A friend from India writes of a local bank that "Capital Adequacy Ratio as per Basel II guidelines is 16.5 percent well above regulatory minimum of 9 percent....translation...aggressive but financially not reckless.. ."
Yet this whole issue of "adequate capital ratio" for banks misses the entire point of having banks.
In a country with a fiat currency, banks are licensed by the state to provide accurate, honest credit evaluations. Thereafter, loans create (mostly) FDIC-insured deposits, and trigger bank-reserve notation with the CB (central bank).
Banks rarely, if ever, fail for lack of their own capital. They fail when fraudulent or incompetent bank managers arrange bad loans by various means that all fail the original banking license provisions. That, in turn, can happen ONLY when there is incompetent or dishonest bank regulation - usually per politics; usually per a complacent, lazy, foolish electorate. There is an unbroken causality chain.
The solution?
An adequate regulatory ratio.
NOT just some arbitrary capital ratio.
(This ain't rocket science.)
Is an adequate capital ratio in banks like keeping extra gas in your car, in case the engine/transmission/brakes/drivetrain ever breaks down? What you really need is a better maintenance program, not just the personal risk of losing extra gas in the tank. That's crude & unproductive thinking, and it doesn't stop crooks from arranging accidents and collecting the insurance money.
Why not just replace most banks & CBs with GoogleMoney, or some other cell phone app? And invest in a lot more banking maintenance instead?
Russell Huntley writes: "Good explanation, but capital requirements are becoming more of a focus [among limited intellect politicians] because regulators, don't trust the accuracy of the bank reporting."
Ya think? And do we trust the productivity of regulators, OR of politicians? ??
Weepin' Buddha on an incline! Start by getting some better @#$%&! regulators!!! Then get some better politicians. Then get a better electorate. Do that or just kiss your grandchildren goodbye, tell 'em it's all faux love, and that you really don't give a rat's patootie about them or their future. Be honest.
Do cops say they don't trust the self-reports of crooks, and ask for crooks to place bonded deposits? No! They walk their damn beats & make their own reports. Sheesh!
Ditto for electorates. Do NOT listen to crooks saying it's too expensive to regulate crooks. Just how dumb do we think we are?
In any organization, EVERY process it too important to be left to the presumed process owners. That's what "organization" means. Look up the word in a dictionary. An organization is NOT a collection of complete Libertarians granted the miracle of unlimited, real-time calculation power enabling them to instantly evaluate infinite choices. Return on coordination requires investment in the cost of coordination - which means everyone looking into everyone else's operations, to see how to compound team return. That, for example, is why rugby is a great game. It never stops, and requires all players to continuously auto-organize and invent ways to benefit the team, no matter what the situation. Like business and reality, it's not scripted - except the general setting. Scripted politics produces slow, stupid policy. We need fast and smart to craft successful national policy.
Weepin' Buddha on an incline! Start by getting some better @#$%&! regulators!!! Then get some better politicians. Then get a better electorate. Do that or just kiss your grandchildren goodbye, tell 'em it's all faux love, and that you really don't give a rat's patootie about them or their future. Be honest.
Do cops say they don't trust the self-reports of crooks, and ask for crooks to place bonded deposits? No! They walk their damn beats & make their own reports. Sheesh!
Ditto for electorates. Do NOT listen to crooks saying it's too expensive to regulate crooks. Just how dumb do we think we are?
In any organization, EVERY process it too important to be left to the presumed process owners. That's what "organization" means. Look up the word in a dictionary. An organization is NOT a collection of complete Libertarians granted the miracle of unlimited, real-time calculation power enabling them to instantly evaluate infinite choices. Return on coordination requires investment in the cost of coordination - which means everyone looking into everyone else's operations, to see how to compound team return. That, for example, is why rugby is a great game. It never stops, and requires all players to continuously auto-organize and invent ways to benefit the team, no matter what the situation. Like business and reality, it's not scripted - except the general setting. Scripted politics produces slow, stupid policy. We need fast and smart to craft successful national policy.
