Banks as Patient Debt Investors

This speech by Jeremy Stein is interesting.

3 replies on “Banks as Patient Debt Investors”

I prefer the way banks are portrayed in this animation (the UK bit) 🙂

How are things back in sunny Ireland? It’s bloomin’ cold where I am but hopefully I will be flying back tomorrow. Look forward to catching up on a bit of IE and some rugby (and some decent beer).

I’m glad to see some discussion on the foundations of the economy. i.e. How money is created.

I think it’s still misleading to call account holders depositors because even the speaker describes the process by which banks create almost all of the ‘deposits’ on the liabilities side of the balance sheet.

I would also like ‘credit’ to be referred to its more accurate term ‘credit/debt’ because the language we use at present hides the fact that every dollar has a matching debt.

It’s a shame there was no mention of how banks destroy money through processing loan repayments because this should be a better-known fact also.

I suppose from the speech I was ask the question:
If money comes from bank loans, and we can demonstrate that we’ve reached the debt capacity of households and businesses, should we look at having money come from a public source instead? In other words why should the money supply be proportional to our debt capacity?

@ PR guy

It’s mild. And I prefer this video from our UK equivalent, Positive Money.

Part 3 of a 6 part series it explains the monetary system very well.

There is evidence to suggest the expense of branch offices and adverts are actually insufficient to render deposit accounts sufficiently sticky. If so then it is implicit and explicit government acceptance of potential liabilities along with potential recaps that are subsidising the economics – and allowing those long term assets to be acquired at otherwise uneconomically high prices.

That, and tax regimes, encourage too much debt financing, and the dumbed-down, binary analysis that goes with it, compared to equity financing.

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