tag:blogger.com,1999:blog-6948982521501107752.post863207340246399872..comments2023-10-21T09:03:15.270-04:00Comments on Rogue Economist Rants: Do bank reserves add to risk of hyperinflationRogue Economisthttp://www.blogger.com/profile/03439817966760459091noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-6948982521501107752.post-18014063540161742592011-12-09T17:20:39.175-05:002011-12-09T17:20:39.175-05:00yes agreed completely MBA.yes agreed completely MBA.Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-8191280373180489962011-12-09T08:02:57.984-05:002011-12-09T08:02:57.984-05:00I think Reserves have nothing to do with how much ...I think Reserves have nothing to do with how much banks will lend, and does not determine whether and how much hyperinflation can happen..MBA in real estatehttp://www.homburgacademy.orgnoreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-65904319549932962122011-06-29T09:07:52.116-04:002011-06-29T09:07:52.116-04:00Thank you kindly, Mario!
Good point on the 9x let...Thank you kindly, