While interesting, that title is misleading (this has nothing to do with banks and is actually a critique of our Federal Government), has nothing to do with bank profits, she definitely did not write that herself and critics are right, allowing the gov to borrow from the BoC would allow them to essentially print their own money.
Meanwhile Canada's 5 biggest banks earned a total of $6.55 billion in the second quarter....
And? Banks making $6.5 billion dollars in a quarter is a good thing; it means they aren't losing $2 billion like JP Morgan and causing a financial calamity.
Banks are a necessary evil. Find me a country that doesn't have a stable banking industry and I'll show you a place you probably don't want to live.
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I didn't know that profits were illegal, and that company profits = enslavement of people.
Its another occupy argument that's becoming popular.
Its great that she wrote a paper and speech, he just has a very weird understanding that its not always good to have the government get open access to cheap money.
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A lot of her arguments are really naive though. Sure, banks make some money lending money to the government(s), but so do bond holders. A lot of those bond holders happen to be regular citizens, pension funds, and investment funds. That money is a loan that requires interest, otherwise no one will lend the funds. So, while its great to say we shouldn't have to pay interest so someone else can profit, you run into that little flaw of no one lending you money.
She is right that every bank is basically insolvent though; I don't know if the figures she uses are correct and just take them at face value, but that's why a run on a bank is so dangerous. Banks don't have the money to pay everyone out on every given day. It sounds like a shocking truth she has uncovered here, but it's a fairly well know fact in the financial world. While the average guy might be thinking "what?? How can we have let them get away with this??" It's really nothing new.
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A lot of her arguments are really naive though. Sure, banks make some money lending money to the government(s), but so do bond holders. A lot of those bond holders happen to be regular citizens, pension funds, and investment funds. That money is a loan that requires interest, otherwise no one will lend the funds. So, while its great to say we shouldn't have to pay interest so someone else can profit, you run into that little flaw of no one lending you money..
Good points, but I'd even take it one step further. You've essentially got a government that's funded by taxes (people and businesses), bondholders (people, businesses, institutions(pensions), and debtors (banks). At the end of the day, all, of the cash coming in or out is going to lead to an individual (in dollars, services, etc)
So the Royal Bank earned $X billion in profits, thats just $X billion more flowing into individuals and the government in taxes. Arguments like hers paint corporations as some money eating pit where these grotesque profits are earned and hoarded away for some fictional entity. Nothing is stopping her or anyone else from owning their share of these banks and getting some of those earnings for themselves.
At the end of the day, regardless of where the funding/profits are coming from, it will eventually end up with an individual (in one way or another); the real arguments to have are the distribution of that wealth, and the impacts of foreign ownership.
Oh, and don't even get me started on the multitude of issues that occur from simply borrowing from the BoC. "Why borrow money when you can just make more money.....for free!" I eagerly anticipate the Twelve Billion Zimbabwe Canadian dollar note.
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And? Banks making $6.5 billion dollars in a quarter is a good thing; it means they aren't losing $2 billion like JP Morgan and causing a financial calamity.
Banks are a necessary evil. Find me a country that doesn't have a stable banking industry and I'll show you a place you probably don't want to live.
6.5 billion works out to just over $200 for every Canadian.
Not a huge amount of money when you consider that without banks noone except the extremely wealthy would be able to buy a home or start a business. You'd also have to guard your money with a shot gun and wouldn't be able to conveniently access it from a bank machine or debit card.
Not to mention that when a bank makes money, that doesn't necessarily mean someone is getting screwed (although convenience fees really piss me off). It is possible for both the investor/lender and the borrower to both profit.
The reason why the Canadian government pays so much in interest? The baby boomers overspent horribly to maintain a non-sustainable life style. And the banks don't own most of the debt. Canadian citizens do through the purchase of securities such as bonds. If you want to get the government out of debt, just give them your GICs.
This girl's dad, who clearly wrote this speech, deserves a kick in the nuts. For both the non-sensical speech and exploiting his daughter.
A bank has 10 people walk in the door and leave $1 each. The bank has $10.
Regulators require the bank to keep $1.2 around and on hand. This is called a Tier One Capital Ratio.
The bank is also supposed to have a way to generate another two dollars or so fairly quickly in case of unlikely but possible demand from depositors. Other tiers of capital ratios.
The bank then lends out the other money.
Therefore the bank has about $1 on hand, a few other dollars close at hand and the rest is gone into the economy.
The banking industry for centuries has been built on the scenario that no more than one or two of those ten people at any one time is going to show up and ask for their dollar back on any day of the week.
It is essentially true that banks are insolvent in that they don't have your money at hand if you and nine other people showed up and asked for it.
Its also a practice built on centuries of practice and common sense.
Where the world got in trouble in 2008 is that a firm like Bear Stearns effectively owed $32 for every $1 it had on deposit. It needed everything to go right. All the time.
Banks make profits. In Canada, we give them semi-monopoly status in exchange for heavier regulatory oversight versus other countries. Our banks are generally prevented from driving themselves over cliffs because they would eventually if given the chance. We pay for that benefit through reduced competition.
Quid pro quo.
The notion that banks shouldn't make money or that there should be limits on the amount a bank or a banker can make is absurb. It misses the entire point.
Banks are essential to a modern economy. They help the blood (money) flow through the body (the economy). Without blood flow, you're dead.
Its about the level of regulatory oversight. There should be more of it. Bankers should not be trusted to know what the best level of oversight is. That's where the people come in and can protect the system through regulatory bodies.
My two cents.
Cowperson
Cowperson
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A bank has 10 people walk in the door and leave $1 each. The bank has $10.
