It’s Wednesday and we have some snippets that really just make way for the music feature. Today, I consider the recent inversion of the US yield curve, which is typically a sign that recession is around the corner. We also learn that while most people are being hit with rising prices and flat wages, the banks are recording record net interest income as a result of their non-competitive, cartel like behaviour. And we wonder how more silly can the Swedish central bank prize in economics become. And then, after all that, we have the music feature to rescue the day.…
Bill Mitchell – billy blog
Banks gouging super profits, yield curve inversion – nothing good is out there
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
Banks gouging super profits, yield curve inversion – nothing good is out there
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
4 comments:
“ the banks have to source higher cost finance and they will quickly move to increase deposit rates.”
No they won’t because the reserve assets will go to the RRP with the reduction in deposit liabilities…
(A-L)/A
Numerator is unchanged and the denominator is reduced…. INCREASES ratio and banks can accommodate even higher loan assets…
JPM just kicked Kanye to to the curb and told him to go to the RRP last week…
Banks are actively seeking to REDUCE deposit liabilities …
MMT bigwig lost on banking.
Come on guys. I know Bill has jumped a few sharks recently, but you know what he's getting at.
When RRP/QT has drained the excess reserves fat and we're into the bone of actual risk assets, then what happens to the deposit beta?
Particularly when the risk assets start to show signs of distress.
Bill is saying move your money out of banks to force them to start paying better rates of interest. By invoking the RRP you've confirmed his point. Until the banks want deposits they won't shrink their net interest margin. Why should they?
re: the base effect as regards net interest margin
This from Tim Worstall:
The Guardian complains that savings rates aren’t rising:
The artificially low interest rates of the past decade compressed banking interest rate margins. As rates rise we expect to see decompression here. We can even see it in the quarterly results of the banks – their gross interest margins are expanding. We have, that is, a reversion to the status quo ante.
In other news, bank shareholders are loving those higher interest rates and net interest margins. Here in Canada, the S&P/TSX Composite Banks Index is down 16% YTD. Oh, wait.
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