Banks Don’t Lend Out Reserves

  By Frances Coppola

This post by Sober Look caught my eye. It has a lovely chart which shows the considerable shortfall of lending relative to deposits in American banks:

This doesn’t look too good, does it? Why on earth aren’t banks lending? After all, it seems they have the money to do so. So what is stopping them?

Firstly, here’s a short explanation of bank lending. Under normal circumstances, deposits and loans are more-or-less equal across the banking system as a whole. This is because when a bank creates a new loan, it also creates a new balancing deposit. It creates this “from thin air”, not from existing money: banks do not “lend out” existing deposits, as is commonly thought. You can see this clearly on the chart. Until 2009, deposits and loans were roughly equal.

But since 2009 there has been a very evident change.  There is a large and growing gap between loans and deposits. So what is causing this?

Forbes: «Το Grexit είναι ήδη προγραμματισμένο»

Της Frances Coppola

Όπως αναφέρει η σημερινή έκδοση της »DeutscheWirtschaftsNachrichten»

«Η ταπείνωση της Ελλάδα κατά τη σύνοδο κορυφής δεν ήταν ένα ατύχημα. Είναι μέρος του προγράμματος που επιδιώκει από καιρό ο Βόλφγκανγκ : Ο ίδιος θεωρεί ότι η ΕΕ στη σημερινή της μορφή είναι μη-λειτουργική. Ο ίδιος δεσμεύεται να δημιουργήσει μια στενή πολιτική ένωση. Αυτό είναι δυνατό μόνο με επιλεγμένες χώρες. Στο τέλος θα φανεί ποιες απ’ αυτές ταιριάζουν με τη Γερμανία και ποιες όχι. Το Grexit είναι ήδη προγραμματισμένο. Θα ακολουθήσουν και άλλες χώρες-μέλη. Το τραπεζομάντιλο κόβεται. Αμετάκλητα.»

Ας επανεξετάσουμε το πώς βλέπουμε τη γερμανική στρατηγική και το κατά πόσον η πρόθεση της είναι να αναγκάσει την Ελλάδα να βγει από το ευρώ. Την Κυριακή, φάνηκε σαν η Γερμανία να είχε ήδη συνθηκολογήσει, όπως λέει ο GideonRachman στους FT:

Greece and the EU: a question of trust

Της Frances Coppola

I have been mulling over the terms of the agreement between Greece and the Eurogoup. Initially, I thought that Greece had ended up with an appalling deal, getting almost none of its aims and losing control of EFSF funding for its banks. The retention of future primary surplus targets under the November 2012 agreement – only the target for this year is under review – seemed particularly harsh.

But then I listened to Pierre Moscovici explaining the thinking behind the deal, and suddenly the penny dropped. We’ve all been missing the point. Holger Schmieding of Berenberg Bank was on the right lines – he commented recently that the real problem in the Greek negotiations was that trust had broken down. Indeed it has. But not recently. Trust in Greece broke down a long time ago.

The most obvious breakdown in trust happened in 2010 when the extent of Greece’s indebtedness was revealed – and the lengths to which it had gone to conceal its true position. With the help of Goldman Sachs, it had lied about its finances to gain admission to the Euro in 2001, and had been living a lie ever since.