Unreasonable expectations and unpalatable truths



At the ICAEW's conference "Do Banks Work?" last week, there was a fascinating interchange between Ian Gorham of Hargreaves Lansdowne and RBS's Ross McEwan. Apparently RBS had refused a large deposit from Hargreaves Lansdowne, to the irritation of the asset manager. "There is a problem placing client money", said Gorham. And he went on:
"Banks don't need people's savings, because they now have much more capital to support lending. This means that savers receive much lower interest rates on deposits. For an ageing society, this is a problem". 
This is a variant on the "banks don't need savings because they are awash with cash due to QE" meme. It does at least have the merit of understanding the structure of a balance sheet - for the same assets, if you have more equity you need less debt. But the WHOLE POINT of all the regulatory reforms of the last seven years was to force banks to deleverage - permanently. The inevitable consequence of this is, of course, that they need less debt. Deposits are bank debt. Clearly, they need less money on deposit than they used to.

Or - do they? Here is Ross McEwan's response.
"There is a huge amount of money floating around the financial system looking for a home. The supply is greater than the demand, and that causes the price to fall." 
So, for McEwan, the problem is not so much that banks need less on deposit, it is that more money is trying to find its way into banks. There is too much supply, not insufficient demand.

McEwan is right. There is indeed too much money in the financial system. It has been deliberately created by central banks to encourage people to invest productively instead of sitting on cash.  It has singularly failed, largely because no-one joined up the dots. Money never leaves the banking system except in the form of physical cash. Putting more of it into the banking system therefore cannot possibly increase the flow of money around the system. It is rather like pouring more water into a stagnant pool, without removing the leaves and debris that have blocked the outflow and caused the stagnation . You simply end up with a much larger stagnant pool. So since they have destroyed demand for deposits and killed the interbank market with QE, central banks now have to introduce additional policy measures such as negative rates on reserves to try to improve the velocity of money. Governments, too, get in on this game, providing subsidies to banks to encourage them to lend and bungs to people to encourage them to borrow. These interventions have some effect, of course, but at the price of more and more state intervention in the banking system. It is, in effect, creeping nationalisation.

But Gorham, too, has a point. Banks do not want to take deposits for which they have no immediate need: they would rather customers placed them somewhere else, and they don't really care where. So this interesting exchange touches on a deeper question. What exactly do we want our banks to do?

Traditionally, banks accepted deposits, made loans and provided payment services. They paid interest on deposits, charged higher interest on loans, and imposed fees on payment and other services. But that was at a time when the demand for loans roughly matched the supply of deposits, and free-while-in-credit banking didn't exist. Now, the supply of deposits vastly exceeds the demand for loans, interest rates are on the floor, and payments have become a vital (and largely free) public service.

And this, as both Gorham and McEwan acknowledged, creates a problem. Customers - including asset managers, apparently - want banks to provide a deposit-taking service regardless of whether banks have a productive use for the money. Banks may of course provide such a service, but if they can't use the money to fund profitable activities, they will not pay customers for it. Why should they borrow money at interest when they have no profitable use for it? It would be wholly irrational, and probably a failure of fiduciary duty towards their shareholders.

So, banks are starting to demand payment for deposit-taking services. Some banks are already charging institutional customers for the placing of very large deposits. And among retail customers, there is a growing scandal over the mis-selling of bundled current accounts, which in effect are an attempt by banks to charge fees for transaction services without being seen to do so. The imposition of fees on deposit-taking is, of course, a proxy for the negative interest rate that deposits should bear in a banking system where the supply of money exceeds the demand for it. Unless the demand for money picks up - and that means a considerable increase in profitable lending - savers will continue to receive very low or even negative rates, especially on demand deposits.

Banks have the right to refuse deposits. Indeed, under certain circumstances (such as if they suspect the money comes from a dodgy source), they are obliged to. And it is prudent of them to refuse deposits that would make their balance sheets unstable. Banks have been under severe regulatory pressure to reduce reliance on forms of funding that are prone to runs. The worst is wholesale funding.- which is exactly what Hargreaves Lansdowne's client money is. No wonder RBS refused it. Not only does RBS have no productive use for it, the bank would pay a levy to the government for accepting it.

