More from MMT-MCT

  By Mystic | July 9, 2012 - 04:44 |

This video is from the same meet as the Steve Keen one.
Here Michael Hudson talks about the origins of credit.

And, from the same gig…..Stephanie Kelton gives a good talk on money.

…although, I’m not sure about what she has done to her hair~!
What do you think~?

Written by: Mystic on July 9, 2012.
Tagged . Bookmark the permalink.
  • http://www.alda-architects.co.uk/ Alan

    Periodically cancel all arrears or face a possible dark age. In the modern context how do you do that?

    • http://overthepeak.com/wordpress/ Mystic

      Tricky, is the first word that comes to mind.
      Debt is an accounting thing, so someone has to take the loss.
      The government is the only entity that could take the hit and stay standing.

      • http://www.alda-architects.co.uk/ Alan

        So central bank creates the necessary, and buys up from the lenders? That won’t work as the debt still exists. Perhaps some sort of tax credit system? That would be an interesting budget speech.

        Politically very tricky,  moral hazard, carping ‘prudent’ voters, and the sums involved! Sort of thing Labour could do, but Conservatives would need someone exceptional on presentation. International ramifications? Yes very tricky.

        If they have any sense they will hope inflation does the trick. A few years at 20% ought to do it.

        • http://overthepeak.com/wordpress/ Mystic

           Inflation is as good as impossible.
          Everyone seems to understand now, that central banks have `what it takes`….. Doesn’t mean it won’t be tricky though~!?

          • http://www.alda-architects.co.uk/ Alan

            True enough from where we now stand. If governments started a really large spending programme, on capital projects, could that stoke up inflation?

            Been considering the matter whilst sorting out the runner beans. Can’t see how you could have a tax related scheme to cancel arrears that appeared remotely fair. Most loans are secured against property so it would perhaps be an ability to write down a percentage of the value of all property (up to a limit) against earnings over a period of years. Depreciation. Big tax break for property owners.

            How do you present something that is counter intuative to the way many think? Doubtless if there is a will …….etc. There could be long term consequences in political outlook.

            • http://overthepeak.com/wordpress/ Mystic

               Would a `really large` spending program stoke inflation~?
              No, although, `absolutely fucking humongous` may have a chance.

              `Solutions` are not really my speciality. 

              • windslice

                “If a problem has no solution, it may not be a problem but a fact – not to be solved but to be coped with over time” – Shimon Peres.

                “Everyone wants to live at the expense of the state. The forget that the state lives at the expense of everyone” – Frederic Bastiat.

                • http://overthepeak.com/wordpress/ Mystic

                   Yeah …… but don’t forget that Bastiat was a jumped-up froggy git~!

                  • windslice

                    In that case even more appropriate.

                    “Hollande: 75pc tax rate ‘form of patriotism’”

                    The Greeks have had a few “know it alls” in the past too.

    • ZarathustraSpeaksAgain

      I think the following comment by Hudson applies here, “We don’t have a problem; problems have solutions. What we have is a conundrum.”

      Some time back I posted an image of what collapse looks like using a money supply curve. It is obvious that every few years we suffer a mini-collapse of sorts and it is these mini-collapses when viewed together that show what the big collapse looks like.

      There is a way out, heck there are several ways out, but there is no political will for it. The wealthy are drunk with the power their wealth buys and the rest of us are passive as sheep lined up for the slaughter.

      Maybe, I’ll post something more thoughtful when I have seen the other video. I might even go back and try to watch Steve Keen again … I couldn’t get past about 20 minutes on the first try. 

      • http://www.alda-architects.co.uk/ Alan

        Often throughout History the wealthy seek to maintain narrow self interest. Yet by forgetting that their well being is reliant on the greater society they live in, and are part of, they bring about their own destruction. So you get behaviour like that at Manzikert.

  • lgrinaker

    I wish I could keep up with how fast Keen talks relative to most of us – we heard him a few times within a bit of discussion here… (which I guess means the same as how fast he must think relative to most of us, ;-)). Whew!

