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by dan-robertson
1748 days ago
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Banks don’t get to create money. Quantitive Easing isn’t something banks can call up on demand and it isn’t banks getting loads of free money. Instead they sell certain slightly risky assets to the government at a slightly higher price than they would be worth without QE. This small price difference is the free money but the bigger difference is that the banks have more liquid cash to use for e.g. making loans. I think mortgages are pretty competitive, especially for reasonably well-paid people and there isn’t really that much profit made by the banks (your interest corresponds to inflation and the risk that you default on your loan with the house price having fallen. Money today is worth more than money in 25 years and you have to pay the difference. |
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Literally every loan a bank gives out is mostly made up on the spot, everywhere in the world.
In some countries, banks are subject to reserve requirements — typically from fractions of a percent to some percents of their liabilities to depositors. Basically: banks need to cover the savings of people.
In the UK (and many other countries), this is not the case; banks are not required to have cash on hand in relation to their liabilities to depositors.
Instead, they are subject to capital requirements, which means they need to have sufficient equities (cash, securities, other financial instruments) with sufficient liquidity in relation to their risk-weighted assets (credit and loans). In effect: banks need to cover the investments of the investors.