The scars of the 2008 crisis run very deep. People still don't trust banks. They want to lend their money to banks, because - let's face it - these days it is very hard indeed to manage without a bank account. But they don't want to tie up their money in term deposit or notice accounts, because that means that in the event of a bank failure they would not be able to get their money out. This is reasonable. What is not reasonable is the expectation of immediate access to savings AND positive returns.

The provision of liquidity to retail and institutional customers is one of the principal services provided by banks. It's an essential market function, and when banks restrict liquidity the whole economy suffers - just look at the effect of capital controls in Greece, for example. But since providing liquidity creates risk for banks, it is reasonable for them to charge for it. So the underlying problem here is people's unreasonable, though wholly rational, desire to have their cake and eat it. Customers cannot have both immediate access to, and positive returns on, their deposits. If they want liquidity, they must pay for it in the form of low, zero or even negative returns. Liquidity has a price, and the more safe we want our banks to be, the higher the price of the liquidity we want them to provide may have to be. For Hargreaves Lansdowne, the price was infinite.

Ian Gorham's annoyance at RBS's refusal to accept very large deposits of client money therefore misses the point. Asset managers are not supposed to be providing liquidity for their clients, and banks don't have to help them to do so. Asset managers are supposed to be investing for the long-term. It is a measure of how unreasonable people have become that they expect not only banks, but asset managers too, to generate high returns on their savings while providing immediate access.

However, it is not just demand deposits that face interest rate compression. Time deposits do too, even though for banks they are a good source of stable funding. And that is because the world has changed. We are now in a low-growth, low-inflation, low-interest rate paradigm, which shows no sign of shifting any time soon, despite the optimistic forecasts of central banks and other institutions. Low expectations of growth and inflation depress investment and encourage hoarding, both of which put downwards pressure on interest rates: while an ageing, asset-rich society increasingly regards the primary aim of financial management as avoiding losses rather than taking reasonable risks. Passivity is all the rage. Stagnation is not just due to QE - it has an underlying demographic driver.

The days are gone when bank managers borrowed at 3%, lent at 6% and were on the golf course by 3pm. These days, much of their lending is at far narrower spreads: deposits earn less, but so do the mortgages which make up most of their business. Banks face stiff competition in all areas of their business: for savings, from funds and asset managers; for loans, from online providers and peer-to-peer lenders; and for transaction services, from mobile money and fintech. It simply is not possible for banks to provide the services of the past and remain profitable.

Retail banking, in particular, is looking more and more like a public utility akin to water or railways, heavily regulated and requiring extensive public subsidy to enable it to function at all. This seems inevitable: surely it is time we grasped this particular nettle, and stopped pretending that retail banks can be effective providers of financial services to the real economy without government support? I wonder if attempting to unpick state support of banking is going in the wrong direction. Banks that cannot rely on state support in a crisis are inevitably risk-averse, and that makes them less willing to provide finance to the riskiest part of the real economy - small businesses and startups.

Ross McEwan says that banks must "face their customers". Indeed they must, and that means being honest with them. If customers have unreasonable expectations, banks must tell them unpalatable truths. In a world of excess money, customers cannot have significantly positive returns on deposits. The price of liquidity, too, may be higher than some customers want to pay. Similarly, with lending, some customers will be unable to access finance at a price they can afford, because the lending risk is higher than the bank wants to accept. As a result of all this, some people will be pushed out of the banking system: for example, self-employed people who prior to 2008 would have obtained a self-certificated mortgage now cannot borrow to buy a house, and savers who want higher returns are looking at alternative providers. This is a feature, not a bug. Having safer banks inevitably means excluding riskier customers and those who want abnormal returns on savings.

The question is what we do about those customers. This to my mind is not being adequately addressed. It is not safe to assume that the unregulated sector can meet the needs of those voluntarily or involuntarily excluded by the banks. Historically, financial crises have always started in the unregulated sector, and spilled over to banks primarily through the payments system, because all money, even that supposedly deposited in the unregulated sector, actually lives in banks. Unregulated financial institutions are customers of regulated banks. If access to finance for marginal borrowers is key to unlocking future growth, it may be better for the state to accept the risk of lending to them rather than allowing society to take the risk of unregulated lenders blowing up the whole system. And similarly, if the old being able to live on the returns from their savings is beneficial to society, then it is rightfully the role of the state to enable it.

