I am interested in Mosler's book and I might get it. I have a copy of Murray N. Rothbard's The Mystery of Banking. I am not sure what you think of that. This is the issue I have Rothbard's book was recommended here and I have had a good look at it. I think it would differ from Mosler's book from what you tell me, so I am not sure which one is accurate. I feel my understanding of the banking system is accurate and that the sources I linked to supported my statements on bank operations. I did not know that in America that banks could fall below their reserve requirement to lend and then use the reserve adjustment facility to correct their reserves. I am not sure if that would be legal in the United Kingdom. I have myself written four books. My books are different to the other authors books they are not observations or explanations of the banking system as they see it or how it may in fact be. But original economic policy which governments have adopted and used successfully since they were written, my books have changed economics. I have strong evidence they have changed banking operations or at least banking strategies too. The alterations in pension saving and pension reform have enabled the economic targets to adhered to and made massive treasury cost efficiencies. This is the problem with the 'old school' banking system until my school of economic thought came in to play. I noticed the impact pension saving and pension regulation has on the economy, which no one seemed to appreciate before my work. Not only is it possible to control economic targets like economic growth, inflation and even interest rates with pension reform but not managing pension saving in the first place may have been a big problem. I have evidence that since pension saving has been controlled annually and vast pension reform has been made the economic target rates have flat lined. This has led to very low treasury costs in government debt repayment. Since using my work the banking system, pension system, central banking system and economy have stabilised. I have also noticed how many problems the banking system you describe and also the packaged debt product banking system have created. I am not a fan of the current banking system or systems but I can help to stabilise them through pension reform. The process has been successful making massive treasury cost savings whilst increasing pension saving.
Mosler's is accurate except it is pre U.S. C.B dropping the reserve requirement. A step in the right direction certainly.
Rothbard is a well known, Austrian School leaning economist -- he's dead isn't he? -- but you should read Read, in preference to Rothbard, Mosler's well written little book. And then read: http://neweconomicperspectives.org/category/l-randall-wray and, http://bilbo.economicoutlook.net/blog/ see also: https://en.wikipedia.org/wiki/L._Randall_Wray and, https://en.wikipedia.org/wiki/Bill_Mitchell_(economist) I mention these two economists as important because they understand Central Banking as well as Ben Bernanke and Mario Draghi, which also see: https://www.brookings.edu/blog/ben-bernanke/ and, https://en.wordpress.com/tag/mario-draghi/page/2/ Bernanke and Draghi, two brilliant economist-central bankers. Both were at MIT at the time Samuelson was there. Both should be paid attention if you want to know truth. There is no harm in reading Rothbard, but I certainly would warn against starting there. I recommended Mosler because his little book is the most succinct, while still being correct. L. Randall Wrays books are wonderful and much more detailed, but expensive -- maybe not his earlier "Understanding Modern Money," which I can also highly recommend. In March , Mitchell and Wray's new Macroeconomics text was published. Two other books every serious student of economics must study are: Quiggin's book, "Zombie Economics", -- a wonderful book! and Hyman Minsky's critique of Keynes General Theory..., entitled, "John Maynard Keynes" -- not easy to read without a strong background in economic theory.
I just ordered Mosler's book. I don't know when I will get it because of the virus. However I find that the banking system as it stands has many flaws. I have been developing a new banking system and products that should resolve many of the problems it has. I have developed a new economic control system that has been preventing the need to make large scale alterations to the central bank's base rate of interest in the United Kingdom. It has prevented the interest rate from becoming too high when there was inflation and has helped to sustain economic growth through the deflationary period. The base rate of interest was constant for seven years in the United Kingdom and pension saving was altered instead to control the economy and it targets. This has proven to be massively successful in the United Kingdom and you may get it in America to help support growth, read the below. http://morganisteconomics.blogspot.com/2019/03/pension-pumping.html?q=pension+pumping http://morganisteconomics.blogspot.com/2019/03/optimal-pension-saving.html?q=optimal+pension+saving http://morganisteconomics.blogspot....-can-be-taken_8.html?q=optimal+pension+saving http://morganisteconomics.blogspot....croeconomic-tool.html?q=pension+early+release Success below. http://morganisteconomics.blogspot.com/p/success.html
Your going to be doing yourself a big favor by reading Mosler's book. If you want to propose improvements to banking then I would think the first step is to correctly understand how banking works now.
I feel that it has already moved on. They now use alterations to pension saving and pension reform in the United Kingdom to achieve economic targets. They aims to keep the interest rate low so that it doesn't cause a banking crisis through the defaults that it would cause from high interest rates. They also want to manage government debt and private debt repayments so they use pension saving and pension reform instead of the interest rate to reduce repayment costs. The processes used in banking have already changed radically in the United Kingdom and some parts of Europe too, this is way forward now, it is about managing massive debt repayments. I also influenced a change in the way the economy provides funding. In the United Kingdom there has been an increase in corporate bond issuances to fund businesses instead of unsecured credit. This has made investment a lot more secure due to the nature of corporate bonds being paid out in preference if the business defaults. The bond yield payments are fixed and make the pension funds' income constant to prevent a loss of income for annuity recipients. This was put forward in the book Modern Applied Macroeconomics in chapter 9. You have to understand my work is the new school of thought the British government uses and the new system for funding enterprises and controlling the economy, it is all about pensions.
