a bit off topic bringing up the notion of banks being a source of new money in the economy. No doubt the banks need liquidity to survive, it's how they create money out of thin air and their accounting practices that enable that, which subverts the role of the reserve bank that most think is the sole source of money:

http://www.positivemoney.org.nz/Site...letter_72.aspx

BAA