Regulators and banks would like us to believe that things are now "back to normal" after the disaster of 2008. But this is as unreasonable as the expectations of customers. Things are not "back to normal", and they never will be. We are in the middle of a process of fundamental change. What the "new normal" in the distant future will look like, we don't yet know. But one thing seems clear: the banks of the future will be very different from the banks of the past.

Related reading:

The slow death of banks - Pieria











Comments

  1. Perhaps too much money in the financial system.
    But not enough in peoples pockets.
    Savings = waste ,
    This is after all a forever autumn economy of saving (storing the harvest from Jan to Dec)
    With the advent of credit banking in England we had a immediate push to banish the Ghost of Christmas present.

    The problem with the UK is that the entire apparatus of state orbits central bank policy.
    This system of banking control exported from Sweden and the UK is now sadly the world model.
    That is the control of correct information and the spreading of misinformation.
    Current goals of banking is creating investment opportunities though industrial sabotage.
    The Paris climate talks is the ultimate expression of this policy.
    The papers are all up for it of course.
    Including this fabulous piece of misinformation from the Guardian.

    http://bishophill.squarespace.com/blog/2015/12/3/solving-the-uruguay-mystery.html

    What's striking to me now is that the authorities are not even trying very hard now.


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  2. I like the stagnant pond analogy.
    I think it's clear that the payments system is a crucial public facility and I reckon it makes sense for the state to underwrite it up to, say, a certain level.
    I think a big part of the problem is the current emphasis on monetary policy to do the heavy lifting in the global economy rather than state fiscal policy, this approach is evidently not working effectively.

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  3. "We are now in a low-growth, low-inflation, low-interest rate paradigm, which shows no sign of shifting any time soon"
    Growth has disguised usury for 500 years now .......
    The bank refuses to compromise because if they did it would be eliminated by people with buying power.
    The tactic as always is to increase prices (capitalistic costs) even when income is declining
    Capitalism has again exposed itself as a concentration game divorced from the act of production / consumption.
    We can observe how desperate the UK is to increase friction costs.

    https://www.eia.gov/todayinenergy/detail.cfm?id=20912


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  4. no doubt you've seen this : http://eng.forsaetisraduneyti.is/news-and-articles/reform-of-the-monetary-system

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    1. yes. I think it's a silly idea. It will simply reduce productive lending in the economy.

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    2. Productive lending ........you have got to be kidding.
      When I think of such words I always cast my mind back to the Irish 70s farm bubble , where investment destroyed both peasant farms and the rivers and meadows to boot.
      Leaving us with the 80s wasteland of increased costs but no market.
      The political intrigue was fun though.
      All the signs are showing much the same stuff today with political tension in the IFA (big farmers body)
      They will never learn , never never ever listen to the Alan Dukes of this world.
      It will lead to your utter ruin.

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    3. http://www.irishexaminer.com/farming/beef/waterfords-key-role-in-libyan-exports-219070.html

      After "investment " it becomes a question of how you offload costs.
      With the first euro Austerity in the Ireland of post 79 , birth rates peaked in 1980.
      This affected the domestic milk market especially .
      Real population began to decline between 1986-91.
      The albeit small Irish market and its contraction as well as much more important European production surplus forced Charlie to become inventive to the consternation of the Dublin 4 set...........
      He saw himself as the new Dingle chieftain engaged in trade deals with the modern versions of 16th century Spain.
      Meeting in the desert with Gaddaffi and the lads.

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    4. The Rosetta stone for understanding modern bank crisis is the % of transport inputs relative to total Final energy consumption.
      A crisis is brewing in Ireland again.
      2015 transport % TFC will equal or better the 2007 figure.
      The multinationals have found a extra few billion for the government to buy the election again.
      When it is over we will find ourselves in yet another crisis (we have really been in it for 400 -500 years)

      The wasted effort in these usury based economies keeps getting bigger and bigger.

      This wasted effort is what you call investment Francis.
      How can you invest (without massive subsidies ) in such a market , it is not a organic thingie.

      Delete
  5. Very much agree on some points, less so on others.

