Labour pays homage to Iron Lady

[Beskar]

Again, you are being out of touch with how business works. And no, we're really not talking about "just now". If you want to ban debt for banks, that impacts the future as well. The current situation does demand limitations on how far banks should be allowed to go into debt. But again, you must remember that banks don't operate on the same business model as most businesses. When they have lots of money(ie deposits), they lose money. When they have debt(ie- loans), they increase their revenue, assuming its paid back. That is why banks have so much "debt", they aren't meant to have a huge amount of cash on hand. Because of the prior assumption, there should be limits on just how far they go into debt, but barring them from debt causes havoc with the entire model and will likely run a large number of banks out of business entirely, with those surviving being crippled both in their ability to finance average folks and aspiring entrepreneurs, and their own fiscal ability to expand business and pay their employees a good wage.

I will accept this argument I am slightly out of touch, because I have to say, how do banks lose money when they have lots of money?

Obviously, working on interest of the deposit and the interest of the repayment would correct the balance out? Also, I was meaning surplus money as being its own money, not actually deposits.

Yes, there is possibly the chance that deposits could revert just to keeping that money in storage (after all, who wants to carry all their money around in their house where they could lose it for good?) however, I don't see how banks could actually lose money, unless no one invested and the loans were not repaid and they weren't secured against property or anything like that.

[seireikhaan]

I will accept this argument I am slightly out of touch, because I have to say, how do banks lose money when they have lots of money?

Obviously, working on interest of the deposit and the interest of the repayment would correct the balance out? Also, I was meaning surplus money as being its own money, not actually deposits.

On deposits, yes. Depending on the type of account, they are required to pay interest to the person as payment for giving the bank the money.

Banks lose on money that's just sitting in a vault because of inflation- its sitting there, being slightly less valuable each day. Plus, if they could find someone who was a worthy candidate for a loan, they could give that money to them, and earn interest on it. Of course the loan could bust, but then, that's the nature of banking.

Also, just as an interesting tidbit- the money you deposit in your bank usually doesn't stay in it. Usually its sent out to other people/banks/businesses as a loan, and when you ask for your money back, you get some other person's cash that's on its twentieth loan trip through the banking system.

[Beskar]

Also, just as an interesting tidbit- the money you deposit in your bank usually doesn't stay in it. Usually its sent out to other people/banks/businesses as a loan, and when you ask for your money back, you get some other person's cash that's on its twentieth loan trip through the banking system.

We call this "The Credit Crunch" due to them relieving money against a wall and when people took out their deposits, the bank is left completely vulnerable and bankrupt.

Hence why the bank shouldn't go in the negative, and the surplus is there so any changes in the equilibrium can be cushioned.

Hence "Money has to come from some where", and as such, there needs to be some one, some where, which doesn't actually go into debt, unless it is a recipe for devastation.

I am fully aware that banks skate on a thin-line where they just give away money they don't have, relying on the future, but it really is a very poor practise. Debt overall needs to shrink everywhere.


As for inflation, I believe it is zero at the moment, or was it actually negative? Only good inflation has is for those indebt, as they only have to repay less, while people with savings lose out.

[seireikhaan]

We call this "The Credit Crunch" due to them relieving money against a wall and when people took out their deposits, the bank is left completely vulnerable and bankrupt.

Hence why the bank shouldn't go in the negative, and the surplus is there so any changes in the equilibrium can be cushioned.

Hence "Money has to come from some where", and as such, there needs to be some one, some where, which doesn't actually go into debt, unless it is a recipe for devastation.

Again, we're at a wall here. Simply put, your solution is far too extreme. As I've pointed out repeatedly, if you mandate that, credit slowly dries up and tightens the noose of too many banks. The credit market for those outside the larger business cycle will be vitally threatened, and you risk the very health of the economy by hoping that those that are benefited by the new barriers to entry will not fail. I agree that there's to be some limits in place, but limits that actually allow for credit to be available to those that need it.

[Beskar]

Again, we're at a wall here. Simply put, your solution is far too extreme. As I've pointed out repeatedly, if you mandate that, credit slowly dries up and tightens the noose of too many banks. The credit market for those outside the larger business cycle will be vitally threatened, and you risk the very health of the economy by hoping that those that are benefited by the new barriers to entry will not fail. I agree that there's to be some limits in place, but limits that actually allow for credit to be available to those that need it.

You could always just have one bank. The lack of competition would ensure money would flow easier (as it has a monopoly on the market).

As I said, this wouldn't be an overnight thing, and the good thing is, if it ends up being a little too extreme, you could always relax it by undoing the top button to find that happy place. As I am some one who does things in stages anyway, it probably would get to a point it would be too negative.

I think it is a difference in that I am far more optimistic and you are far more pessimistic about the possibility. There are millions of other factors we haven't even discussed and working out all of those, I believe a very stable and solid banking system could be done.

[drone]

You could always just have one bank. The lack of competition would ensure money would flow easier (as it has a monopoly on the market).

You may as well just bring back the gold standard.

The reason we are in trouble today is not because banks had debt, but because they had too much debt. When you deposit money into a bank, you are essentially loaning the bank money (usually at a fairly low interest rate). The bank makes money by then loaning money from deposits (or loans from the federal banks) out to people or companies at a higher rate. The payback of these loans are at a planned, scheduled rate, with some magic math added in to account for defaults. What is unscheduled and unplanned for is the amount of money deposited or removed by the account holders, so a bank run will crush the bank since it can't demand full loan repayments to cover. Bank runs are caused by the perception of vulnerability, even the best run bank in boom times could potentially be hit under the right circumstances.

What you seem to be proposing is that a bank must build up a huge amount of capital of it's own, independent of it's deposits, before making loans. This would pretty much kill the economy. A better solution would be to properly regulate the banks (holding and investment) so they do not become over leveraged. A debt-to-equity ratio of ~15:1 is fine, not the ~30:1 the US investment banks got to before the crash.

[Philippus Flavius Homovallumus]

Another major issue is that they took on debts they didn't know the value of.

The world works like this, there are 8 screwdrivers, we can either have 4 each, or we can swap around as we need them. Some days I have all 8, sometimes I have none; but it's like we both have 8. The problems only start when one of us decides not to share.

The problem with socialism is it tries to give everyone eight screwdrivers, socialists are greedy.