Perception management as a discipline has been evolving for some time now. While it is still in relative infancy, it is probably the most nuanced and effective it has been in human history.
One of the really interesting things that came out of the study of cults is the unexpected effect of cognitive dissonance. It was believed that cognitive dissonance between what the cult leader was preaching as truth, and obvious and unavoidable reality would cause people to leave cults. What actually happened is that cognitive dissonance only led to a small percentage of cult members leaving the cult, the remainder made a decision to disregard their perceptions of reality and believe the imaginary reality of their cult's belief system.
It is believed that this is because people who join cults have a much stronger need to belong than any desire for the "truth". And the same can be said, to a lesser degree, of suburbanites,academics and the intelligensia.
Add to this a good unhealthy dose of fear, in the form of competition from Asia, terrorists from the middle east, and the Russian bear, growling in the north, and you have fertile ground to plant all kinds of nonsense into. The demand for money comes from borrowers. It's effect is seen in interbank lending. Borrow short, lend long. If there is no lend long, there is no borrow short, and no interbank rate to speak of.
Not according to the rba. Here is the link on how they set the cash rate which is consistent with my earlier post.
If, hypothetically, in 2017, not one lending institution wrote a single new loan, issued no bills, underwrote no paper, how much interbank lending would there be?
If, hypothetically, in 2017, not one lending institution wrote a single new loan, issued no bills, underwrote no paper, how much interbank lending would there be?
About the same there is today. That is because banks use their ESA balances to sertle transactions on behalf of customers. Banks then lend to each other to square the books at the end of the day. So interbank lending is driven by customer transactions not purely loan creation.
Loan creation expands bank balance sheets - the loan creates the deposit. Over time this means banks need more ESA balances to support a larger balance sheet. The rba supplies these baLnces because they target a interbank rate. Endogenous money 101.
But don't take my word for it. Just visit the rba website. My link is a good place to start.
About the same there is today. That is because banks use their ESA balances to sertle transactions on behalf of customers. Banks then lend to each other to square the books at the end of the day. So interbank lending is driven by customer transactions not purely loan creation.
Rubbish. Net deposit drain is tiny compared to loan creation.
Quote:
Loan creation expands bank balance sheets - the loan creates the deposit. Over time this means banks need more ESA balances to support a larger balance sheet. The rba supplies these baLnces because they target a interbank rate.
The RBA lends those balances, not supplies. If bank's balance sheets shrink (which, without credit creation, they MUST), ESA balances are repaid.
Perception management as a discipline has been evolving for some time now. While it is still in relative infancy, it is probably the most nuanced and effective it has been in human history.
One of the really interesting things that came out of the study of cults is the unexpected effect of cognitive dissonance. It was believed that cognitive dissonance between what the cult leader was preaching as truth, and obvious and unavoidable reality would cause people to leave cults. What actually happened is that cognitive dissonance only led to a small percentage of cult members leaving the cult, the remainder made a decision to disregard their perceptions of reality and believe the imaginary reality of their cult's belief system.
It is believed that this is because people who join cults have a much stronger need to belong than any desire for the "truth". And the same can be said, to a lesser degree, of suburbanites,academics and the intelligensia.
Add to this a good unhealthy dose of fear, in the form of competition from Asia, terrorists from the middle east, and the Russian bear, growling in the north, and you have fertile ground to plant all kinds of nonsense into. The demand for money comes from borrowers. It's effect is seen in interbank lending. Borrow short, lend long. If there is no lend long, there is no borrow short, and no interbank rate to speak of.
Yep, I recommend you see Adam Curtis' 'Hyper-Normalisation', released last week but dumbed down by Curtis' standards. Already causing a bit of a stink among some if the yes-men and obfuscators in the financial world. But nobody cares. Most suburbanites won't take any notice anyway.
If, hypothetically, in 2017, not one lending institution wrote a single new loan, issued no bills, underwrote no paper, how much interbank lending would there be?
It would be less, but the normal flow of interbank transactions is enormous.
Without that facility we would be in the stone age.
Take risks - if you win you will become wealthy, if you lose you will become wise
Has been happening for years. ING for example have never dropped below 8% for stress testing. Other ADI's range from 7.15% to 8% but most are in the 7.15% to 7.55% range.
I also deal with a few non-ADI's who are not really under the APRA umbrella, but even they are sticking to the 7% floor in their assessments.
I read an APRA report yesterday and my take was they will introduce larger buffers into investment rental income. That's what they seemed to be aiming for.
How do they account for the 99.9% mortgage fraud loading you maintain is occurring?
WHAT WOULD EDDIE DO? MAAAATE! Share a cot with Milton?
How do they account for the 99.9% mortgage fraud loading you maintain is occurring?
The applicants may tell fibs but the process rectifies that. In the application only verified values are used for important assets and liabilities. They can still BS about the value of their furniture and art collection, but that's a value that no one takes any notice of.
On a personal balance sheet there are important items, and others that no one gives a toss about. We let them inflate the value of their stamp collection or antique furniture, it makes them feel better and it doesn't matter a hoot.
Take risks - if you win you will become wealthy, if you lose you will become wise
The RBA lends those balances, not supplies. If bank's balance sheets shrink (which, without credit creation, they MUST), ESA balances are repaid.
Yes - they supply ESA balances via repo’s (repurchase agreements, which is effectively a secured loan). The loans are repaid when the banks receive a surge in ESA balances from Government spending via the Treasury (who also has ESA account with the RBA). Again the RBA facilities this via open market operations.
Now if bank balance sheets shrink, the commercial banks require less ESA’s to support their balance sheets. So the RBA reduces to aggregate ESA balances so as to maintain their target rate (if not the rate will fall to the lower bound - 0.25% below the target). This is entirely consistent with the link I posted earlier. Here is what the RBA has to say about it.
Quote:
As part of its responsibility for monetary policy, the Reserve Bank Board sets a target for the cash rate. This is the rate at which banks borrow from and lend to each other on an overnight, unsecured basis. The rate is determined by the demand and supply of exchange settlement balances that commercial banks hold at the Reserve Bank. Through its open market operations, the Reserve Bank alters the volume of these balances so as to keep the cash rate as close as possible to its target. http://www.rba.gov.au/mkt-operations/
So in summary; - The RBA controls the interbank rate. - They do this by manipulating the ESA balances the banks hold with the RBA via open market operations (allowing the banks to borrow and repay ESA’s). - Therefore people like Simon will get very frustrated waiting for official cash rates to increase from “market forces"
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