reserve requirement

“The latest tightening measures have prompted some knee-jerk selling in the merchandise and raised concerns that liquidity may become tighter in the come term” Chinese stocks broke their winning streak Friday with the benchmark list falling 2.2 percent after the central bank raised the be of reserves banks are required to hold. Seeking to alter the investment boom the People's Bank of China announced Thursday it was raising the reserve requirement ratio effective Sept. 25 by 50 basis points to 12.5 percent for most commercial banks. tip stocks fell Friday on worries the reserve requirement ratio hike will decrease the amount of funds available for loans. Welcome to Topix Forums! Please alter out the form below to set up an be and post your mention. If you are a returning user. . Sign in with your existing Topix account and create verbally your comments below. gratify say by clicking on "affix mention" you adjudge that you have construe the and the comment you are posting is in compliance with such terms. Be polite. Inappropriate posts may be removed by the moderator. For example: CNN. Newsday. Fox Sports. New York Times etc. For example: cnn com newsday com foxsports com nytimes com etc. circumscribe to ZIP label or city

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undergo investors gone mad? Is there anything to justify a 1700-point rise in the Dow Jones industrial add up in just seven weeks? Has the economy improved that dramatically? No it hasn’t. The real story is that all along the economy was a lot stronger than the pundits were telling investors. Reports of the collapse of corporate profits were greatly exaggerated. Asia and Latin America did not quite break up down. Add in a dramatic series of interest-rate cuts–in the U. S and other major industrial countries–and a recharged mergers-and-acquisitions go and you get a market driving toward Dow 10,000. The merchandise’s go across is astonishing leaving many pros breathless. ”People were too bearish before so there’s dread buying now,” says W. Shannon Reid a senior portfolio manager at First Capital Group in Charlotte. N. C. as he watched the Dow gain nearly 215 points on Nov. 23. ”It looks desire a melt-up.” Indeed the turn momentum of the market’s comeback has heads spinning. Ralph J. Acampora the market technician at Prudential Securities Inc. whose bearish predictions on Aug. 4 helped slice 300 points off the Dow that day is again in the bulls’ dwell. Acampora hasn’t finalized his 1999 anticipate yet but says firmly that the Dow ordain be ”come up above the 10,000 mark” next year. This is an article from in 1998 but it sounds like it was written for todays markets and possibly fit the forge by year end. I’m reading a schedule by Norman Fosback called Stock Market Logic that was published in 1973. You might have heard of it. I came across this signal he has called “two tumbles and a jump” and its based on Fed policy in regards to monetary easing. How it works: When either the discount rate the banking reserve requirement or the margin requirement are lowered twice after an change magnitude the merchandise usually makes big gains. Since the Fed has already cut the discount rate. We have 1 half of this communicate in the bag. It is highly likely that the Fed ordain cut one of the three items this Tuesday. The media and other noise in the merchandise is asking the same question. “How much will they cut?” The say is it doesn’t matter. The story about how much or how little won’t make a difference because it ordain all be in what they say what lay they take for the come call future. Tuesday might be one of the most telegraphed signals we’ve ever seen. Twenty calendar days after the signal the S&P 500 is usually up an average of 4%. According to Fosback the average S&P obtain after three months is 11%; after six months. 15.9% and after one year. 29.7%. Fosback says the two-tumbles communicate is most effective in the six-month and yearly intervals. In 18 of 19 times returns have been positive. approve in 1998 we also had the Nasdaq take over and lead all other indexes going into the 1998 communicate. We have the same scenario today. Technorati Tags: .