    I think it's time for state provision of electronic transaction processing (for retail banking) and "National Savings Bank" should also be the "National Current Account Bank" which providers zero-interest current accounts (and hence access to electronic transaction infrastructure) ideally with tiered costs so that the poorest in society are subsidised and others contribute to the upkeep of the infra. (Of course, I suspect the practical way to do that is to make it all free and fund out of general taxation.)

    Where I have to disagree is the notion that banks are innocent in the strangulation of the economy. Small business lending has been massacred by the retail banks.

    (1) Base rate might be low, but banks are still pitching SME lending at base rate + 6-10% depending on their prejudices.

    (2) Alongside that, they've introduced a whole pile of arbitrary rules which push for business owners to put their personal homes up as collateral for just about anything. (Most recent example was a £500 increase in credit card limit. We said, no thanks, we'll find another way. Mark you, this is a card we pay for, have paid off perfectly for going on 5 years now, and the business is going ok.)

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    1. The immediate cause of the collapse of SME lending after the crisis was the fall of RBS, which was by far the biggest lender to SMEs.

      But I'm sorry, I am not going to blame banks for this. Lending at risk is incompatible with the regulatory reform agenda and with the desire of depositors for safety. The high margins and collateral requirements on SME lending since the crisis are because SME lending incurs a high capital weighting and banks are having to increase capital to meet tighter regulatory requirements. Banks don't want to take on more lending of a type which ties up a lot of capital. SME lending is not the only type affected, but it is the one that is most talked about.

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  6. Frances, you say "Money never leaves the banking system except in the form of physical cash". I dont see so clear. I think it is possible to move spending without cash in hand.

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    1. Physical cash is a liability of the central bank not the commercial banks. All spending via transfer of (bank) deposits remain liabilities of the commercial banking system. Is there another type of spending?

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    2. Yes, but: is it not posible to increase total spending without phisical cash? That is a curious affirmation for me. in fact, the velocity of cash has been decreasing through time...

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    3. Miguel,

      I think you are missing the point. Money never leaves the banking SYSTEM. That doesn't stop it being used for spending. Electronic money created by banks is used for spending in the real economy (card purchases, online transfers, direct debits and so on), But this money just moves from bank to bank. Only if electronic money is converted to physical cash (say by being withdrawn from an ATM) does it leave the banking system. And it returns to the banking system when deposited in a bank account.

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    4. The money *cannot* leave the banking system. Cash is 3% of the total money supply including credit. As soon as people try to withdraw it then it's clear it can't be done.

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    5. Sorry, I think you are being committing a mistake. I'm talking about how money move spending. I don't see any need of cash to see real effects in expenditure. In the graph we can see that physical cash is lesser and lesser important with time. That is completely logic. Cash transaction have a higher cost compared with moving deposits through Checks or credit card.
      I don't see any significance to your sentence that money exit banks only in physical cash. It is residual. In the future phisical money will disappear.

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    6. Miguel,

      Money can only exit the banking SYSTEM as physical cash. But it can of course exit individual banks in any form. Electronic money simply transfers straight to another bank, whereas physical cash is removed into a wallet, purse or pocket. That's the difference.

      Delete
    7. Ben,

      +3

      And, that is when the gold bars and coins used to go out the back door and visibly get deposited in the front door.

      Delete
  7. https://research.stlouisfed.org/fred2/graph/fredgraph.png?hires=1&g=2PCu

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  8. Let's back up here. The "too much money" came because from 1997 onwards banks issued more money than there was wealth generated via land. That's why you can't get a return on it and there is too much.

    http://bankunderground.co.uk/2015/06/30/banks-are-not-intermediaries-of-loanable-funds-and-why-this-matters/

    Banks don't need to get deposits before they lend. They just create an asset and a liability and hit their keyboard a few times. Hey presto the debt enters the system.

    This has slowed down as the boomers+ are dying and they borrowed most into existence.

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    Replies
    1. Dear oh dear. Bash the boomers, eh? Please, let's have something a little more reasoned than that.

      The long mortgage boom actually started in the 1960s, and the first borrowers were the boomers' PARENTS. There have been three housing crashes during the period of this long boom, each of them preceded by a mortgage lending bubble - one in 1973-4, one in 1989-90 and the third in 2007-8. Each was followed by a recession. The third was the largest bubble, the worst crash and the deepest recession. But these are all cyclical variations in a much longer, secular trend.