    Linda

    • http://overthepeak.com/wordpress/ Mystic

       SK is on a mission…..No time to lose….and he has done so many presentations/talks/speeches in the last few years, that he can speak it all in memory chunks (no need for thinking).  ((and…..he talks funny~!!)

  • snedmeister1

    Good evening Nick.

    I don’t have the time to watch these until my next day off, but the post today sparked a question…

    Is it time for MMT to be pushed into the lime light..??

    I know we had a discussion a way while back, where I held the position that it was the likely progression, and you took the opinion it wasn’t…

    I ask, because strange as it seems, I now hold the opinion it isn’t likely, if only because people in general are not ready to hear it ( yet )….

    I was curious if your position had changed with new info, or if you posted this on the basis it is just interesting information for everyone to know..??

    Sned.

    • http://overthepeak.com/wordpress/ Mystic

       I don’t know if it was in one of these videos, or in the Fullwiler video ( http://www.youtube.com/watch?feature=player_embedded&v=XsKqgTItYWU#! ), where someone says that it is now seven economists against the rest.
      That is about the size of it.  (we are being very fringe freaky by listening to these people).

      It will be necessary to swing vast herds of conventional economists over to MMT thinking, before politicians could hide behind their knowledge and actually do something like Stephanie suggests. 

      Hello Sned.

    • http://www.alda-architects.co.uk/ Alan

      Sned I would regard myself as part of ‘people in general’. There is a logic to MMT that many would be ready to hear. Conveying the analysis, different matter, and resistance from vested interests assures opposition in media and from many political factions.

  • CSArichardo

    Wake up people !  The US dollar can only survive as a global currency if demand exists for the US dollar global currency. 

    1.  Trade in US dollar creates such demand.  Global oil market, weapons market, etc
    2.  Wars that overthrow governments with new US dollar friendly patriots/freedom fighters also creates demand for US dollars.  All new governments for some reason need to borrow US dollars !!
    3.  A stumbling/crumbling Euro creates demand for US dollars.  Forget about the Europe friendly US Marshall Plan…that is long time deceased.

    Until all three of the above slow the demand for US dollars, the US will continue to be and grow as the global empire or at least the globalists that control the US politicians will be !!  This includes the global bourgeois of Russian oligarchs, Canadian oligarchs, etc. who support US dollars as opposed to their own national currencies!?  Maybe I have that wrong ?  Your wisdom would be appreciated !

    • http://www.alda-architects.co.uk/ Alan

      That is a very unstable empire, problems at home, hated across large regions of the world, setting up regimes that are not at all friendly, reliant on Euroland not getting their act together, fire fights everywhere, and the long term support of oligarchs. Not to mention decline in real power relative to other countries and other regimes improving on their propaganda.

      The US collectively needs them more than they need it. Won’t last, no real allegiance beyond the self interest of some and reputation in tatters.  The empire is in decline and that is dangerous for us all.

  • CSArichardo

    I guess if the US Dollar is the world reserve currency then only the US federal government can provide a global jubilee for debtors ?  Until they do this no other nation will even think of it ?!  So the US and free world awaits a Steve Keen moment ?

  • ZarathustraSpeaksAgain

    I cannot believe some of the ignorant things I heard intelligent people say!

    No place in the entire hour of Kelton’s video did I hear here admit that the government taxes or borrows money. She seems to think that the US Treasury has a magic keyboard that it uses to load it’s account.

    But these are smart people!!! How can they be unaware that year after year after year the expenditures of the government which are nothing more than credit transfers from the US Treasury demand deposit account to other demand deposit accounts are balanced by transfers from other demand deposit accounts to the US Treasury demand deposit account either for the payment of  taxes or the purchase of Treasuries?

    This is the dogma of MMTers everywhere and it requires unbelievable effort to not notice where the money comes from that is spent by the US Treasury.

    Here is another one for you, “The government doesn’t have to repay it’s debts.”Someone explain that to me … please. If the government uses keystrokes to create the money it spends, where does the government debt come from? Is it possible that real people and businesses are buying Treasuries? What would happen to the economy if the US Treasury stopped repaying those loans?