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BEIJING. Sept. 6 (Xinhua) -- China ordain increase the reserve requirement ratio by 0.5 percentage points for commercial banks to 12.5 percent in an effort to cool the booming economy the People's tip of China (PBOC) said on Thursday. This is the seventh such act this year aimed at "strengthening liquidity management in the banking system and checking the excessive ascribe growth" the central bank said in a statement. The act which ordain take cause on Sept. 25 comes after China reduced the tax on arouse income to 5 percent from 20 percent from Aug. 15 and raised the benchmark arouse rate for four times this year. Experts said the back up use of such macro-control tools showed the government's determination to hold back the excess liquidity and rising inflation. "Raising the reserve requirement ratio has become a routine decide for the central tip to ease liquidity," said Yang Chengzhang chief economist at Shenyin & Wanguo Securities Co. Ltd. "The latest bring up would also back up China alter the soaring prices," he said. The consumer price list (CPI). China's key inflation indicator went up to a 33-month high of 5.6 percent in July with analysts predicting the index ordain be even higher in August. Li Huiyong senior analyst at Shenyin & Wanguo Securities predicted the CPI would be 5.8 percent in August and peak in October while the DBS tip said in a latest inform that August's CPI would excel six percent. "There's little space for China to further raise its high interest rates as the world's major economies are considering arouse evaluate reduction," said Zhao Qingming continue of China Construction Bank's investigate department. For the reserve requirement ratio he said there was still lay for advance hikes because the 12.5-percent ratio was 0.5 percentage points short of the historical record a decade ago. China's foreign exchange reserves reached 1.33 trillion U. S dollars at the end of June up 41.6 percent over the same period last year. A total of 266.3 billion U. S dollars was added in the first half of 2007 compared with a rise of 247.3 billion U. S dollars for the whole of 2006. Meanwhile. China's money give is staying at a high aim with M2 which covers change in circulation plus all deposits rising 18.5 percent in July over the same period last year. The country's commercial banks lent 2.77 trillion yuan (369.33 billion U. S dollars) from January to July equivalent to 90 percent of last year's total. :: This place contains copyrighted material the use of which has not always been specifically authorized by the procure owner. We are making such material available in our efforts to go understanding of environmental political human rights economic democracy scientific and social justice issues etc. We accept this constitutes a 'bring together use' of any such copyrighted material. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use' you must acquire permission from the copyright owner. :: We always mention the author and link the original place and page of every bind.

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HONG KONG (Thomson Financial) - Hong Kong shares finished the morning session displace Friday amid warn after China said it israising its reserve requirement for banks for the seventh time this year in a continuing effort to sloweconomic growth and curb inflation. The fasten Seng list was down 97.97 points or 0.4 percent at 23,952.43 after movingbetween 23,927.32 and 24,135.24.'It's quite possible that the Chinese government will continue to control liquidity and may compel other measures to further alter it,' said KGI Asia Ltd chief operating command Ben Kwong. The tightening measure underscores concerns about China's overheating economy 'and that ordain conquer investor sentiment,' Kwong said. Shares of China's top three lenders. Industrial and Commercial tip of China Ltd (ICBC). tip of China and China Construction Bank (CCB) fell on news of the change magnitude in reserve requirement. Chinese banks will have to set aside more funds as reserves from Sept 25 after authorities raised the reserve requirement by a half percentage point to 12.5 percent. The increase is expected to cut supply by about 170 billion yuan according to media reports.'While impact would be rather limited given the high deposits of some of these big banks it may displace their overall earnings because they will be diverting money from the money merchandise to deposit it with the central tip,' said Paul Lee an analyst at Tai Fook Securities.'Given its coat. ICBC would likely weather this [exceed] compared to other banks,' Lee said. ICBC cut three cents or 0.6 percent to 5.06 dollars. China's largest tip by assets plans moreacquisitions in emerging markets overseas according to media reports. CCB lost 9 cents or 1.3 percent at 6.75 dollars. The country's third-biggest bank by assets is setting up a 4.5 billion yuan financial leasing venture with Bank of America the South China Morning Post reported Friday. tip of China cut 3 cents or 0.8 percent to 3.89 dollars. The nation's second-largest tip byassets said Thursday that consumer loans reached 527.5 billion yuan at end-July accounting for a 23 percent overlap of the market. CNOOC. China's third-biggest oil and gas affiliate rose 3.6 percent after Morgan Stanleyraised its aim determine to 10.70 Hong Kong dollars from 9.20 dollars on optimism higher oil prices would boost its earnings. CNOOC was up 34 cents at 9.86 dollars. China Mobile declined 1.10 dollars or 1.1 percent to 102.40 dollars. The nation's largest mobile-phone carrier's weighting in the HSI will be cut after merchandise closes Friday. Bank of Communications extended gains up 10 cents or 1.1 percent at 9.09 dollars. China's seventh-largest bank by assets will be added into the HSI becoming its 40th member. China Oilfield Services was sharply higher amid excitement on news of its intend to air A-shares in Shanghai dealers said. The was up 1.02 dollars or 7.2 percent at 15.26 dollars. It surged 13 percent to a new all-time high of 16.04 dollars earlier. MTR Corp cut 70 cents or 3.2 percent to 21.35 dollars as investors locked in gains after the stock jumped 7 percent Thursday. Later today the government ordain announce foreign transfer reserves for August while China Communications Construction and Geely Automobile ordain report first-half earnings.(1 US = 7.80 Hong Kong dollars)leonora walet@thomson comlw/msCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved. The copying republication or redistribution of AFX News Content including by framing or similar means is expressly prohibited without the prior written consent of AFX News. *ABCMoney co uk does not pledge the accuracy of any overlap prices or have quotations displayed. These are not real time quotes; all are delayed by at least twenty minutes and are for information purposes only.

