tag:blogger.com,1999:blog-8897997766931633186.post8082719023848406788..comments2024-02-14T03:21:37.506-05:00Comments on Monetary Freedom: The Yields on Deposits and Monetary DisequilbriumBill Woolseyhttp://www.blogger.com/profile/06330232724290161369noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-8897997766931633186.post-47930117235732213962016-06-28T19:44:35.220-04:002016-06-28T19:44:35.220-04:00There is just so much to look for, as current situ...There is just so much to look for, as current situation everything is going to make a huge difference, so we got to be really careful with everything. I am following this blog quite often and get plenty of useful articles. I am currently trading with OctaFX broker through which I am able to do good job and that’s with their amazing daily market news and analysis service, it’s easy and simple to follow yet highly effective as well for me.Salmannoreply@blogger.comtag:blogger.com,1999:blog-8897997766931633186.post-80035507408369428482013-01-03T01:30:10.477-05:002013-01-03T01:30:10.477-05:00"Nor to they quickly check the yield that the..."Nor to they quickly check the yield that they are earning on their checking account before deciding to give up their wares."<br /><br />Yes they do, if their 'wares' are investments! They compare the yield and liquidity of their current holdings to the yield and liquidity of deposits. If deposits offer a better deal, they sell. If not, they don't.<br /><br />Willingness to accept a check is not the same as willingness to hold a deposit. If Congress placed a punitive tax on deposits, people would still accept checks, but the quantity of deposits would decrease.<br /><br />In fact, something like this actually happened. Deposit rates used to be capped, which didn't matter until interest rates increased above the cap in the '70s. This problem inspired the invention of the money market fund, which offered an unregulated substitute for deposits. People who would otherwise have held deposits held MMFs instead. Banks lost the business.<br />Maxnoreply@blogger.comtag:blogger.com,1999:blog-8897997766931633186.post-48466927534801416402013-01-02T20:55:02.859-05:002013-01-02T20:55:02.859-05:00I think that equilibrium deposit interest rate dep...I think that equilibrium deposit interest rate depends on the real supply and demand for deposits.<br /><br />If there is an excess supply of money, the price level rises until the real quantity of deposits equals the real demand for deposits. If the deposit interest rate is greater than the marginal cost of providing intermediation services, then banks will raise their deposit interest rates and expand their balance sheets. <br /><br />If there is some external constraint on the banking system, like redeemability in gold or a target for the growth path for nominal GDP, then banks will limit the quantity of deposits issued consistent with the constraint, and pay interest on deposits consistent with the marginal cost of providing intermediation services.<br /><br />But, banks will not adjust the interest rates they pay so that there is no excess supply or demand for deposits. Bill Woolseyhttps://www.blogger.com/profile/06330232724290161369noreply@blogger.comtag:blogger.com,1999:blog-8897997766931633186.post-45560377109289512272013-01-02T19:22:24.278-05:002013-01-02T19:22:24.278-05:00Makes sense, but then what determines the rate on ...Makes sense, but then what determines the rate on deposits? Surely banks try to set this rate to maximize profits and surely, the rate that they set will affect the quantity that people are willing to hold. Therefore, conversely, if the willingness of people to hold deposits changes, doesn't it stand to reason that the optimal rate which maximizes profits of the banks would change? Admittedly, the HPE serves as sort of an outlet to relieve pressure without rates changing by driving prices up (or potentially down) instead, but wouldn't you expect the market to be brought back to equilibrium by some combination of a change in price level and a change in the interest rate not entirely one or the other?Mike F.http://realfreeradical.comnoreply@blogger.com