    There where plenty of contradictions in this, but I want someone to try and explain how what I already mentioned works first. I want to know how an MMTer can talk for an hour about deficit spending by the government without mentioning the revenue component of taxes or the borrowing component of selling Treasuries but can manage to assert that the magic keyboard creates the money that government spends.

    • http://overthepeak.com/wordpress/ Mystic

      “US Treasury demand deposit account” returns no exact Google search hits, could you be a bit more exact on the name please Z~!?

      • ZarathustraSpeaksAgain

        It appears that my replies are now being moderated. Am I now regarded as a troll? Would you like me to leave the forum?

        Please don’t read anything into this. I have enjoyed being here and I think well of you and what you do here. I just don’t know how else to take your recent change and I won’t post more here if my posts are giving you grief.

        • http://overthepeak.com/wordpress/ Mystic

           This is not a `forum` ……. it is a pub~!

          I saw the comment and read it from my E-mail box.
          I presumed you had deleted it, because when I went to reply, it was not there.

          There are many things that happen around here that I do not understand~!

          Question, to help me.
          When you are reading comments ….. do you have a `moderate` button that open up bottom left of a comment.
          It does for me, because I am `site moderator`; but do you get one as well~?

          • ZarathustraSpeaksAgain

            I tried to edit the first reply and got the message (paraphrased), “This user’s replies are being moderated.” When I posted a new reply that I thought was a bit shorter and more to the point, it didn’t take. That’s why I thought you were moderating me.
            And, honestly, I would be OK with that. This is your child and I know you have been trying to get discussion to take on a new kind of life … i.e. become a pub instead of a forum.

            More to your questions, I don’t have any ability from this end of the connection to do any moderation. There is no ‘moderate’ button that open on the bottom left of a comment.

            One thing I would like to be able to do is ‘delete’ a comment if I think I did a particularly poor job of expressing myself. I guess I will have to be happy with the ability to ‘edit’. That is a lot better than most forums … ooops … pubs.

            • http://overthepeak.com/wordpress/ Mystic

               Interesting ….. If you can’t `moderate` anything ….. how can anyone label your comments as spam~? ……… hmmm~??
              Thinks …..
              I think you may be on the `log-in problem`.
              There are some who can `edit` their comments …. and some that can’t.
              In the past, I think it comes down to people who stay logged in …. and others who log in every time.
              If I remember me right, if you stay logged in `via Facebook or Twitter`, you can do the edit thing (and maybe the moderate thing).
              I have not got to the bottom of it, because I cannot do the testing myself as Disqus recognizes me. 
              Thinks ….
              Maybe if I have a go from my laptop, I can pretend to be someone else~!?
              (not tonight)
              One thing is for sure ….. some people can edit their posted comments~!

              • ZarathustraSpeaksAgain

                When I roll the mouse over the lower left area of a reply, the word “Flag” shows up as I roll over.

                My options for the replies of other are to “Like” or “Reply” and they show up in the lower right corner. My options for my replies are “Edit” or “Reply”.

                There is also the to “show more” or “show less” in the lower left corner. And, as I roll the mouse over a reply, a “-” button appears in the upper right corner to “Collapse thread”.

                I am logged in both on WordPress and on Disqus.

                • http://overthepeak.com/wordpress/ Mystic

                   Ah, so if you can flag, so can anyone.

                  …….and `edit` you say.   Good, so you can edit your comment as well (edit it unto deletion if you so wish).

                  Thank you.
                  I will have a play tomorrow.

                  (I should know how everything works ……………. but, I don’t~!)

                  • ZarathustraSpeaksAgain

                    The “edit” option does NOT let you “delete” the reply. I tried deleting all of the text and hitting “save” but it complained that I could not save unless there was text in the box. 

                    So the edit option doesn’t let you delete. It may be programatically important to leave at least a little text up to maintain the discussion thread.

