Saturday, 3 October 2020

Mr Spiv the banker meets up with bank regulators.



“Hello guys. I’ve got a great plan to boost the economy. It’s like this. I borrow short and lend long, which is what banks always do, and which is risky. But you, i.e. the taxpayer, provide me with “deposit insurance” so that those I borrow from are guaranteed not to lose out, plus you provide me with billion dollar bail outs when needed. That turns deposits in to a 100% pukka form of money, which increases the money supply, which in turn provides stimulus.”

“We’re not falling for that, wise guy. I mean if government and central bank want to provide stimulus they can do that any time in a variety of ways, e.g. by simply having the central bank create money and do a helicopter drop, or give the money to government to spend. A third option is to have the central bank create money and buy up government debt (known as QE).

Plus private banks provide stimulus (i.e. create money and lend it out like there’s no tomorrow) in a boom, which is exactly when stimulus is not needed. Plus come a recession, the call in loans, i.e. destroy money, which again is exactly what is not needed. Money creation by private banks is a pain in the a*rse.



 Well in that case I’ll tell politicians the economy will be hit unless I’m allowed to print money, and they’re bound to fall for that sob story, especially when I stuff their back pockets with wads of $100 bills so as to “make them see sense”.


“Well as bank regulators we can’t argue with that. That’s just what we’d do if we were bankers. As Paul Voker, former Fed chairman put it, “You know, just about whatever anyone proposes, no matter what it is, the banks will come out and claim that it will restrict credit and harm the economy…It’s all bullshit.””

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