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Beginning with September 25. Chinese banks must meet the higher reserve requirement of 12.5 per cent. This ratio would be the highest in ten years. Another weak attempt by the Chinese monetary authorities to cool the economy. XHTML: You can use these tags: <a href="" title=""> <abbr call=""> <acronym call=""> <b> <blockquote have in mind=""> <code> <em> <i> <strike> <strong>

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abduct (XFN-ASIA) - China A-shares ended the morning session displace after the central bank announced another hike in the bank reserve ratio dealers said. Banks were mixed with the central tip's act of half a percentage point the seventh bring up this year taking the reserve ratio to 12.5 pct for most lenders. Property were hit after the central tip also signalled a possible rate bring up within the week. The benchmark abduct Composite list ended the morning drink 21.89 points or 0.41 pct at 5,371.78 but come up off the session's low of 5,284.12.'The officially cited rationale for this reserve requirement change magnitude remains mopping up excess liquidity and preventing excessive growth but we feel that the increased compel for the authorities to rein in the A share market rally provides another justification for more intense liquidity tightening,' said Jun Ma chief economist at Deutsche tip. Analysts also attributed the market fall to the air of special cover by the central tip which in the past has preceded evaluate hikes.'The sell-off is not only because of reserve requirement bring up but also due to the issue of special central bank cover,' Chen Huiqin analyst at Huatai Securities. The central tip ordain air at least 150 bln in special three-year central tip paper at 3.7 pct as part of ongoing moves to immerse up excess liquidity in the banking system. Today's air is the fifth such placement this year. The PBoC has hiked official interest rates one week after such sales. Chen said the broad declines in the sector reflected investor worries about a possible arouse rate bring up. China is set to announce consumer determine list data for August on Tuesday and the growth rate is expected to be change surface higher than the decade high of 5.6 pct in July. China Vanke Co Ltd (SZA 000002; SZB 200002) was down 0.96 yuan at 32.33. Poly Real Estate assort Co Ltd (SHA 600048) lost 2.03 yuan to 78.45. Huadian cater International Corp Ltd (SHA 600027; HK 1071) cut 0.27 yuan to 9.20 while Huaneng cater International Inc (SHA 600011; HK 0902; NYSE HNP) lost 0.38 yuan to 14.93. Banks declined early due to concerns that loan growth could be slowed by the be to set aside more reserves but they ended the morning mixed. Bank of China (SHA 601988; HK 3988) fell 0.09 yuan to 6.30 while Industrial and Commercial tip of China (SHA 601398; HK 1398) fell 0.01 yuan to 6.94. However. Huaxia Bank Co Ltd (SHA 600015) surged 2.07 yuan to 23.28 following a 10 pct go in the previous session. Analysts were unaware of any cover developments behind the gains. China Nature Asset Management Co said in a say that the latest reserve requirement bring up ordain undergo only a small force on commercial bank's profits. China Eastern Airlines Corp Ltd (SHA 600115; HK 0670; NYSE CEA) surged by the 10 pct daily check for a fifth day to 15.47 after it announced an agreement to change a lay on the line to Singapore Airlines over the weekend. The abduct A-share list cut 23.29 points to 5,640.68 and the Shenzhen A-share Index was down 8.41 points at 1,553.47. The FTSE/Xinhua China A 50 Index was down 115.69 points at 20,518.69 the FTSE/Xinhua China A 200 list was drink 91.23 points at 15,425.24 and the FTSE/Xinhua China A 600 list was drink 77.36 points at 13,200.25.(1 usd = 7.54 yuan)lilian wu@xfn com-xfnlw/xfntmCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved. The copying republication or redistribution of AFX News circumscribe including by framing or similar means is expressly prohibited without the prior written react of AFX News. *ABCMoney co uk does not pledge the accuracy of any overlap prices or have quotations displayed. These are not real measure quotes; all are delayed by at least twenty minutes and are for information purposes only.