And while we're at it, get a better @#$%&! electorate. This one's getting what it deserves.
You hear that Joe & Jane SixPack? Time to get involved & read the manuals. You want a country that works? Then start acting like an owner again. Find out for yourself what everyone's job is (hint: they all work for you, every last one). Then, personally reassign* every last person who isn't doing their job. Today.
* Reassign, not fire. No one shirks, no one hides, and all must be given meaning by contributing something, somewhere. If we want a nation that succeeds, then everyone must be allowed to be a valued part.
11 comments:
Why not just replace most banks & CBs with GoogleMoney, or some other cell phone app?
That's just what digital currencies like Bitcoin aim at doing.
An increasingly large number of people realize that the only way to take control of one's life is to set up an alternative system. Started back in the 70's and is building steam now globally due to the net and social media.
It's true that some of these initially community based networks like eBay and FB have gone regrettably corporate, but this is just the beginning of a whole new trend that will transform the global village in unforeseeable ways. There's going to be a whole lot more alternatives and nuanced options (niches) within them.
Two minutes:
http://marcbrecy.perso.neuf.fr/history.html
@ jrbarch
Great. Thanks for sharing.
Here's the link
Two Minutes
"Reassign, not fire. No one shirks, no one hides, and all must be given meaning by contributing something, somewhere."
Your footnote did not go un-noticed... good stuff Roger ;) rsp
Bitcoins and the like will be the new derivatives, a ground ripe for scammers, speculators and Ponzi schemers. There is no reason to think these homemade and unregulated currencies will provide any more security than the spontaneous use of Bazooka Joe comics or cigarettes as local moneys. Here one day; gone the next.
Money is a vitally important public utility. It needs law, careful thought and state organization - not the the moonbeams of laissez faire, anarchist fantasy.
@ Dan K
Until the robbers are ejected from power, alternatives will spring up on the left, right, and in between (criminality). There will be varying degrees of success as different alternatives are tried, most of which will either fail or be suppressed, especially if perceived as a threat.
The robbers won't be ejected by people retreating into their libertarian-anarchist mini-paradises Tom.
Radical individualism is an illusion. We're all part of the continent and there is no escape. I don't care about "taking control of my own life." I'm already 53 and life passes pretty quickly these days. My individual life doesn't matter much. I'm more interested in working with millions of other people to take charge of the life of this country, and the global life of enduring humanity. Those things will last a lot longer.
Everyone makes their own choices, Dan. Some try to beat the system, others oppose in in the belly of the tiger and others ignore the nonsense, adopt alternatives and create their own world. Always been such and always will until humanity grows up.
Under full reserve it’s virtually impossible for banks to fail (plus there is no taxpayer funded subsidy for banks). Reason is that almost the entire liability side of banks’ balance sheets is loss absorbing: in particular, depositors who choose to let their bank lend on or invest their money take a hit if those loans or investments go wrong.
If I invest in corporation X, Y and Z, and they fail, I take a hit. But under the current system, if I invest in X, Y and Z via A BANK and it goes wrong, the taxpayer rescues me. That is totally illogical.
The only liability that is not loss absorbing are deposits which depositors have said they want to be 100% safe. That money is NOT LOANED ON OR INVESTED, thus it is very safe (it could be lodged with the central bank).
Simple.
Dan K, Tom,
Diversity is the source of all resilience. Don't worry about diversity, only the lack of it.
Tolerance limits is what we need to worry about.
"Weepin' Buddha on an incline! Start by getting some better @#$%&! regulators!!! Then get some better politicians. Then get a better electorate. Do that or just kiss your grandchildren goodbye, tell 'em it's all faux love, and that you really don't give a rat's patootie about them or their future. Be honest.
Do cops say they don't trust the self-reports of crooks, and ask for crooks to place bonded deposits? No! They walk their damn beats & make their own reports. Sheesh!
Ditto for electorates. Do NOT listen to crooks saying it's too expensive to regulate crooks. Just how dumb do we think we are?"
Love it, Roger! Keep it up!
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