Regulators require the bank to keep $1.2 around and on hand. This is called a Tier One Capital Ratio.
The bank is also supposed to have a way to generate another two dollars or so fairly quickly in case of unlikely but possible demand from depositors. Other tiers of capital ratios.
The bank then lends out the other money.
Therefore the bank has about $1 on hand, a few other dollars close at hand and the rest is gone into the economy.
The banking industry for centuries has been built on the scenario that no more than one or two of those ten people at any one time is going to show up and ask for their dollar back on any day of the week.
It is essentially true that banks are insolvent in that they don't have your money at hand if you and nine other people showed up and asked for it.
Its also a practice built on centuries of practice and common sense.
Where the world got in trouble in 2008 is that a firm like Bear Stearns effectively owed $32 for every $1 it had on deposit. It needed everything to go right. All the time.
Banks make profits. In Canada, we give them semi-monopoly status in exchange for heavier regulatory oversight versus other countries. Our banks are generally prevented from driving themselves over cliffs because they would eventually if given the chance. We pay for that benefit through reduced competition.
Quid pro quo.
The notion that banks shouldn't make money or that there should be limits on the amount a bank or a banker can make is absurb. It misses the entire point.
Banks are essential to a modern economy. They help the blood (money) flow through the body (the economy). Without blood flow, you're dead.
Its about the level of regulatory oversight. There should be more of it. Bankers should not be trusted to know what the best level of oversight is. That's where the people come in and can protect the system through regulatory bodies.
My two cents.
Cowperson
Cowperson
You seem pretty optimistic about the current banking system.
The reality is that the founding documents of America and Canada (and other Western nations) give the elected body the power to create and regulate the value of their national currency.
We have essentially outsourced this power to private interest (banks). In Canada and America, the government can no longer get their treasury to spend money into the economy, interest free like before.
Considering the debt levels of most western nations, this system is obviously .....unsustainable.
I don't agree that oversight will keep this in check.
The Canadian government has been borrowing since 1974, and our national debt has exploded since then. The Americans have been doing this since 1913, when the Federal Reserve was set up.
People always wonder why we can't have better health care, education etc,.....it's because interest payments eat alot of our tax money. We in Canada and America have payed trillions in interest since this system came to be. After the Pentagon budget, the interest payments on national debt is the biggest financial commitment the U.S. taxpayer has.
According to debtclock.ca, we in Canada pay $86 million per day in interest on the national debt.
When you combine this monetary system with an out of control governing class who couldn't balance a budget to save their lives, what we have is an unsustainable system that will lead to economic ruin.
If the religions of the world got one thing right, it may have been the hatred of the concept of usury....
Last edited by mikey_the_redneck; 06-02-2012 at 10:48 PM.
And? Banks making $6.5 billion dollars in a quarter is a good thing; it means they aren't losing $2 billion like JP Morgan and causing a financial calamity.
Banks are a necessary evil. Find me a country that doesn't have a stable banking industry and I'll show you a place you probably don't want to live.
Um....JP Morgan earns 5.4 Billion a quarter on its own and has a balance sheet in the trillions.
TD Canada doesn't do a lot of risk, and has been criticized for it by other Canadian banks, but they did the best during the 2008 crisis.
I do believe the CEO of TD Canada has said that banks need to have more regulation because they will easily cause themselves to fail by taking on risk at levels that they don't even realize.
I'm not too worried about our financial system. It has been tried, tested and proven to withstand a global meltdown.
You seem pretty optimistic about the current banking system.
The reality is that the founding documents of America and Canada (and other Western nations) give the elected body the power to create and regulate the value of their national currency.
We have essentially outsourced this power to private interest (banks). In Canada and America, the government can no longer get their treasury to spend money into the economy, interest free like before.
Considering the debt levels of most western nations, this system is obviously .....unsustainable.
I don't agree that oversight will keep this in check.
The Canadian government has been borrowing since 1974, and our national debt has exploded since then. The Americans have been doing this since 1913, when the Federal Reserve was set up.
People always wonder why we can't have better health care, education etc,.....it's because interest payments eat alot of our tax money. We in Canada and America have payed trillions in interest since this system came to be. After the Pentagon budget, the interest payments on national debt is the biggest financial commitment the U.S. taxpayer has.
According to debtclock.ca, we in Canada pay $86 million per day in interest on the national debt.
When you combine this monetary system with an out of control governing class who couldn't balance a budget to save their lives, what we have is an unsustainable system that will lead to economic ruin.
If the religions of the world got one thing right, it may have been the hatred of the concept of usury....
Your sound like you just read Peter Schiffs new book "America's coming Bankrupctcy".
I'm not too worried about our financial system. It has been tried, tested and proven to withstand a global meltdown.
It's like that old joke about two campers woken from their sleep because of a bear. One starts pulling on his shoes and the other says "you're crazy, you'll never outrun a bear", to which the other replies "no, I only have to outrun you".
Same with banking and international economics in many ways - we don't need to have the perfect system, we just have to ensure we have the best of the rest.
If a 12 year old could solve the problem the world currently finds itself in it would have been solved a long time ago. The suggestion that moving the ability to print money into the hands of politicians will solve any problem is ludicrous. How about the country just stopped running deficits, that's how you stay out of debt.
To provide a counterpoint to Mikey, debt is not bad when used to generate opportunities to grow the economy. Interest provides a way to assess the time value of money, so a project/business can decide whether spending money on something is worth it. The concept of debt and interest also rewards people who can save, providing a return for money stored away. Doing away debt is not possible anymore.
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12 year old delivers scathing critique on Canadian Banks
