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hedi

Do Banks Need Our Cash Anymore

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as the funding for lending scheme for mortgages stopped in January, some commentators supposed that banks and building societies might have to increase retail deposit rates to try and attract money to lend. this is not happening at all. are we now to suppose that our banking system has learnt from the americans and that from now on, our banks no longer require depositors cash. if so this is a major game changer.

any thoughts, as to how they are getting money and from whom, and is there any reason why they should bother with retail depositors ever again. it would be helpful to know so one can alter ones investment targets and expectations.

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as the funding for lending scheme for mortgages stopped in January, some commentators supposed that banks and building societies might have to increase retail deposit rates to try and attract money to lend. this is not happening at all. are we now to suppose that our banking system has learnt from the americans and that from now on, our banks no longer require depositors cash. if so this is a major game changer.

any thoughts, as to how they are getting money and from whom, and is there any reason why they should bother with retail depositors ever again. it would be helpful to know so one can alter ones investment targets and expectations.

Coupled with the 'schemes', I would imagine that the difference between base rate and mortgage rate is an increase in revenue for the banks and building societies (at least I'm not paying that), which presumably also allows them to give less incentive to retail depositors - win win

My generous ISA provider wrote to me last week saying that my ISA rate would be reducing again.

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Any money (or credit if you think that adds to the discussion) exists as a deposit in a bank somewhere unless it has been pulled out as cash, which is only true for a very small percentage. None of these governments schemes change that fact.

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Any money (or credit if you think that adds to the discussion) exists as a deposit in a bank somewhere unless it has been pulled out as cash, which is only true for a very small percentage. None of these governments schemes change that fact.

what the schemes do is change the market for money and therefore the amount of leverage ( credit) by changing the rules.

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what the schemes do is change the market for money and therefore the amount of leverage ( credit) by changing the rules.

Sure, they're obviously not without effect (otherwise they wouldnt be done) but they don't change the above fundamental truth. They just mean there is more money/credit on deposit somewhere really.

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Sure, they're obviously not without effect (otherwise they wouldnt be done) but they don't change the above fundamental truth. They just mean there is more money/credit on deposit somewhere really.

At the BoE mostly.

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At the BoE mostly.

Yeah. That's true actually. Hasn't thought of it like that. With qe though they're creating 385 of excess reserves, right, which will remain on deposit there. But as these are new reserves they won't affect the already existing credit need to be on deposit somewhere. You agree?

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Sure, they're obviously not without effect (otherwise they wouldnt be done) but they don't change the above fundamental truth. They just mean there is more money/credit on deposit somewhere really.

you cant spend credit, and neither can banks....what they can do is borrow and loan against it.

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My generous ISA provider wrote to me last week saying that my ISA rate would be reducing again.

My guess is it`s just another theft from the savers to make up the loss fro FLS

As for the OP perhaps its just a little too soon for it to have an effect

There seems to be quite a few bank adverts popping up of late targeting savers saying all that I still believe TPTB will restart QE before raising base

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you cant spend credit, and neither can banks....what they can do is borrow and loan against it.

I think its safe to assume you're one of the folk who think credit/money is a useful distinction. I think the separation adds nothing to most conversations.

If you want to make the distinction though I think we probably need to swap the word money for the word credit for most the pays in this thread though.

Edited by terryturbojr

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I think its safe to assume you're one of the folk who think credit/money is a useful distinction. I think the separation adds nothing to most conversations.

If you want to make the distinction though I think we probably need to swap the word money for the word credit for most the pays in this thread though.

They spend the same day to day...of course they do.

BUT, when we are talking about a shortage of funds, an increase in funds, funding for lending etc, it is the creation of credit we are talking about. So yes, its not a big deal day to day, but it IS a big deal when looking at the Macro World of Banks.

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They spend the same day to day...of course they do.

BUT, when we are talking about a shortage of funds, an increase in funds, funding for lending etc, it is the creation of credit we are talking about. So yes, its not a big deal day to day, but it IS a big deal when looking at the Macro World of Banks.

It's also rather a big deal in the event of a bank bust as it becomes all too clear that you were only ever a creditor of the bank. Most of the public still incorrectly see banks as being some sort of custodian for their 'money'.

Of course, chances are that your 'money' only ever existed as bank credit as I'd say that almost everyone these days is paid by bank transfer - so you are working in exchange for bank credit which can supposedly be swapped on demand for actual money. Unless of course the bank is asked to actually pay out at the same time by enough people when it becomes clear that they are leveraged up many times on their holding of cash or near-cash assets.

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Who here would like less debt and a reliable income off your assets?

Banks feel the same. Your savings are their debt and thier assets are your debt.

Banks would rather you take out your money and spend it so the people that owe them money can service their debts and not go bankrupt.

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Who here would like less debt and a reliable income off your assets?

Banks feel the same. Your savings are their debt and thier assets are your debt.

Banks would rather you take out your money and spend it so the people that owe them money can service their debts and not go bankrupt.

The thing about savers is...the like to save.

Trying to force savers to take their money out the bank has only forced them to save more.

The only people who have taken their money out the bank are those that want to get rich quick.....the only people getting rich quick are the bankers and the politician's friends.

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The thing about savers is...the like to save.

Trying to force savers to take their money out the bank has only forced them to save more.

The only people who have taken their money out the bank are those that want to get rich quick.....the only people getting rich quick are the bankers and the politician's friends.

I have come to the conclusion that it is inequality that has wrecked the banks. Large corporates stacked up with money. Money that needs to be spent into the economy so the debts can be serviced.

If the corporates wont spend their money into the system the only way the debts can be serviced is if new loans are made to pump new money into the system so the old debt can be retired.

corporates will not invest money into the system unless they think they can make a profit and with all their potential customers tapped out that doesn't sound like it's going to happen.

There is a lot said about zombie banks zombie business and zombie house holds. The word zombie makes this out to be a bad thing I don't think it is.

What we need is money flowing around the system with out obstruction like blood flowing around our bodies with out obstruction savings is like a blood clot.

zombie = spending everything you earn.

and high interest rates make the blood clot bigger.(assuming low rates don't increase the amount of debt)

Edited by gf3

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It is their credit creation that has largely driven the inequality. They have sown the seeds for their own demise.

agreed TPTB have looked long and hard at the problem and realize they are the problem. that is why it isn't going to be fixed anytime soon.

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Who here would like less debt and a reliable income off your assets?

Banks feel the same. Your savings are their debt and thier assets are your debt.

Banks would rather you take out your money and spend it so the people that owe them money can service their debts and not go bankrupt.

The banks require capital in order to lend.

Of course, if they can borrow the money more cheaply from the central bank than they can from customers, they'll be quite happy to do that and reduce incentives for would-be depositors.

My bank has certainly succeeded in dis-incentivising me from holding my house savings fund with them (I have a stack of sterling in savings accounts awaiting an eventual house purchase) thanks to the niggardly rates on offer. I'll be stuffing as much of it as possible into premium bonds and an ISA so that I at least can avoid getting taxed on the scraps of interest I do earn. Considering sticking a wedge into Zopa too and maybe adding to my gold with some silver.

My goal is to only hold a current account and an ISA in the banking system. Regular savings just aren't worth it.

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