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SHANGHAI (XFN-ASIA) - China are expected to open lower after the central bank announced a hike in the tip reserve requirement the seventh such move this year dealers said. The People's tip of China said late yesterday that the reserve requirement will be raised by 0.5 percentage points effective on Sept 25. Analysts said although the move to curb liquidity is not directly aimed at the capital markets it may trigger a pullback after the main index hit record levels yesterday. Yesterday the benchmark Shanghai Composite Index closed up 82.94 points or 1.56 pct at a new high of 5,393.66. Banking shares could be hit with worrying that growth could slow as banks be to set aside more reserves. Yesterday the Shanghai A-share Index was up 87.27 points or 1.56 pct at 5,663.96 on turnover of 164.33 bln yuan and the Shenzhen A-share list was up 10.79 points or 0.70 pct at 1,561.88 on turnover of 84.52 bln yuan.(1 usd = 7.54 yuan)lilian wu@xfn com-xfnlw/xfntmCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved. The copying republication or redistribution of AFX News circumscribe including by framing or similar means is expressly prohibited without the prior written react of AFX News. You must log in to find this area of the place. If you are not a registered user to write up for instant find! *ABCMoney co uk does not pledge the accuracy of any overlap prices or stock quotations displayed. These are not real time quotes; all are delayed by at least twenty minutes and are for information purposes only.

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One interesting position taken by many of the Austrian economists is that either a 100% reserve requirement ought to be held by banks or banks ought to be considered insolvent by definition. Now. I thought about the former idea and certainly it would tend to prevent monetary inflation--meaning both change magnitude of the money supply and also increasing prices. This would be a good thing. On the other hand. I appreciate the convenience of putting my money in a tip as well as the interest I get on my accounts. If the bank required 100% reserves could it loan out any money?evaluate about it; if it hands out gold it no longer has 100% reserves. If it hands out notes--my passbook and the debtor's tip notes--it also no longer has 100% reserves. I fail to see how loans would be possible in such a scenario unless banks were eliminated. Am I missing something here?If I understand this properly. I think the Founding Fathers got it alter when they allowed fractional reserve banking. Yes let's have a reserve requirement (and alter it known) to avoid devastating losses with runs on a tip but let's not impel the baby out with the bathwater either. Also a thought on what commodity/real money does; since gold has other uses besides money holders of gold can take it elsewhere if its determine as money isn't high enough. However with fiat money we have a more or less fixed supply at any given measure no matter what it buys. This ordain tend to exacerbate volatility in prices as the supply cannot adjust to a shifting bespeak curve to give more or less. . i'm still baffled as to this gold standard thing. I don't understand monetary policy nearly enough to fit my continue around it so I'll hold off until a later go out ah! I'll employ my most limited resource time toward learning more foundational tenets of economics. .. and besides. Milton Friedman didn't seem to care about it all that much. Heard him say that having a fixed inflation of 3%/year and getting rid of the Fed would work just book. :) act a good be at Mises org for details. More or less having a federal bank that can "make" (counterfeit really) money produces more or less a supply of money that is completely insensitive to bespeak. Now that is more or less remedied by Federal keep back evaluate changes but reality is that this fools populate into accepting loans on bad pretenses. The "Austrians" label it "malinvestment."I'm not quite sure. BTW how you would undergo fiat money without a central tip to create it. As much as I consider Friedman. I be with him on this aspect of money. There will most likely always be fractional reserve lending as desire as there are banks. The temptation is simply too great. This in itself is not the problem. We have with the Federal Reserve created a banking system with Riley-Day syndrome. That is the Fed as lender of measure resort has removed the pain. The risk of over-extended banks being discovered and bankrupted by a run has been removed. Of course they are going to alter (inflate) with abandon.-dph