      It may be that the secular mortgage boom will tail off as the number of borrowers falls. But if government continues to support the housing market, the value of mortgages will continue to rise, and there will be no end to the boom. However, house purchase will increasingly come to be effectively funded by the state. I'd regard this as a form of nationalisation. In which case we will come full circle: the mortgage boom principally arose because the state gradually stepped back from providing housing.

      By the way, I know that banks don't need deposits in order to lend. I've written about that many times, long before the Bank of England took up the cause.

      Delete
    2. Too much money ......too little money ........
      Inflation ........or deflation ........
      People are falling for the finance capitalism trap.

      That money is a mirror of the physical world.
      It is not.

      In the real world private car consumption has been growing in Europe for 2 straight years now.
      As overall energy consumption is static or falling this means less and less energy is available for final (human) consumption.

      Austerity is simply the rationing process required to sustain the consumer war economy .
      With each passing year the rationing gets more and more severe .
      GDP growth or pointless economic activity gives further acceleration to the entropy.
      How much money was invested in European "green" investments since 2008 ?
      It must be over a trillion euros at least.

      Its investment without demand.
      The "investments" goal is to drive up prices when the true purpose of production should be consumption.


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    3. Dork I utterly agree. Money is issued ex nihilo with no constraint on tracking resources. I don't expect anything else from Coppola.

      I think we can use our energy more efficiently, no? Are you saying the available energy is constant but the amount used shows rationing?

      I completely agree that money indicators are devoid of reality.

      Delete
    4. Frances I really don't think you can extrapolate to the point where the state is lending all money on housing without saying that is a systemic change. This would mean the state takes over money issuance (a good thing) however they continue to issue it against land to take a share of the labour of the worker (bad).

      If we get to the point where the state issues 90% of mortgage debt then I think the game is up. For starters will the banks allow this? What will neo-liberals say about the "free market"?

      It's heading towards this as it dies but it will die before it gets there. Good.

      Delete
    5. Frankly you are way too obsessed with land, which in a post technological age is becoming less and less important as a driver of production. Nor is money issued "against land" as you suggest. We do not have a land-backed currency, though I agree the dominance of mortgage lending takes us in that direction.

      The state taking over mortgage lending wold undoubtedly be a systemic change. I never said otherwise. This whole post is about systemic change - a point that seems to have passed you by.

      Delete
    6. Social creditors goal is to create equilibrium in society.

      To balance production with consumption and so avoid the wasted effort of investment without demand.
      My guess is that it would be highly deflationary but in a equity money system this is a good thing.
      Current euro policy especially is to guarantee income for investors.
      I know a girl in Kerry who meets British wind investors every second day.
      The purpose of these wind follies is to secure this income, it provides work in sales etc and thus advances the bankers goal of full employment or sysphian capitalism.
      But these wind follies are diffuse energy machines working in a industrial setting.... they do not work very well.
      If you follow the energy matters website for example you will see how Denmark (wind mill Central) imports most of its energy from Hydro Norway which is a concentrated source of energy.
      Banks like to see wasted effort as it maintains wealth concentration.... and that appears the only purpose of present economic and indeed social activity.

      Delete
    7. @Ben
      Capitalistic efficency is a illusion
      Irish transport consumed 75% of inputs in 2013.
      Agriculture 6% and fisheries 1%.
      This was not always the case.
      Up until the 1970s the small farmer (30-50acres) was common.
      He typically used a small Ferguson tractor.
      He was replaced by the 200acre outfit
      Energy inputs per acre decreased but productivity did not increase per acre.
      Typically someone grew spuds for the local village market.
      I know of only one such case today in the extreme Sw.

      Now much of lowland south Kerry is covered in a 30 year old scrub later of Rhodos, Birch and Sally.
      The energy cost to distribute stuff increases with each passing year.
      The community is entirely dependent on car and bus based tourists distributing purchasing power as there is no local purchasing power to buy local goods.

      Delete
    8. That is 75% of diesel inputs in 2013.
      It is of course much higher today.
      To a alien visitor it would appear that the function of economic activity is to free up living space for the cars.