                  • ZarathustraSpeaksAgain

                    Since we are trying to work out bugs, another option I miss from the old OTP format is the ability to send you a private message. I am logged in on both WordPress and Disqus. I have access to the Dashboard. I can create, post and edit articles (I just remembered I have a draft article out there). But I can’t private message you or anyone.

                    I don’t miss the groups and forums from the old OTP, I like just seeing the articles as they are posted. I do miss being able to see faces next to the articles. I tried to edit my profile to add back my face but the option seems to have disappeared.

                    • http://overthepeak.com/wordpress/ Mystic

                       If you use the new buttons on the right, you can drop down to the bottom of the page and find a message thing down there.  

                      I’ll have a look for icons on the posts~!

                  • http://www.alda-architects.co.uk/ Alan

                    Zarathustra & Mystic

                     I may have accidentally clicked over where the flag tab appears, not intentional, sorry. It is not visible until the cursor is over it.  Was scrolling down and computer was ‘stalling’.

                    It would would be useful for the author to be able to delete a post. Second thoughts or under the wrong comment.

                    • http://overthepeak.com/wordpress/ Mystic

                       Alan,
                      It looks like the best that can be done is a radical edit, via the `edit` button.

        • http://overthepeak.com/wordpress/ Mystic

           I have just made some adjustments in the Disqus back-office, so no one should be able to be accidentally or maliciously spammed shut.  

    • http://www.alda-architects.co.uk/ Alan

      From what little I know MMT does take detailed account of interactions between central banks, government, and commercial banks and they do have views on tax and borrowing in the overall model. They go to great lengths to consider these interactions and some of the conclusions are counter intuitive. Like tax causes upward pressure on interest rates by withdrawing cash available to banks who may then have to borrow to meet their reserve requirements. Government spending has the opposite effect. At least I think that is how it goes. It is the central banks that have the magic keyboard. 

    • windslice

      No government has ever repaid its debts (I can’t think of an exception, but feel free to correct me). They are rolled over and over and over again.

      Or defaulted on.

      Or the government gets knocked into oblivion along with the debts.

      • ZarathustraSpeaksAgain

        Yes, this puts the statement in a much better light.

        But it isn’t without problems. The US government’s debt has been reduced many times in recent history.

        But it can’t be eliminated without eliminating the money supply since US Treasuries are the theoretical basis for reserve currency.

        • windslice

          Like when?

          http://www.davemanuel.com/history-of-deficits-and-surpluses-in-the-united-states.php 

          I would hesitate to use the term “many times”, maybe a “handful of times”. And every single year since 2009 the deficit has been more than the sum total of ALL the surplus years, by a long long way.

          To reduce the debt pile the government has to run a surplus budget. This is an interesting idea, as it can only occur through over taxing the people.

          Please explain your last statement.

          • ZarathustraSpeaksAgain

            I’m not sure why you posted a link with eleven years in which there were surpluses and then asked me what I meant? Each time the government had a surplus it’s debt was reduced. That is exactly what I posted in my comment. It demonstrates that government can run a surplus and can reduce its debt.

            I have no idea what more you want, I agreed with you that government has not actually paid off ALL of its debt and this is probably what was mean’t in the video by “Government never pays off its debts.” Of course the government does NOT have to run a surplus to pay off the debt! The government does not use a magic keyboard but it does have one. The government can establish new money any time it wants to and use that money to retire its debt.

            • windslice

              You don’t seem to understand where the money comes from when a government runs a surplus. It comes from the private sector, the only wealth creators. I suppose you suggest taxing the “golden goose” to extinction?

              The government does not have a magic keyboard. Bernanke has a something like it. Bernanke is not the US Government.

              The US government has problems even to exceed the current limit set on the deficits. Congress has to agree.

              The US government cannot simply establish new money and pay off its debt. That is illegal under the current system.

              It would also create massive problems for all the trillions currently invested in the debt.

              If they were given USD cash, where on earth do you think they could put the money?