Books are one thing, but I used to work in a bank. This is how it operated in the United Kingdom. The central bank or other bank would offer a low interest loan which would be made available to the bank, the bank would then receive the money at this low price of borrowing to then lend out again at a higher price. Meaning the process of extending the bank's lending capability was led by the price of borrowing falling which made it possible to pass on the debt at a higher interest price to make a profit. When the base rate of interest fell it was possible to expand excess reserves to lend out further loans at a higher price than the price of the borrowed funds. The bank had targets on loan agreements to make sure the money was lent out. An example was the extension of the zero percent balance transfer, which charged a three percent transfer fee. The bank would make a three percent return on the transfer of funds from other credit cards, which would make them a two and a half percent profit with a half percent central bank loan. There were many other loans like this, but this is the one I remember dealing with. The bank was very strict about hitting its targets on loan agreements and balance transfers. To the point it annoyed people who were being pressured in to getting loans. However the balance transfers did offer people who already had debt inexpensive loans. By the very nature of the bank getting the low interest loans and how they made their profit from the difference between the price of borrowing and the price of lending out again meant they borrowed first. The mechanism of selling on this cheap borrowing was only made possible by reduced price loans from the central bank or other banks. When the cheap loans became available the bank would borrow the money straight away and then sell it on quickly. The mechanism you stated of adjusting reserves after the loan had been made would not necessarily provide this mechanism of selling on cheap debt and profiting from the difference. It would also not fit within the central banks macroeconomic targets. The process of borrowing from the central bank was very much led by the profit made by the difference between the cost of borrowing and the return from lending it out again. The banks would borrow the funds when the interest rate was low and only borrow at a reduced capacity when it was higher. This fit within the central banks macroeconomic strategy and helped to control the rate of lending. Passing on a higher interest rate when the central bank rate rose was not always an option because the higher interest rate deterred borrowers. The ability to sell the debt to customers was the other aspect in the process of loan agreements. If the balance transfer rate was zero percent it was easy customers would be queuing up to get the money. If the bank wanted more money on top of the three percent transfer fee it would put the interest rate on the balance transferred account up but it was harder to sell it on. If the bank had the low interest loans in its excess reserves it could guarantee it could sell the debt on at cheap prices and sustain demand. By the nature of how the bank operated in its lending process it was essential to get the money from the central bank at the desirable price it offered. This guaranteed the ability for the bank to make a profit and to be able to receive the demand it wanted from its customers. I am not sure that the process you described in America of falling below the required reserve to then make an adjustment through the reserve facility would work. Would this process enable the bank to make a profit and to get the demand it wants? If you can see the point that I am making. The bank was making money specifically from its ability to borrow money from the central bank at a low price in advance of the loan being made to offer the price it needed to make money and get the demand it wanted. This process of holding an excess reserve, even if it was only for a short period enabled the bank to follow a profit making and price setting process that generated a guaranteed level of profit and guaranteed level of demand for the products it was selling. I am not sure if the reserve adjustment facility offers the same ability as holding an excess reserve, even for a short time, does to enable the bank to profiteer and set the price for lending it needs to get the demand it wants for its products. This process enables banks to make money effectively and provide more competitive prices for lending, it was seen as being efficient. The process you have described may not offer the same flexibility for banks to make a profit and set the prices it needs. Can the reserve adjustment facility offer this advantage?
Most people, from vice presidents down, who work in banks haven't a clue how their Central Operates and controls the wholesale price of money.
No No No. The money the Bank borrows to loan out is a liability, but only a fraction of it must be held on reserve , can't be loaned. And that small fraction just brings the bank to their required reserve amount they need, no excess! The rest is loaned out. The loan they make will be a bank asset and, because of the spread, more than balance out the money they borrowed to make the loan. The net result is an increase in the Bank's assets. If you are going to parrot back to me what I have taught you, please try to be accurate. Maybe you should check with BOE and make certain they have a reserve requirement! A reserve requirement is not necessary because reserves are not discretionary in the first place. Every bank has to maintain them in order to operate. But if their is no specific reserve requirement than the mechanism the C.B. uses to target the interest rate is slightly different. See Canada's Central Bank for example. Apparently there is a report out that the U.S. C.B. will drop its reserve requirement. It is about time and good riddance, I say.
You are not differentiating in what is classed as an excess reserve it is only a temporary surplus of funds that banks hold before lending out. In the United Kingdom it is necessary and helps banks to make profits and set the lending price they need. It is this mechanism in the United Kingdom that makes the bank competitive with other banks and makes some banks more successful than others. A banks success in the United Kingdom may be more down to how it handles its ability to set lending prices competitively through this excess fund process, even though it may only hold on to these excess funds for a few days or even a few hours. I have figured out what you are missing in your understanding of the banking system, it is this ability to make a bank competitive with other banks by offering cheaper loans. It is down to how they manage or handle the funds they borrow to lend out to customers and how this enables them to offer a more competitive price to other banks. You have taken price competition and the market for debt out of the picture. You are not taking into consideration what makes customers want to borrow from a bank, how the bank attracts it market share of lending and what it has to do to get that custom. Does the reserve adjustment facility you explain enable American banks to compete with each other. The system in the United Kingdom does through providing opportunities to take advantage of low debt borrowing offers and then passing them on to the customer. Part of a banks success is how well they manage this function. Funding from borrowing at low prices enables this competition and having the money at a good price in advance helps it.