      Delete
  9. What was the capital cost for the push toward the creation of a European diesel car fleet. ???
    What was the return.......
    Miles travelled increased which gives the illusion of efficiency as cars travelling longer distances increase efficiency per mile.
    But they are merely travelling longer to reach the aldi store as the customers do not have the cash flow to buy in the corner shop.
    Irish diesel inputs has increased from 43 kbd to 53 kbd in 3 years.
    This is simply incredible for such a small country.
    The waste from capitalistic investment just keeps getting bigger and bigger and bigger.
    The wasted effort is so sad to watch.

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    Replies
    1. I think I see where you are coming from. My belief is that our system of debt is incentivising the easiest way to "make" money. Now you *could* take a raw material and then fashion it into a product and sell this on and take the difference. However there are two problems with this:

      1. it doesn't *make* (create) money

      2. it is far less efficient at capturing / making money than providing the illusion of a service and charging for it - take a bow modern finance

      Our system pushes all effort towards pretending to do something in order to capture banker credits. Bankers exchange these credits for actual physical resources which they consume.

      Because there are so few of us engaged in productive work we are seeing a smaller and smaller pie.

      In the end we will have everyone betting at Ladbrookes.

      Delete
    2. @Ben
      The state is now deeply embedded in securing the capitalistic illusion of motion
      To give you a example they are closing down the 3 semi viable peat stations in Ireland with all their embedded capex costs and building biomass stations on the coast to absorb North American forests into a furnace
      The fact that the peat stations produced more power last year is beside the point (the dry summers of 2013 and 14 helps fuel efficency)

      What matters is the illusion of motion.
      Carbon taxes and "Green" energy subsidies are driving this investment and not demand.
      This investment destroys demand.
      You also get a increase of transport inputs also so when looked at holistically it does not solve the carbon problem either.
      It's not designed to solve any problem other then to create a investment opportunity.
      The current consumer war economy is little different in substance from a traditional war economy.

      Delete
  10. Well if banks don´t want large deposits and depositors want to get their money backe in case the bank approaches insolvency....

    Sounds like a time to start a bank! Less competition, and no bad loans on the balance sheet yet.

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    1. Less competion for deposits.

      Delete
    2. Hold my beer, while I watch you running around the market getting depositors trust you and lend their money to your bank.

      Delete
    3. And just how will you generate the returns that depositors expect while protecting yourself from a bank run?

      Delete
  11. Frances, the crucial point is that deposits change of hand, not that money exit banks only in cash. That is irrelevant. What move the economy is the transmission mechanisms of money from one to another, not that transactions are payed in cash. We are not in a rural economy! I spend a lot in Internet without moving cash! what move are things, commodities, services, houses, and so on, through the change of accounts.

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    1. Miguel, I agree, but this is slightly beside the point. The point I was making is that money stays in the banking system and moves around within it. But if there is too much of it, it doesn't move.

      Delete
    2. Not too much or too little money

      This is looking at the world from a finance capital prism.

      There is simply too much waste in the physical act of distribution.

      Look at how my city actually worked within living memory.

      The dockers would wait for the ships to come in, let's say the banana boat or some other thingies that you could not produce.
      They waited in the early morning pubs.
      Both breweries serviced both sides of the river.
      They would sober up, work hard and return to the pub.

      It was a terrible short but colourful life.
      But the distribution system was extremely tight.
      Medieval Florence textile industry was also very tight.

      Florence hinterland remained agrarian with the purpose of servicing the basic demands of the town.

      Can we argue such circumstances exist today?

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  12. Not over abundance if you cannot afford to buy the product .

    Typical field pattern of modern western Ireland.


    http://www.geograph.ie/photo/3592085

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  13. http://www.geograph.ie/photo/3592118

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  14. Archie talking about life , finance , luxury goods etc etc
    Hilarious.
    https://m.youtube.com/watch?v=5VXiyuaoYok

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  15. http://motherjonescork.com/tag/docker/

    Cork dockers strike 1911.
    The monumental production / consumption crisis that would overtake the world in 1914 was building.