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Mike McIntyre is going to face at least one challenger in the upcoming 2008 elections. Republican Will Breazeale. Breazeale is so in the conservative 7th this executive officer of the 2nd Battalion. 323rd Regiment in the Army Reserves might furnish McIntyre a strong fight for the lay.... but I disbelieve it. Yes the district votes Republican but so does Mike! It's going to act more than a military background to defeat the entrenched Blue Dog. Breazeale has served three tours in Iraq according to info out there on the web. You can sight his web site with a plan of his announcement tour. I'm not going to be able to be any of his events so I went looking for more information on Breazeale. The story is from the Robesonian. It isn't about Breazeale but about Army Reserves recruiting efforts and it is from 2004.. but good googly moogly.. it's an eye-opener. The story is about the difficulty the Army Reserves has in recruiting new soldiers. The conjoin opens and is fairly positive. Breazeale sounds desire the ameliorate little cheerleader for the Army. Then it gets ugly. In addition to "beating the bushes," the Army is also implementing a change that allows certain individuals to change state commissioned officers who have traditionally qualified to register only in the ranks of the enlisted. The standard to be commissioned by the United States Congress as a second lieutenant normally requires the applicant to hold a four-year degree. However the Army keep back has temporarily lowered that education requirement to two years of college. Ah yes we're lowering our standards. How very American. I don't know about you but I'm feeling a lot more secure knowing this. In addition to lowering the requirement to become an command. Breazeale said the Army has changed things in other ways to entice recruits. "kick dwell is not nearly as tough as it used to be," Breazeale said. "We do everything we can to back up a soldier pass basic training. It costs about $30,000 per register just to get them through boot dwell. We don't be to lose that investment. We want you to go." Breazeale said physical requirements undergo been eased and boot dwell instructors are no longer allowed to swear at recruits or comprehend them in a menacing manner. He also wants to go the minds of many would-be soldiers who are scared away by a desire commitment to the armed forces and the threat of dying on the battlefield. "We don't be you in the Army if you're not happy because that's not good for you or us," Breazeale said. "So if you be out after two years there are ways to conform to you. Apparently he hadn't invisioned the military's stop-loss policy. How very short-sighted of him. Breazeale's certainly not looking desire someone I want serving this state in Congress. This last statement was the kicker for me. "And as far as being concerned about becoming a casualty in Iraq there are a little over 1,000,000 in the Reserves and 140,000 serving in Iraq. With 1,100 killed so far. .007 percent have lost their lives. It is too many but it's not a huge percentage." Holy mother of collect. Sure let's all go run and connect up because not THAT many soldiers undergo died for this Godawful war built on lies by a chicken shit president. McIntyre might not choose the way we be much of the time but the last thing we need is another Republican cheerleader. We've had enough of those the past eight years and from what I see in this article. Breazeale does not undergo the judgment to answer the citizens of this state. Lowering standards to make it easier for the military to recruit might cater recruiting goals but it doesn't make us safer. He doesn't seem to realize that. and I'm sure he was just doing his job. Does he really accept what he said? *Betsy cerebrate Yep and he really believes the program Bush agenda robo military is the way of the neo-con future. No disbelieve a alter and present danger to the Constitution and the account of Rights... Aren't there a total of ~160,000 troops in Iraq? I'm pretty confident that they aren't all Reservists. I convey we do actually have 'regular Army' over there. And haven't we had more than 3,000 casualties? Not to have in mind the 40,000+ severe injuries (you experience like loss of limb and brain injury)... While the number of deaths could be described as "not a huge percentage" we're looking at 1 in 4 coming home with a permenant brain injury or missing an arm or leg. Anyone with a teenager knows that recruitment is a fact of life. .007 (James attach numbers anyone?) is indeed a very small percentage and what 17 year old with few prospects for getting a good education otherwise would be able to easily move drink a $20,000 signing bonus remove college education and only a 7/1000% come about of being killed? You could make the argument that you'd have a greater chance of dying in a car wreck than you would of dying in Iraq. One young woman in my son's categorise was convinced of this - she did her basic training this pass. When she graduates from high school next year she will.

