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Retail banks to be ring fenced
Comments
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There is no such a thing as free banking. We already pay through the nose for it as most current accounts receive no interest or infinitesmal at best. We deposit our money in a bank with which they make tons of money giving us nothing in return.
The real question should be, what is the real cost of banking to us as customers, not to the banks.
Let us not forget the benefit of fractional banking, which even if done conservatively, they reuse our money 9 times over.:cool:"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
^^^Fractional banking is so far ingrained within the financial set up that we don't even think of it any more, we just accept it.
Like so many other things it's such a scam. But who's ever gonna do anything or who can?0 -
Fractional banking is so far ingrained within the financial set up that we don't even think of it any more, we just accept it.
Abolishing fractional reserve banking would certainly be one way of deflating the housing market! :eek: Although the only "bears" that have suggested it on this board tend to be the insane silver loving ones!0 -
grizzly1911 wrote: »Let us not forget the benefit of fractional banking, which even if done conservatively, they reuse our money 9 times over.:cool:
Barclays ( 2009 accounts) recycled its lending exposure to 72 times its capital base.0 -
Abolishing fractional reserve banking would certainly be one way of deflating the housing market! :eek:
No need to abolish. Even the proposals as they stand will mean an increased cost of borrowing. So we will be heading back in time so to speak. Something to consider when making long term investment decisions.0 -
Thrugelmir wrote: »Barclays ( 2009 accounts) recycled its lending exposure to 72 times its capital base.
Bob and the exec got massive bonuses, shareholders less divi than 20% of the peak.
Funny I always thought the shareholders employed the CEO for their benefit."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
Thrugelmir wrote: »No need to abolish. Even the proposals as they stand will mean an increased cost of borrowing. So we will be heading back in time so to speak. Something to consider when making long term investment decisions.
Good for making those decisions though as it will bring back stability, once settled and hopefully progressive growth.
Short term risk investment don't suit bears."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
Philosophically, I like the idea of abolishing it; I'm not convinced that FRB really has any positive points in the long run. That said, I'd hesitate to actually recommend abolishing it, certainly without extreme care, because it's so ingrained in the current system. It would likely take decades to gradually wean the system off it without completely destroying some peoples' assets in a pinch.Abolishing fractional reserve banking would certainly be one way of deflating the housing market! :eek: Although the only "bears" that have suggested it on this board tend to be the insane silver loving ones!
Exactly - it makes things a lot more realistic. What I find interesting though is that I completely accept that it's "bound to" increase the cost of borrowing without thinking too hard about it. But would it really? Currently it seems like peer-to-peer loan sites like Zopa, Funding Circle etc. can offer very competitive rates; and that's without any kind of deposit multiplication, just each loan funded 100% by other peoples' deposits.grizzly1911 wrote: »Good for making those decisions though as it will bring back stability, once settled and hopefully progressive growth.
So there's no reason why a bank couldn't pay, say, 5% interest to depositors and charge 7-8% interest on loans, leaving the 2-3% spread as its take. No need to multiply the deposit money to be profitable - though of course this does mean extra income. (I realise that P2P depositors face the full risk of defaults, though a bank could price this into the rate easily enough. Since they're an institution they'll see very little variance from the EV so it's not necessarily relevant here - call it 4.2% guaranteed rather than 5% with exposure to loss).
That said, clearly banks take a massive effective spread when loaning out depositors' cash right now. It does make me wonder what would need to be cut if loan profits went down - presumably free banking with branches, free cash machines, etc.0 -
That said, clearly banks take a massive effective spread when loaning out depositors' cash right now. It does make me wonder what would need to be cut if loan profits went down - presumably free banking with branches, free cash machines, etc.
As you have said it is an effective way of spreading risk.
If the multiplier were reduced the loan cost would IMO increase ( and borrower stake would need to increase where applicable) more significantly, ratcheting up as it reduced.
I am not sure they would be able to absorb it, or want to, through processing costs."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
So there's no reason why a bank couldn't pay, say, 5% interest to depositors and charge 7-8% interest on loans, leaving the 2-3% spread as its take. No need to multiply the deposit money to be profitable -
Why do Dominoes charge £15 for a Pizza? When the ingredients at wholesale price are a matter of pence. Too simplistic to say 2-3% is enough to run a bank's business lending model.
The banks have been cross subsidising products and services for a number of years. The PPI pay-out by Lloyds of over £3 billion represents one years entire pre-crash peak profits. A huge sum by any standards.0
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