Why do you think I'm Austrian? (I'm not). I'm not sure anything I say implies I have a supply concept of money. Again - there's no aggregate change in money supply when savings deposits are converted to securities. This is what we are talking about. Northern Rock was different: it was a concern that the asset side is worth considerably less than it should. Further, it's a run on Northern Rock, not a systematic run on UK banks. If you insist on talking about individual banks (and not about any impact on the aggregate banking system), then it's not particularly useful for this discussion. Individual banks fail all the time for various reasons.
I never said there was an aggregate demand change. I just said it could create a bank run. You are confusing me with someone else. Don't forget Lloyds group urm and also HBOS and RBS. That is not just one bank and they make up a huge percentage of the banks. The reason I think you are an Austrian is because the Monetarists seem to use a debit or credit understanding of money circulation. You do not. What school do you follow then?
No money is a means of exchange. Credit is "a proxy for future consumption at the expense of current consumption".
Sigh... first, credit is a proxy for current expenditure at the expense of future expenditure. And yes, money is a means of exchange as one of its primary function. The other function - as a store of value - is what I said. QUOTE]Quote from morganist: No money is a means of exchange. Credit is "a proxy for future consumption at the expense of current consumption". [/QUOTE]
No, you keep talking about individual (rather than macro) effects when the thread is talking about macro implications of investment flows. I pointed out that on a macro level it doesn't matter, and on a micro level it doesn't matter. Now, if enough deposits are flowing out of Lloyds/RBS/BoA to matter - I got two questions for you: (1) where will that money go? (hint: custodial accounts at the same banks; and (2) what will they buy? there's not enough assets that can be purchased that those level of flows. How is everything I'm saying not coherent to the monetarist view of money and the economy? (also, "What school do you follow then?" makes this sound like a kung fu movie).
Your making a big assumption that the money taken out will be reinvested in the same bank or in banking products at all. Also it could leave the country. The point I was making is that huge bank runs have already happened and the central bank failed. It had to call in the Government. The Government cannot even hold it. As you pointed out there is not enough assets to spend all that money on. In relation to your point about why I think you are not Monetarist. It is because the demand side understanding of money circulation is closer to what they seem to follow, as per "their" understanding of credit and debit to the economy. Your understanding is supply side and more in line with Austrian. Your explanation of how money circulated in from banks to stocks was closer to the supply side.
This is so completely silly: you are keen to argue that it's possible for enough investment flows to occur to endanger a bank. I agree it's possible. I argue that if it happens, it must always be a localized situation - if even that. It will be handled by the FDIC for US banks or by the financial service compensation scheme in the UK. Systematically, it's not possible for it to have any major effect for large diversified economies like the US or UK. If you are interested in arguing this part, we'll continue. Otherwise, it's boring: who cares about an isolated bank fail - happens ALL THE TIME. Northern Rock was a VERY different kind of failure. I really can't see how it's relevant to the topic at hand. Finally, judging from your whole Monetarist/Austrian spiel, you seem to be so concerned with talking about ideologies (that are completely divorced from the concerns of the theories themselves) as to miss the whole point of macroeconomics.
The reason for the Northern Rock run was as a result of the subprime and the inability of debtors to repay debts. This meant there was not enough money to cover withdrawals. I think this situation will occur again in the future. Just my opinion. I can't see people investing from abroad anymore if the interest rate is negative, that will have an impact on demand because it is supported by credit. Less demand less employment and more default, a negative cycle. In relation to the more OP comment. I think the withdrawals will leave the country in many cases and prices of precious metals will rise. There is no limit to how high the price can rise. I have set what I think will happen very clearly. We will see in time if I am right. Besides we are looking at inflation in the near future. At least in Britain.