5 ms·

> I don't understand the bank hate around here. They limit what you can do with your own money. The reason for getting deposits is so that they can loan 10x o

by tertius 11y ago

> I don't understand the bank hate around here. They limit what you can do with your own money. The reason for getting deposits is so that they can loan 10x or 100x (or whatever your country allows) on the deposit and earn interest/fees. That doesn't benefit me, only them. The reason I use a bank is so that I can have "security" and "ease" in transfer/payment. They make a lot more off of me than the utility I describe above.

fennecfoxen 11y ago
> The reason for getting deposits is so that they can loan 10x or 100x They can loan out 90% of your cash, if that's what you mean. (In the US.) They give you both security and liquidity as well as payment processing options. If you think they're overcharging, you could always buy government/corporate bonds yourself (or through bond funds, maybe.)
- logfromblammo 11y ago
  The money multiplier is the inverse of the reserve requirement. If the requirement is 10%, the bank loans out 10x the deposit. This is because from each $1 you deposit, the bank keeps $0.10 in reserve, then loans out $0.90 to a debtor account. Of that, they keep $0.09 as reserves, and lend $0.81 out to another debtor account. Of that, they keep $0.081 as reserves.... Get it now? As long as the same dollar is present in the vault, it qualifies as reserves for $10 in electronic circulation.
  - fennecfoxen 11y ago
    Yes, I understood to begin with; I did grow up with a PhD economist in the house and read the textbooks in middle school while bored. This description you've just picked is no longer quite as misleading, except I'm not sure what you mean by "electronic circulation" (making loans off deposits long predates electronic record-keeping). Are you trying to impugn the value of the money in question with the adjective in order to facilitate outrage? If not, I still don't understand why the existence of a money multiplier is a reason for Bank Hate as indicated before. It's a trivial property of any system which permits lending.
    - tertius 11y ago
      The point where "hate" enters the equation is where the bank uses my deposit to make money and do not adequately reward me. They then, when not stopped by regulation, lend to those who cannot afford to pay back, predation. You can claim amorality, I don't buy it. Therefore the 'multiplier' rewards/encourages bad behaviour in an arational world. We can't get mad at the multiplier, only at those who are rewarded by it. Fair and moral reward is the only option, even if it means less reward in the short term.
      - fennecfoxen 11y ago
        > the bank uses my deposit to make money and do not adequately reward me. So go use your money elsewhere. If you do business with a group like Vanguard and meet some modest minimums, you can buy and sell bond funds from a variety of asset classes for free, and you can see exactly how much of your returns they take - for instance, VGSH, which charges 0.10% on a 0.70% yield, or VCIT, which charges the same on a 2.28% yield. Of course, you lose your 100% guaranteed return and the use of that money with checks and ATMs and debit cards, but there you go, that's the stuff you didn't want to pay for. > the 'multiplier' rewards/encourages bad behaviour in an [irrational] world. You're blaming a measurement for bad behavior. That's all the multiplier is, just a measurement of lending activity. If you find fault with banks being predatory then any ability for any group to lend any money at all under any circumstances presents the same incentives. If you're upset with the existence of a multiplier you basically want to ban lending. The real funny part, though, is that even when you seem to think that most of any bank's business is predatory and deserving of hate, you have the chutzpah to turn around complain that you're not getting a big enough cut. Do you have real principles or do you just hate banks? Decide, now. > Fair and moral reward is the only option In practice, whenever this statement gets turned into Politics it's basically a call for elected politicians (Bernie Sanders and friends) to decide who deserves to get money -- a paean to central planning, never mind the economic stupor and corruption it ultimately engenders. The sad thing is, it doesn't help. Even payday lenders, everyone's favorite punching-bag and icons of Predatory Lending, earn pathetic rates of return, typically in the neighborhood of 3%. And central planning gives you things that contribute substantially to crises, like when the government had FMAE and FMAC buy up millions of subprime loans without question as part of a program to extend more credit to minorities. But no one pays attention to history, so we're doomed to repeat it.

by tertius 11y ago

fennecfoxen 11y ago

> The reason for getting deposits is so that they can loan 10x or 100x They can loan out 90% of your cash, if that's what you mean. (In the US.) They give you both security and liquidity as well as payment processing options. If you think they're overcharging, you could always buy government/corporate bonds yourself (or through bond funds, maybe.)

logfromblammo 11y ago
The money multiplier is the inverse of the reserve requirement. If the requirement is 10%, the bank loans out 10x the deposit. This is because from each $1 you deposit, the bank keeps $0.10 in reserve, then loans out $0.90 to a debtor account. Of that, they keep $0.09 as reserves, and lend $0.81 out to another debtor account. Of that, they keep $0.081 as reserves.... Get it now? As long as the same dollar is present in the vault, it qualifies as reserves for $10 in electronic circulation.
- fennecfoxen 11y ago
  Yes, I understood to begin with; I did grow up with a PhD economist in the house and read the textbooks in middle school while bored. This description you've just picked is no longer quite as misleading, except I'm not sure what you mean by "electronic circulation" (making loans off deposits long predates electronic record-keeping). Are you trying to impugn the value of the money in question with the adjective in order to facilitate outrage? If not, I still don't understand why the existence of a money multiplier is a reason for Bank Hate as indicated before. It's a trivial property of any system which permits lending.
  - tertius 11y ago
    The point where "hate" enters the equation is where the bank uses my deposit to make money and do not adequately reward me. They then, when not stopped by regulation, lend to those who cannot afford to pay back, predation. You can claim amorality, I don't buy it. Therefore the 'multiplier' rewards/encourages bad behaviour in an arational world. We can't get mad at the multiplier, only at those who are rewarded by it. Fair and moral reward is the only option, even if it means less reward in the short term.
    - fennecfoxen 11y ago
      > the bank uses my deposit to make money and do not adequately reward me. So go use your money elsewhere. If you do business with a group like Vanguard and meet some modest minimums, you can buy and sell bond funds from a variety of asset classes for free, and you can see exactly how much of your returns they take - for instance, VGSH, which charges 0.10% on a 0.70% yield, or VCIT, which charges the same on a 2.28% yield. Of course, you lose your 100% guaranteed return and the use of that money with checks and ATMs and debit cards, but there you go, that's the stuff you didn't want to pay for. > the 'multiplier' rewards/encourages bad behaviour in an [irrational] world. You're blaming a measurement for bad behavior. That's all the multiplier is, just a measurement of lending activity. If you find fault with banks being predatory then any ability for any group to lend any money at all under any circumstances presents the same incentives. If you're upset with the existence of a multiplier you basically want to ban lending. The real funny part, though, is that even when you seem to think that most of any bank's business is predatory and deserving of hate, you have the chutzpah to turn around complain that you're not getting a big enough cut. Do you have real principles or do you just hate banks? Decide, now. > Fair and moral reward is the only option In practice, whenever this statement gets turned into Politics it's basically a call for elected politicians (Bernie Sanders and friends) to decide who deserves to get money -- a paean to central planning, never mind the economic stupor and corruption it ultimately engenders. The sad thing is, it doesn't help. Even payday lenders, everyone's favorite punching-bag and icons of Predatory Lending, earn pathetic rates of return, typically in the neighborhood of 3%. And central planning gives you things that contribute substantially to crises, like when the government had FMAE and FMAC buy up millions of subprime loans without question as part of a program to extend more credit to minorities. But no one pays attention to history, so we're doomed to repeat it.