              In the end there is nowhere to stuff trillions of USD’s other than in US treasuries. There is a guaranteed return of 1 USD for 1 USD invested, even if the 30 year yield is some piss poor rate 1% or so.

              • ZarathustraSpeaksAgain

                You come so close to the truth, but then … 

                What would happen if tomorrow the US Treasury stopped borrowing money? What would the wealthiest 1-5% of the people do with their money if they could not lend it to the US Treasury?

                What if tomorrow instead of borrowing money from the wealthy, the government taxed them?

                They obviously have the money, otherwise they wouldn’t be lending it to the government. And they obviously have nothing better to do with it, otherwise they would be doing other things with it.

                Something to think about!

                • windslice

                  If the government stopped borrowing money they would not be able to pay the bills.

                  I have no idea what the wealthy do with their money. It would also affect all the pension schemes and insurance companies, as they need somewhere to park their cash.

                  The very rich are quiet elusive when it comes to paying tax. I find it vaguely annoying that someone can claim to own a billion USD’s in assets. But that is the system, and the system will generate top dogs, a few middle dogs, and whole swathes of lower dogs. All trying to get a little bit more for themselves.

                  • ZarathustraSpeaksAgain

                    The question was meant to point out that the purpose of government borrowing is NOT to fund government, it is to provide wealthy people with a way to avoid taxes and get more wealth.

                    I know it isn’t that simple but I have a saying, “First we establish the rule, and then we deal with exceptions.”

                    The rule is simple, those who have the means to pay taxes are the same people who instead buy Treasuries. It does not matter to me whether they are saving for retirement or investing to expand their portfolio. It does not matter to me whether they are individual buyer or part of a fund. It does not matter to me whether they are real humans beings or big corporations.

                    In fact, let me be very clear, I am not even saying this is a good or a bad thing. I’m just saying that the government does NOT need to borrow money to pay for government; it chooses to do so for political reasons.

                    I should tell you what I think would happen if government stopped borrowing. The people with excess wealth would have nothing to do with it so they would spend it, invest it in productive activities instead of borrowing for them, help their family, their neighbors and their community, fund the arts, build schools and donate to charities to avoid taxes, etc., etc., etc. Heck, if the corporate tax rate was high enough, they might even pay their employees better instead of paying taxes.

    • lgrinaker

      Now, here’s a place in which I know I can’t enter the conversation, even though I want to know more about how what you’re saying would/wouldn’t relate to the work of somebody like Stephanie Kelton (and/or Scott F. and/or other MMTers). 

      In a sense, I get the feeling that they’re giving a kind of simplified overview, rather like a high-school chemistry teacher might introduce first-time chemistry students to some of the general ideas about how an atom is structured, while also knowing that a more sophisticated discussion about the structure of atoms is being left for later chemistry studies.  To a sophisticated chemistry student, talk of “electron shells” just isn’t a good enough reflection of what’s actually happening, although it hints at it.

      Because I can’t really take up your objections, I’m left wondering what Kelton and others would bring to such a discussion.

      So, Z, if you ever have a serious and shared conversation with these folks, I want you to be sure to record it and to share it with us, ;-).

      Nice to “see” you again, Z, ;-).

      Linda

      • ZarathustraSpeaksAgain

        Yes, what I do is High School science, not PhD college chemistry. Excellent analogy!

  • windslice
    • ZarathustraSpeaksAgain

      Skimmed the article. I am wondering what the role of an investment bank is after the repeal of Glass-Steagall? Does/did Europe ever have a Glass-Steagall type of restriction on commercial banks vs. investment banks?

      • windslice

        An investment bank carried on doing the same after the repeal, but expanded its activities to deposit taking.

        The idea of the Glall-Steagall was to keep the deposit taking banks with a government guarantee separate from the investment banks with no government guarantee.

        The UK went through its period of deregulation starting in 1986. It marked the start of a ramping up of private debt leading to economic growth and resulting in the hangover we now have.

