Re:Inheriting is becoming nearly as important as working
by hgomersall on Sunday March 02, 2025 @05:49AM
(#43229192)
Bankers make money by creating loans, which are subject to regulatory requirements imposed largely through the adoption of Basel III. The reason they take deposits is because they are the cheapest form of liquidity. The certainly don't make money lending out deposits, whatever that means. Many countries don't even have reserve requirements, which rather highlights the flaw in the fractional reserve model.
Re:Inheriting is becoming nearly as important as working
by dreghgh on Sunday March 02, 2025 @07:11AM
(#43229653)
I don't think you know what 'liquidity' means, but if you do you are incorrect about it here. Deposits provide funding, not liquidity. Banks certainly do use deposits to fund loans.
It is not true that most countries do not have reserve requirements.
Re:Inheriting is becoming nearly as important as working
by hgomersall on Sunday March 02, 2025 @11:15AM
(#43231929)
I think before commenting further you need to take a deep dive into actual banking operations, because you really are wide of the mark. I posted a few links in the other post local to this one that might help. I also suggest reading the Basel III accords (or at least a summary) to understand the role of liquidity in banking.
There's not much point me discussing this further with your since you're so wrong. Take care and good luck with your enquiries.
Re:Inheriting is becoming nearly as important as working
by sjf93 on Sunday March 02, 2025 @06:56AM
(#43229538)
I suppose that’s true.
I do think that your original argument that bank deposits don’t contribute to economic growth is wrong though. As you point out, they are a cheap form of liquidity for lenders. I think you’d agree that loans play a key role in economic growth.
Re:Inheriting is becoming nearly as important as working
by hgomersall on Sunday March 02, 2025 @11:39AM
(#43232179)
The ability of banks to lend is limited by the availability of credit worthy borrowers, not liquidity. Banks will always get the necessary liquidity from the central bank (assuming the system is working as intended), but prefer deposits because they are cheaper than whatever is offered by the CB. Inter-bank lending is an alternative preferred option if insufficient deposits are available.
Essentially banks are only required to have a fraction of their deposit liabilities as liquid assets and can loan out the rest. If I remember correctly, this is actually how a substantial amount of money is created in the US and likely most of the world. If you deposit $100, a bank could make a $1000 loan assuming the reserve rate is 10%, which leads to an increase in the money supply of $900.
Money supply is definitely not the same as the size of the economy, but it is incorrect to say that bank deposits are just sitting stagnant. Banks are quite active with those deposits - how else would bankers make all that money!