Why banks won't loan $ to small business.

[Lynnie]

It's a liability on one ledger, but if a bank lends money, it's an asset (collateralized) or A/R on the balance sheet. Rates are going to go up....we just don't know when. I'm surprised there isn't more money between the member banks changing hands for the overnight rate, but we just aren't in that climate right now.

Since it's stimulus money, I'd like to see some legislation enacted that it's earmarked for lending only.....not for investing in the safest instrument in the World. The banks might then get their hands dirty trying to help small to medium sized businesses.

 

[scooterbug44]

Question - if banks get money from the government and then use it to buy t-bills (instead of lending it etc.) isn't that a deficit increasing double whammy?

I thought that since the government didn't have that money in the first place they had to sell treasury bills to "raise it".

Once again, I am trying to find a phrase to describe the process (one that I could say in front of Mama Scooterbug w/o getting smacked) and am failing.

Is anyone (besides the banks who caused this mess) benefiting from this arrangement? It sounds like we are racking up more debt so these banks can make a profit while they screw over the taxpayers.

 

[futurebeachbum]

Question - if banks get money from the government and then use it to buy t-bills (instead of lending it etc.) isn't that a deficit increasing double whammy?

I thought that since the government didn't have that money in the first place they had to sell treasury bills to "raise it".

Once again, I am trying to find a phrase to describe the process (one that I could say in front of Mama Scooterbug w/o getting smacked) and am failing.
.

How about "Money in Perpetually Bad Motion"?

 

[30ashopper]

Question - if banks get money from the government and then use it to buy t-bills (instead of lending it etc.) isn't that a deficit increasing double whammy?

I thought that since the government didn't have that money in the first place they had to sell treasury bills to "raise it".

Once again, I am trying to find a phrase to describe the process (one that I could say in front of Mama Scooterbug w/o getting smacked) and am failing.

Is anyone (besides the banks who caused this mess) benefiting from this arrangement? It sounds like we are racking up more debt so these banks can make a profit while they screw over the taxpayers.

The FED 'prints' the money the banks borrow. Somebody would buy the tbils, it doesn't have to be these banks that borrow. Open up your wallet and take a look at a dollar bill, on the upper left you'll see "federal reserve note". It's backed by the federal government "on faith".

 

[scooterbug44]

Where did I get the t-bill sales as a way for us to "borrow" money?

I thought it still had to come from somewhere - or I am too logical to properly understand this cluster?

I thought "faith" equaled "people willing to buy treasury bills."

 

[idlewind]

Where did I get the t-bill sales as a way for us to "borrow" money?

I thought it still had to come from somewhere - or I am too logical to properly understand this cluster?

I thought "faith" equaled "people willing to buy treasury bills."

T-bills are debt, no more, no less. You are emminently logical but discussing the most illogical organization on earth: the US government.

What will happen when people no longer have "faith?" I think they call that hyper-inflation.

 

[Lynnie]

And, that faith is backed by the United States Taxpayer at the whim of the taxing authority, which is why Treasuries are the safest investments in the World.

 

[scooterbug44]

I think the financial sector, government, and health insurance are in a 3 way tie for most convoluted, illogical, and outright dumbarse way to do things. :roll:

But back to the original question - aren't we technically ending up worse off because the banks are using "debt money" to buy t-bills instead of lending it?

 

[30ashopper]

Where did I get the t-bill sales as a way for us to "borrow" money?

I thought it still had to come from somewhere - or I am too logical to properly understand this cluster?

I thought "faith" equaled "people willing to buy treasury bills."

The U.S. Treasury manages the finances of the federal government. Income, expense, and issuing debt. That's it.

The FED is charged with managing the money supply, it can create and destroy money at will.

When the FED lends to a bank, they boot up their computer, open the reserve account of the bank (all banks have to have them) clickity click, tappity tap, APPLY. It's done, money is created. When the bank pays the FED back, the same thing happens in reverse, the bank transfers funds into their reserve account, and the FED deletes it.

Faith in our currency is, well, exactly that. We use to back our money with gold, but we gave up doing that in the 70s. Now it's just based on faith that it'll be worth something. We can break that faith if we want to, most notably, by printing more money, decreasing the buying power of the dollar.

Sometimes when the FED wants to stave off deflation, it will monetize treasury debt as a way of pumping cash into the system. The FED will buy treasury issued t-bils, flushing the monetary system with cash. (It's doing this right now.) When the FED wants to fight inflation, they suck money back in and destroy it.

 

[LuciferSam]

Shelly once posted a great video on how money is created but I can't find it. If I remember the video talks about how our economy relies on increasing consumption to grow. Real estate is the tangible item that backs up the shell game. I think it suggests replacing the system with an infrastructure based economy. Some would call that big gov socialism.