        • ZarathustraSpeaksAgain

          One of the things that Glass-Steagall did was prevent banks with demand deposits that lent against fractional reserve from risking the deposits from creating new money for the purpose of speculation; because they were fractional reserve banks they needed insurance to protect depositors.

          Investment banks lent two things, the deposits of investors and the the capital of the banks, but they did not create NEW money against fractional reserves; they where 100% reserve banks so they did not need government insurance.

          You only mentioned the part about investment banks taking on demand deposits, you did not mention the part about commercial banks engaging in speculative lending.

          • windslice

            1. The US does not have a fractional reserve banking system.

            2. The government deposit guarantee is there to support the illusion that banks are solid, respectable institutions and that it is safer for old folks to put their savings in a bank rather than under the mattress.

            3. The original deposit taking commercial banks only lent to individuals and companies, with most of their funding coming from depositors.

            4. The original Investment banks took in funds and gambled in “the market”. They did not need government insurance because everybody understood the risk (well they should have). Through the use of derivatives and lots of other synthetic financial inventions they certainly do lever up the amount of money in the markets.

            In particular here the practise of “dealing on margin” I think distorts the markets. Somebody speculating in the forex market on say 10% margin has essentially multiplied his “clout” by a factor of 10. I don’t really understand why this is legal.

            Ever since commercial banks and investment banks have come together, the systemic risk has increased massively.

            • ZarathustraSpeaksAgain

              There are only two types of banks … ONLY TWO … there are FULL reserve and FRACTIONAL reserve. Are the US banks FULL reserve banks? NO! That leaves the other option. US banks are FRACTIONAL reserve banks.

              I’m not suggesting that a good job is being done of regulating the ratios or that there is any credibility whatsoever to any particular fraction of any kind. I advocate for full reserve banking.

              Yes, investment banks are the clearing houses for Casino capitalists!

              But what about my question? Are the insured, demand deposit, fractional reserve, commercial banks now engaging in Casino capitalism? If they are, don’t they have a big advantage in that they are able to establish NEW money and risk it in the Casino? Doesn’t this put old-fashioned investment banks at a disadvantage since they are risking their OLD money in the form of actual savings and investments instead of using a magic keyboard to establish NEW money for investment? Or, are they now playing the same game using trickier rules such as buying on margins which establishes what used to be called M3? Did they always do this and we just missed it?

              Lots of questions …. 

              • http://overthepeak.com/wordpress/ Mystic

                 Hello.  I’m listening in. ~Z~
                What is the `official reserve rate` for US banks~?

                • ZarathustraSpeaksAgain

                  I think you an I know that the minimum reserve requirements are a joke, but officially they are 10% on transaction deposits and 0% on savings.

                  One of the things I learned that a bank we had deposits was doing was moving ALL of the transaction deposits to savings AFTER they had settled, running the reports for the Federal Reserve, and then moving them back to checking.

                  Another bank was moving selected large idle transaction accounts to savings for periods of time and not telling the depositors. The person I knew had $6,000 moved to savings on an account he had not used in a while and then his check bounced. Later he met someone else who had deposits at the same bank who had the same problem.

                  The only thing that really matters in fractional reserves is that there is a positive balance throughout the settlement process. Something about a negative balance in reserves cause programming problems. LoL.

                  • http://overthepeak.com/wordpress/ Mystic

                     As I remember …. I was asking, to make a point, that if the `fractional reserve` is a joke; then is it useful to describe the system as a `fractional reserve system`.

                    I think, before things went all strange, there was a constant 50 billion in as reserves (with no excess reserves).

                    But again, the main point, is that it is not useful to think of the system as `fractional reserve` ….and much better to see it as banks lending with no regard to reserve requirement (some junior will tidy that up at the end of the day if necessary) ((capital requirements being the only real constriction)).

                    • ZarathustraSpeaksAgain

                      What I am saying is that if a banks does not hold full reserves of its demand deposits, then what they hold is a fraction of the full reserve or fractional reserves. It does not matter to me whether there are statutes mandating what percent of full reserves must be held nor does it matter to me whether or not they actually hold the statutory fraction. What matters is that the bank does not hold the full demand deposit in reserve and is therefore a fractional reserve bank.