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  16. Rereading Niall Fergusons money prophets again.
    It is of course darkly Unbalanced, but interesting nevertheless.
    In the final chapter the lads expect a revolution to come but it never does.
    It finally breaks(1848) to their relief.
    Of course nothing happened in Ireland other then famine as the Whiteboy movement was wiped out decades before
    It is in places where people hold some sort of redundancy or wealth independent from the bank which are a threat.
    Usury policies always create such unneeded strife.
    This is subsequently exploited
    by the same forces.
    Quite sad.


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  17. Rereading Niall Fergusons money prophets again.
    It is of course darkly Unbalanced, but interesting nevertheless.
    In the final chapter the lads expect a revolution to come but it never does.
    It finally breaks(1848) to their relief.
    Of course nothing happened in Ireland other then famine as the Whiteboy movement was wiped out decades before
    It is in places where people hold some sort of redundancy or wealth independent from the bank which are a threat.
    Usury policies always create such unneeded strife.
    This is subsequently exploited
    by the same forces.
    Quite sad.


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  18. Interesting British energy economics speech .
    I disagree with 90% of it of course.
    The authors and finance dream of a electric future would be our nightmare as he clearly does not understand transformation losses.
    http://www.bishop-hill.net/blog/2015/12/7/dieter-helm-on-misguided-huhne-davey-and-miliband.html



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  19. "the banks of the future will be very different from the banks of the past." The existing banks are different from past banks and future banks will be different from existing ones. No doubt. But I fear shadow banking will remain and .... remember the 2010 flash crash. AI will change a lot

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  20. Irish farmers journal calling a 9% fall in income this year.
    Increased costs is all they have after all this mercantile effort.
    Meanwhile Cork city is turning into a Puritan dry town......
    I warned these guys about this back in the day and I am but a city boy

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  21. https://m.youtube.com/watch?v=lfDdCwUYek8

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  22. I distinctly remember Dr Alan Ahearne calling the farmers to super invest in production in the ploughing championships a few years ago.

    These banking reps / economists are so damn predictable ....I will try to find the audio.
    If I can get it , I remember it was a cracker.

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  23. Alas it is lost in the RTE state propaganda ether.
    I also found my own reference on the Irish economy blog - Farming Friday with Pat Kenny 7 the remember 2012.

    He was imploring farmers to become more "competitive " which is banker code for getting into debt.
    This guy has form..
    ...his only call to reduce VAT was in the mercantile tourist industry .
    He refused point blank to reduce domestic usury costs claiming it will attract imports.
    Needless to say since 2012 we import 10kbd more diesel ......
    A creature .

    ReplyDelete
  24. The Dork of Cork.:
    December 11th, 2012 at 9:38 am
    What seems to be not understood by most of our economists is that the Euro itself destroys a domestic economy (this is where most of the jobs are)
    External Capital replaces labour because capital is cheap……..
    A domestic firm replaces labour with capital because the books state it is cheaper.
    However when all firms do this they export hard currency out of the country and collapse domestic demand……
    The pub trade dives for example ……….more jobs go……..
    The social welfare then pays a person to be a consumer as he is too expensive to be employed relative to capital in private or public firms.
    Alan Aherne in a quite extraordinary interview fails to grasp this very elementry point
    http://www.rte.ie/radio1/todaywithpatkenny/
    listen to Farming friday 7 th december
    Alan Aherne , talks about how the economy is affecting the farming industry………..
    Farmers tell him the cost of diesel feeds through to almost all intermediate costs……..
    He like a robot then declares we must be cost competitive (which means attack labour)
    When labour (handling) can reduce diesel inputs
    But a reduction of wages as in the UK will merely reduce domestic demand , which means the economy must become even more absurd and export even more………..
    This is crazy………
    The function of a economy is not to export.
    It is to increase wealth.
    The country is a colony.
    The above paper talks about the lower class job crisis but the entropy process is moving up the jobs food chain…..
    It moving up the social ladder because the problem is a structural monetary crisis
    Not a class problem."

    Those were the days I believed in the labour theory of value but nevertheless I was close.
    Farmers who listened to Alan Ahearne are facing bankruptcy.

    ReplyDelete
  25. http://www.thatsfarming.com/news/emb-eu-phil-hogan?section=news&filters%5Bnews%5D=livestock

    Calls for Phil Hogan to resign , this guy is notorious in Ireland for bringing in the water charges.
    The deal he struck was to get away to Europe and get a cushy number.

