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So the bank levies a micro tax on all holders of the currency with the expectation that their investment in the receiver of the loan will yield a better return?

JumpCrisscross 7y ago
> the bank levies a micro tax on all holders of the currency with the expectation that their investment in the receiver of the loan will yield a better return? No. Banks compete for deposits and compete to lend. The spread between those rates must pay the bank’s costs, cover its risks and turn a profit. When central banks reduce the return on safe assets banks hold, their income from lending to the government goes down. The banks thus seek to replace that income with other lending. Unfortunately, everyone in the system is doing the same thing. This competition forces lending rates down. Savers are competing for investments next to the banks. There are lots of them crowding into bank deposits; this lets those banks lower the rate they pay. (Nobody forces savers to deposit Euros only in German banks.) This is a system of feedback loops. Nobody is charging a tax, though banks may charge a fee for a service it costs them to provide. Depositors are free to take their business elsewhere. And entrepreneurs who think they can do better are free to launch competing financial services.
- numakerg 7y ago
  >Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account. If that £100 is spent into the economy but is not returned, did the total volume of available £100 not increase, reducing the buying power of any £ stores? Perhaps it is not a tax because it isn't used directly by the government, but it is a burden that such a lender can enforce upon currency holders with the authority that is given to it by the organization controlling the currency. >entrepreneurs who think they can do better are free to launch competing financial services. Entrepreneurs cannot lend out money they never had. How difficult is it for a new company to obtain a piece of the volume of money that the currency regulator deems available for creation within a timeframe?
  - JumpCrisscross 7y ago
    > If that £100 is spent into the economy but is not returned Loans create deposits. The only way the deposit isn’t returned is if capital is destroyed. > Entrepreneurs cannot lend out money they never had With a banking license, yes. They can. Once you have a banking charter, you can lend to your heart’s content. At the end of the day, you borrow to make your reserve requirement. (If you’re deficient, you die.) Lending creates deposits. Not the reverse.

JumpCrisscross 7y ago

> the bank levies a micro tax on all holders of the currency with the expectation that their investment in the receiver of the loan will yield a better return? No. Banks compete for deposits and compete to lend. The spread between those rates must pay the bank’s costs, cover its risks and turn a profit. When central banks reduce the return on safe assets banks hold, their income from lending to the government goes down. The banks thus seek to replace that income with other lending. Unfortunately, everyone in the system is doing the same thing. This competition forces lending rates down. Savers are competing for investments next to the banks. There are lots of them crowding into bank deposits; this lets those banks lower the rate they pay. (Nobody forces savers to deposit Euros only in German banks.) This is a system of feedback loops. Nobody is charging a tax, though banks may charge a fee for a service it costs them to provide. Depositors are free to take their business elsewhere. And entrepreneurs who think they can do better are free to launch competing financial services.

numakerg 7y ago
>Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account. If that £100 is spent into the economy but is not returned, did the total volume of available £100 not increase, reducing the buying power of any £ stores? Perhaps it is not a tax because it isn't used directly by the government, but it is a burden that such a lender can enforce upon currency holders with the authority that is given to it by the organization controlling the currency. >entrepreneurs who think they can do better are free to launch competing financial services. Entrepreneurs cannot lend out money they never had. How difficult is it for a new company to obtain a piece of the volume of money that the currency regulator deems available for creation within a timeframe?
- JumpCrisscross 7y ago
  > If that £100 is spent into the economy but is not returned Loans create deposits. The only way the deposit isn’t returned is if capital is destroyed. > Entrepreneurs cannot lend out money they never had With a banking license, yes. They can. Once you have a banking charter, you can lend to your heart’s content. At the end of the day, you borrow to make your reserve requirement. (If you’re deficient, you die.) Lending creates deposits. Not the reverse.