                      Contrast this with savings banks where the full demand deposit is held in reserve and only the savings are lent. Or with the investment bank where there are (or were) no demand deposits, only investments which are like savings and are lent.

                      When any fractional reserve bank lend, it establishes new money for any amount it lends beyond the balance of its savers. When a full reserve bank lends it only lends from savers.

                      When any fractional reserve bank establishes money in the account of the borrower, it does so with little or no regard for any actual amount of money in demand or saving accounts. The only real limit is how much you can lend before your end of day settlements become a problem.

                      When a full reserve bank lends it lends against savings and never has a problem with end of day settlements.

                      All of the money lent by full reserve banks is credit earned and saved. All of the money lent by full reserve banks is credit established for the purpose of lending it.

                      Of course it is useful to note the difference between fractional and full reserve banking!

                    • http://overthepeak.com/wordpress/ Mystic

                       It is useful to know the difference …… but, surely it is only children that don’t know the difference~?

                    • ZarathustraSpeaksAgain

                      Scroll up and read windslice, “The US does not have a fractional reserve banking system.” Of course it does! Why would anyone write such a thing? Do they think we have a full reserve banking system? I’m sorry if that is a bit elementary, but apparently it has to be reviewed from time to time.

                    • windslice

                      The US does not have a full reserve system.

                      The US does not have a fractional reserve system

                      The US has a no reserve system and the necessary cash can be borrowed at any time from the FED.

                      See wiki, always good for this stuff.

                      http://en.wikipedia.org/wiki/Reserve_requirement#United_States 

                      “When an institution fails to satisfy its reserve requirements, it can make up its deficiency with reserves borrowed either from a Federal Reserve Bank, or from an institution holding reserves in excess of reserve requirements. Such loans are typically due in 24 hours or less.
                      An institution’s overnight reserves, averaged over some maintenance period, must equal or exceed its average required reserves, calculated over the same maintenance period. If this calculation is satisfied, there is no requirement that reserves be held at any point in time. Hence reserve requirements play only a limited role in money creation in the USA.”
                      Ergo
                      The US has a no reserve system and the necessary cash can be borrowed at any time from the FED. 

                    • ZarathustraSpeaksAgain

                      There are not any commercial banks in the United States Federal Reserve System that do not have any unborrowed credit in their reserve account; every commercial bank has some unborrowed credit in their reserve account. Even if there was one bank whose reserves were fully borrowed, that bank would still have reserves. Reserves are essential for inter-bank settlement. The banking system in the United States is NOT a no-reserve banking system.

                    • windslice

                      To get back on track.

                      The “Fractional Reserve Banking System” is one where the amount a bank can lend out is constrained by the amount of depositors’ cash it has. The constraint does not exist, as the bank can, at any time, borrow the money from the FED overnight. I agree that banks will always have depositors’ cash on their balance sheet, we are talking about what constrains the amount a bank can lend (well, I thought we were)

                      The constraints are

                      1. Maintaining the Capital Ratios as defined by Basel and national regulations.

                      2. The number of punters who want to take out debt.

                      You might like to check out this graph showing loan to deposit ratios

                      http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/05-2/Bank%20LTV%20Ratios.jpg 

                      from here

                      http://www.zerohedge.com/news/what-europes-loan-deposit-ratios-look 

                      And to see how this has changed over the last 25 years

                      http://www.nytimes.com/interactive/2011/10/25/business/banks-are-swimming-in-cash.html 

                    • windslice

                      Please explain how a “Full Reserve Bank” bank that has to keep 100% of the depositors’ money in liquid form can make a loan.

  • http://overthepeak.com/wordpress/ Mystic

     I have done a post based on the Carney article.
    Thank you ….. I think it moves us forward a couple of paces~!

  • windslice

    It was getting a bit narrow,

    More on the Zero Reserve System

    http://news.goldseek.com/GoldSeek/1238970345.php