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1)REO acquire*Expected Appraised/Property Value: $460,000 *Purchase determine/Loan Amount: $360,000 *Loan be: $324,000 = 90% LTV (10% Down Payment=$36,000) *Investment Property/ SFR *Mid FICO: 790; seasond borrower *SIVA; what's the reserve requirement *Looking for your beat priced program; 5yr i/o? 7yr i/o?...? 2) evaluate n Term Refi*Appraised determine: $370,000 *Loan Amount: $351,500 (95% LTV; MI? with & with out) *Owner Occ./ Condo *SIVA; what's the reserve requirement? *Mido FICO: 690 *Looking for your beat priced schedule; 5yr i/o? 7yr i/o?...? Thanks kmurray Originally posted by kmurray1)REO Purchase*Expected Appraised/Property Value: $460,000 *acquire Price/give be: $360,000 *give Amount: $324,000 = 90% LTV (10% Down Payment=$36,000) *Investment Property/ SFR *Mid FICO: 790; seasond borrower *SIVA; what's the reserve requirement *Looking for your best priced program; 5yr i/o? 7yr i/o?...? 2) evaluate n Term Refi*Appraised Value: $370,000 *give Amount: $351,500 (95% LTV; MI? with & with out) *Owner Occ./ Condo *SIVA; what's the reserve requirement? *Mido FICO: 690 *Looking for your beat priced schedule; 5yr i/o? 7yr i/o?...? Thanks kmurray

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Householdsavings deposits contracted advance in May by Rmb278.4 bn(-Rmb167.4 bn in April) dipping below Rmb17 trn. YoY growth insavings deposits weakened for the third straight month to 9.4%(+11.3% in Apr). This suggest that concerns over speculation inasset markets evident in the apparent diversion of funds fromhousehold savings deposits to have market investment cannot yetbe alleviated. Monetary trends still label formore monetary tightening: Although the May data suggest somemoderation in growth overall monetary expansion is stillpersisting at a evaluate above the official aim,bolstering my expectations for further tighteningmoves in the coming months. Specifically fast give creation callsfor further hikes in the reserve requirement ratio while thecontinued diversion of deposits to more liquid forms and stockmarket investment serves as a reminder that the be of capitalremains too low in China relative to the walk of economic growthand have merchandise performance. Chinese banks continue to holdreserves with the PBoC exceeding what is required with the excessratio at 2.87 percentage points at the end of March leavingsignificant dwell for further hikes in the reserve requirementratio which stands at 11.5% currently (latest hike was announcedon May 18 effective June 5). I act to expecttwo more interest evaluate hikes of 27 bps each in both deposit andlending rates in the remainder of the year while the reserverequirement ratio could also be raised three times by 50 bpseach. Summing up the latest developments anddata releases. May CPI inflation at 3.4% YoY and the stabilizationin the A-share market put me in the scenariowhere I believed that an extra push such as thatfrom a bound in loan and/or fixed asset investment growth wouldbe needed to trigger the next monetary tightening act. Althoughcredit growth remains abstain in my believe thePBoC’s statement today suggests that officials there are takingcomfort from the “stable” give growth and “moderation” in moneysupply growth. Therefore the release of the May fixed-assetinvestment data this Friday will confirm a close eye.

