The Wall Street Journal reports that bank are telling their corporate customers to stop making deposits. Yes, you’re reading that correctly: Banks don’t want more deposits.
The basic idea of banking is to take in money from deposits and lend it out at interest to borrowers. But with interest rates near zero, banks hardly make any money doing that, so taking in more money from deposits doesn’t do much for them.
Corporations are banks’ biggest customers, so they are the ones driving what the Journal calls a “surge” in deposits:
Bank deposits have continued to surge this year. Between late March and May 26, they rose by $411 billion to $17.09 trillion, according to the latest available data from the Federal Reserve. That is slower than the pace last spring, but still nearly four times the average of the past 20 years, according to the Fed data.
#1: NeoconsNailed To: Horse (#0)
NeoconsNailed posted on 2021-06-10 23:07:13 Reply Private Reply
#2: BTP Holdings To: Horse (#0)
I got an email from a woman who was on a joint US/UN mission in Syria. She told me her team came upon a horde of cash. Her share was $2 million and she needed help getting it out of the country. I smelled a scam coming on so I deleted the message. She did send me a nice picture of her holding a bull pup rifle though. ;)
BTP Holdings posted on 2021-06-11 02:50:44 Reply Private Reply
#3: Horse To: NeoconsNailed (#1)
Horse posted on 2021-06-11 03:06:05 Reply Private Reply
#4: NeoconsNailed To: Horse (#3)
NeoconsNailed posted on 2021-06-11 13:37:23 Reply Private Reply
#5: Horse To: NeoconsNailed (#4)
Horse posted on 2021-06-11 14:30:53 Reply Private Reply
#6: Pinguinite To: Horse (#0)
Get your silver and crypto now!
Pinguinite posted on 2021-06-11 15:59:30 Reply Private Reply
#7: Horse To: Pinguinite (#6)
By the way, are you in Peru or Ecuador? The leading candidate for President of Peru is making noises about getting more money for their exports.
Horse posted on 2021-06-11 16:10:00 Reply Private Reply
#8: Pinguinite To: Horse (#7)
Pinguinite posted on 2021-06-11 16:41:54 Reply Private Reply
#9: NeoconsNailed To: Horse (#5)
NeoconsNailed posted on 2021-06-11 17:22:35 Reply Private Reply
#10: Esso To: NeoconsNailed, 4um (#9)
Damn right they do! Jamie Dimon is payin' me a whopping 0.01% per month. That's almost a whole quarter a month.
Livin' the dream.
Esso posted on 2021-06-11 18:02:07 Reply Private Reply
#11: NeoconsNailed To: Esso (#10)
NeoconsNailed posted on 2021-06-11 20:16:56 Reply Private Reply
#12: Esso To: NeoconsNailed (#11)
Esso posted on 2021-06-11 20:24:23 Reply Private Reply
#13: Horse To: NeoconsNailed (#9)
Horse posted on 2021-06-11 21:04:40 Reply Private Reply
#14: Pinguinite To: NeoconsNailed (#9)
I've thought on this a bit and here's the rub.
When you borrow money from someone, you take on a liability as you have to pay them back. The person who loaned you money has an asset, because they know/expect you will pay them money in the future.
With banks, it's the same way. When you deposit money into a savings accounts, you have effectively loaned THEM money, and they need to pay it back to you at a future date. So that money you deposited to the bank is a liability, not an asset. But for you it IS an asset.
These banks therefore are telling corps to take their money elsewhere because they don't want any more liabilities in the form of deposits. Reinvesting that money -- converting that cash into an asset to offset the liability, takes a bit of effort. Perhaps the banks are finding they can't find good places to invest the deposits they receive?
Pinguinite posted on 2021-06-12 01:26:59 Reply Private Reply
#15: NeoconsNailed To: Pinguinite (#14)
NeoconsNailed posted on 2021-06-12 04:38:59 Reply Private Reply
#16: NeoconsNailed To: Horse (#13)
NeoconsNailed posted on 2021-06-12 04:41:52 Reply Private Reply
#17: Horse To: NeoconsNailed (#16)
The balance can be invested in real estate loans, commercial and consumer loans and government securities, with the banks' profit determined by the spread between what is earned on their investments less what it pays depositors in interest. The mix of these investments varies depending on the state of the economy.
Horse posted on 2021-06-12 05:18:05 Reply Private Reply
#18: Pinguinite To: NeoconsNailed (#15)
Banks still want to advertise. Certainly handing out loans is the solution to the problem of too much cash in the vaults, so advertising is good for that.
Of course, if banks have too much cash in house because of too many deposits, and they respond by loaning money out, then what's that do to the money supply? Due to fractional reserve banking, it adds more money to the economy than was deposited to the bank which aggravates the money supply problem even more.
Pinguinite posted on 2021-06-13 14:31:34 Reply Private Reply
#19: Pinguinite To: Horse (#17)
Keep in mind that when banks make loans, it increases the economy's money supply further.
Pinguinite posted on 2021-06-13 14:32:48 Reply Private Reply
#20: NeoconsNailed To: Pinguinite (#18)
NeoconsNailed posted on 2021-06-13 20:49:27 Reply Private Reply