    However farmers do not get it , they wish to be subsidised , to raise the price of milk etc etc.
    But the problem is one of demand.
    At the very least VAT needs to dropped on basic goods.
    The money printed.
    This will return local markets again.
    Barley growers replacing mercantile Dairy.

    ReplyDelete
  26. http:/
    /www.farmersjournal.ie/malt-barley-growers-protest-outside-guinness-168939/

    ReplyDelete
  27. The price of a pint......
    https://www.jar.ie/article/the-price-of-a-pint-in-ireland

    I am afraid this only scratches the surface.
    The publican must pay a licence fee.

    Wages are taxed both in the pub and brewery.
    Energy is taxed in both .
    At I guess I imagine the real cost of a pint is 50 cents in a pub within walking distance of a brewery .

    ReplyDelete
  28. Even after the glorious revolution the price of Ale a was kept low in England (for health reasons)
    Now that there is little need for workers.....

    ReplyDelete
  29. Job thingy debate going on over in Billy blog land.
    Very sad, Eu mercantalism destroyed the 30acre farm and now they want to give us Jobs!!!!

    How twisted is That?

    ReplyDelete
  30. Job thingy debate going on over in Billy blog land.
    Very sad, Eu mercantalism destroyed the 30acre farm and now they want to give us Jobs!!!!

    How twisted is That?

    ReplyDelete
  31. Corkery, Daniel. THE STORMY HILLS. Dublin and Cork: The Talbot Press Limited, [1929]. Octavo, original black cloth, spine panel stamped in gold, grey marbled endpapers. First edition. "Fourteen stories representing the author's finest work ... All of them depict the life of humble folk in Munster viewed by one in thorough sympathy with them ... In nearly all of them there is some queer shiftless character whom the author delights to observe and depict. He does not moralise ... He leaves the story to speak for itself. The idiom is reproduced to perfection." - Brown and Clarke, Ireland in Fiction 2, 299. Corkery (1878-1964), professor of English UCC 1931-1947, "was the greatest single influence on Irish prose writing of today ... Both as teacher and writer shaped several generations of Irish novelists and short story writers. His critical work ... was nationalist in vision, and his fiction was strictly provincial which deepened its value but has unfortunately narrowed its appeal outside Ireland." - Cleeve, Dictionary of Irish Writers (1967), p. 35. Several tiny chips to fore-edges of cloth, but a very good copy in good pictorial dust jacket with wear at edges, chipping at spine ends and corner tips, several wrinkles, and some general dust soiling to white background. - See more at: http://www.lwcurrey.com/pages/books/119545/daniel-corkery/the-stormy-hills#sthash.v1mmNpg2.dpuf

    ReplyDelete
  32. https://m.youtube.com/watch?v=dmghQANfWGU

    ReplyDelete
  33. Dork,

    I'm very sorry to do this, but I must ask you to stop posting comments now. There are 58 comments on this post and nearly all of them are from you. Please back off and allow others to speak. Thank you.

    ReplyDelete
  34. Ok Francis, you are too nice.

    I am not
    Sorry.

    ReplyDelete
  35. Ok Francis, you are too nice.

    I am not
    Sorry.

    ReplyDelete
  36. Frances,

    Slightly late.... but then better late than never. I am picking out a couple of comments as below...

    Miguel,

    I think you are missing the point. Money never leaves the banking SYSTEM. That doesn't stop it being used for spending. Electronic money created by banks is used for spending in the real economy (card purchases, online transfers, direct debits and so on), But this money just moves from bank to bank. Only if electronic money is converted to physical cash (say by being withdrawn from an ATM) does it leave the banking system. And it returns to the banking system when deposited in a bank account.

    Miguel, I agree, but this is slightly beside the point. The point I was making is that money stays in the banking system and moves around within it. But if there is too much of it, it doesn't move.

    It can. What do you think is likely to happen when cash moves out (private storage) of the banking system (it CAN when the rates are negatives even if disguised as fees). Like assume people pull cash and store it outside the banking system. Then what can happen since physical cash available is significantly less (may be 10%) of the deposits -- either print money or ban pulling cash out of the system? What could be the other repercussions? Can it create a bank run, given that banks have so much deposits that they are refusing them?

    ReplyDelete

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