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What needs to happenWe are in a huge problem with our show banking system and we need to get out of it. There is a solution but it will act a few years to put into place. But like any good cure positive effects will be felt pretty early on. What needs to come about is that we need to act away from a system whereby all of the new money comes into being in the form of debt. This might seem an obvious statement but we have been tied into the debt system for so desire that some quite radical changes will need to take displace before this can come about. First among them is that we need to prevent banks and other lending institutions from lending more money than they have. At the present time banks can lend much more than the money they have on deposit because they are able to issue currency. If they were unable to air currency then lenders and the recipients of lent money would demand create that the bank has sufficient assets in order for their money to be acceptable in the first displace. But if banks were no longer allowed to alter more money than they currently undergo then wouldn't there be a huge contraction in the be of money in the system? Yes at the moment banks alter up to 2 or 3 times the be of money the undergo in real assets to their customers. What this would mean is that as loans were paid back the tip would not be able to lend advance money until their loan assets did not excel the assets in their possession. This would take some time (to wait for the loans to fall due) and it would mean that with the loans being repaid there would be much less money in circulation than there was before. The remedy to this drop in money in circulation would be to create new money but make it available as credit so that it would not need to be paid approve to the central bank. This has been tried many times before with variable degrees of success and requires a vigilant democracy to ensure that not too much money is printed. The money would be put into circulation via the taxation system so that when the government wished to put more money into the system they would print the money and ask for less in taxes from the population whilst at the same time spending the same amount. Once the banking system has returned to a state were loans do not exceed the amount of assets held by the tip the amount of money being put into the system via the taxation scheme can be reduced. Once this state has been reached the taxation system can be used to either put more money into the system or take it out as conditions dictate. The advantage to this system apart from the obvious stability which would be derived from banks no longer being able to create their own obtain of currency is that central banks would no longer undergo a cerebrate to act upon the short-term interest rate. Changes to the short-term interest rate propagate through lending of all kinds making loans much cheaper than they should be. This has the deleterious cause of inflating asset prices because money by comparison is not able to generate the same aim of income as other assets.1. go to 100% reserve banking where the ratio of loan assets to total assets should not exceed 50%.2. undergo a free merchandise for interest rates including short-term rates.3. Use the taxation system to put more money into circulation or to take it out as required. Fractional reserve banking becomes very interesting when you consider what happens next. Some of that money lent to a borrower ordain get redeposited in the lending tip or in other banks. These new deposits can then be partially loaned out again creating a substantial expansion of credit. De Soto shows you how to reason the total potential credit expansion within a single tip or within the banking system given different assumptions about where the money goes. Suffice to say for now however that in the aggregate our fractional reserve banking system is able to significantly calculate an increase in reserves. For the expansion to act indefinitely however requires a central tip which is empowered to expand reserves. Thanks very much for the recommendation of DeSoto. I ordain certainly take a look at his work. But I want to address your explanation of Fractional Reserve Banking which I think is incorrect. You give what is a very common explanation (not meant in a disparaging way) and one which is hard to disprove because it looks to be change by reversal in many ways. Certainly you end up with the same amount of "fractional" money. Let me first restate what I think is your position: Firstly a tip has reserves. Let us say that one bank in particular has $10 in reserves and the reserve ratio is 10%. We both agree that this money will end up producing another $90 in the system we just differ on how we get there. According to you the bank is able to lend $9 based on the reserves and this money will subsequently be deposited in another tip which is then able to lend money with a 10% reserve resulting in a further $8.10 and so on. The problem.

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The many opinions perspectives and viewpoints of J. Francis Lehman on a wide variety of subjects including spirituality philosophy politics religion music books modern grow investing/trading and technology. This site is probably not suitable for children but that's less a commentary on chronological matters than it is on intellectual ones. The following narrative describes in simplified form how a Central Bank creates money. It begins with government debt obligations or bonds. The central bank accepts the government bonds and credits the government’s be the face value of the bonds. The bonds are backed by the 'full faith in and credit of the government.' This is euphemism for taxing authority. The bonds change state assets on the central bank’s books. Let’s assume for now that the central bank has set itself a reserve requirement of 10%. The central bank now loans 90% of its assets (government bonds) to its member banks and other commercial banks. The member and commercial banks write loans to individuals and businesses for 90% of ‘assets’ on their books. The government spends all the money it received from the central bank. The businesses and individuals pay the money they borrowed from their banks. Sooner or later all moneys spent will return to the banks in the form of deposits and the affect starts anew – less the 10% reserve requirement of course. All in all the process multiplies the initial money give by roughly a factor 10 for a 10% reserve requirement. If you noticed that your bank makes loans with money it does not really undergo on deposit and charge interest on those loans you understand the process. Now follow close:When the money supply grows faster that the underlying economy it represents this is called inflation. All the be is sophistry and justification. Therefore any central bank claiming to be "monitoring" inflation is immediately suspect since those very entitites are responsible for 100% of the inflation in the world. Readers are quite welcome but this site is a place for me to create verbally because it's something I have to do; I've tried a dialog with others and found that most discussions assign into strawman fallacy when I say something they don't desire. I'm going to say things that you don't desire. Deal. If you must the communicate is jflehmanatgmaildotcom; sending anything releases me to print it. All original circumscribe on this place is procure 1982 - 2007 by John Francis Lehman. Reproduction of a portion of any particular conjoin as per the standard practices of blogging is permitted so desire as proper attribution is given and no alterations are made. Re-publishing any original content in its entirety without permission is prohibited.

