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Ahahahaha , gurgle, snort, ahahahahaha

What is the extra cost to the banks? Mortgages are refinanced by banks: they borrow money for shorter terms than they lend it. This means that their costs of providing these mortgages will rise.

Today banks borrow money to lend out, they need deposits. That idea of banks just creating money when they lend is soooo yesterday, Possibly tomorrow too, but not today.

Despite all these disastrous outcomes, the financial markets have now priced in a rate rise to 4% by next May meaning, in other words, that they think that the Bank of England is mad enough to increase its interest rate with all these consequences being likely.

And actually, so do I think that they are that mad because there is no evidence to persuade me otherwise.

It’s a terror, isn’t it? That interest rates might rise to minus 12%?

9 thoughts on “Ahahahaha , gurgle, snort, ahahahahaha”

  1. Can banks just borrow at -12% to fund loans?

    “That idea of banks just creating money when they lend is soooo yesterday”

    How would you know?

  2. The market pricing in 4% interest is an average, not a consensus. It’s a market.

    Much of the inflation is imported, it’s true. In our dreams these pressures will ease. It’s also possible to imagine that a wage price spiral won’t happen as organised labour, from hospital cleaners to expensively educated barristers, will refrain from industrial “action” out of social solidarity with pensioners on a triple lock in fuel poverty.

    Dream on.

  3. Rsm

    His point is Murphy is saying banks need deposits, a direct contradiction of his stated belief on Thursday last week. Of course you are free to agree with his latter proposition but that aligns you with the single most ignorant commentator anywhere in cyberspace.

  4. In the elynomics of joint stock banks there appears to be a profound distinction between current account balances which are NOT needed in order to make loans and refinancing a loan portfolio in the money market which is an entirely different and vital source.

    Old school thinking away from the fens assumes current account balances are by their nature money at call and short notice but mutatis mutandis a predictable volume can be relied upon at a given time unless Co-Op Bank incompetence or Northern Rock cupidity have the management in thrall.

  5. If banks don’t need deposits – why do they need to do mortgages?

    Why not just lend whatever the bank owners want to the bank owners? Why all this convoluted rigamarole when, because they can make money out of thin air, they could just give it directly to themselves?

  6. Exactly Agamammon

    And if a govt needs to pay its debts ( whuch don’t really exist anyway) why not just print money to pay them off ?

  7. I’ll have a go at taking this literally.

    “And if a govt needs to pay its debts ( whuch don’t really exist anyway) why not just print money to pay them off ?”

    Government debts do exist. The government got goods and services in exchange for nothing today. It can pay off those debts by forgoing goods and services in the future. Or not. But if not, then more goods and services need to be made than otherwise, so the price of them goes up.

    So one way or another, when the government grants one group of people get free or cut-price stuff, the people not getting it pay.

    In general: stop thinking about money and trying to do accounting tricks with money. Think about the actual goods and services and who gets to decide how to deploy them and where to spend human time and effort.

  8. Van_Patten

    Can you tell I don’t read Murphy’s blog?

    Agammamon

    Can banks indeed write IOUs as they please, but to get the Fed to accept them they must satisfy some capricious Fed regulations about ratios of certain IOUs (SLR etc., which apply to the biggest banks only)? So, can they use mortgages and Treasuries to multiply their IOU creation?

  9. Rob Fisher

    《when the government grants one group of people get free or cut-price stuff, the people not getting it pay.》

    What if the government gives everyone money, and encourages self-provisioning using common land and common knowledge?

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