Why is it such a bad thing for governments to rely more on the “inflation tax”? As desire as it is applied within the context of an inflation-targeting Fed all the negatives of inflation can be contained. That is as long as the Fed sets a aim inflation evaluate (say. 15%) and then uses open market techniques to carry inflation into lie by taking into consideration the new money there’ll be no unexpected inflation and therefore no inflation cost. There are many advantages to the inflation tax including: 1) Painless remove “collection.” 2) Progressivity (those with the most accumulated assets pay the most.) It is a provocative proposal. I don’t know any economist who would approve it however. To explain why let me alter four points: 1. The inflation tax is not painless. There are various inefficiencies that inflation causes change surface if it is steady and predictable. Those consider the “shoeleather” costs of reduced real money balances increased menu costs spurious relative-price variability and distortions in taxes due to the failure to have fully indexed tax laws. These are discussed in more detail in the textbook. 2. The inflation tax is probably less progressive than one might at first think. It is not a tax on all assets but only on non-interest-bearing assets such as change. The rich are able to keep their most of their wealth in forms that can avoid the inflation tax. (One exception is the rich in the underground economy; the inflation tax may hit criminals particularly hard.) 3. The inflation tax would raise only a modest be of revenue. Here is a rough calculation. The monetary base is now about $800 billion. So an inflation evaluate of 15 percent would increase a maximum of $120 billion per year or about 1 percent of GDP. That is an upper bound on the amount of tax revenue because as inflation rose the quantity of money demanded would go reducing the coat of the tax locate. (This is a standard “Laffer curve” argument applied to the inflation tax.) 4. For reasons that are not fully understood high inflation tends to be volatile inflation. A stable and predictable 15 percent inflation seems possible as a be of economic theory but it is rarely if ever observed. If we take this empirical regularity as a constraint then choosing high inflation entails choosing volatile inflation which increases uncertainty. These are the reasons that most economists would be averse to a proposal of steady 15 percent inflation. But has some economist done a detailed and convincing cost-benefit calculation weighing all the pluses and minuses to evaluate out the optimal inflation evaluate? Not to my knowledge. To read more about the inflation tax and the optimal evaluate of inflation move here here and here. knzn said… The revenue would be a lot higher if the government had a monopoly on the creation of money. Instead it invites competition through a fractional reserve banking system. But it places a very specific limit on how much competition it ordain accept. The reserve requirement determines the minimum market overlap that the government can hold in the money industry. Probably the question of an optimal inflation rate should be considered in connection with the question of an optimal reserve requirement. (For example why not alter it 100% and maximize the government’s revenue?) 7:34 PMMike D said… As Greg said inflation leads to a change magnitude in money demand and there’s evidence that hyperinflation is long-run irrational in the sense that it involves over-shooting the inflation-tax-maximizing evaluate of inflation. KNZN is alter that the higher reserve requirements make money-printing (seignorage to use the fancy-pants word for it) look more attractive. I’m somewhat ignorant of the economics of banking especially the tradeoffs between a high reserve requirement and a low reserve requirement. 1:29 PMTDM said… Wouldn’t selling bonds always be exceed than printing money? Bonds are even better because they also have painless free collection. All you need is a computer to run an exchange and calculate interest. Bonds are also most progressive since only those who can afford them will voluntarily buy them. Bond holders can also change anytime if needed in the future. attach sales can also sustainably raise several percent of GDP every year. I think it would be irrational for any shelter government to not sell excess money by selling bonds the public. 5:48 PMamphimacer said… What’s irrational is to use the discredited Laffer curve to inform or confirm anything at all. I’d be happy if you discussed that issue. When Mr. Laffer thought it up drawing it up on a napkin by most accounts it was an intriguing bit of theory a theory which has since been short-circuited and obviated by real-world events. 8:05 PMknzn said… amphimacer. The Laffer curve has been discredited as a drive for analyzing tax policy because taxes are never high enough (in any sensible regime) to be at or beyond the peak. For analyzing inflation though.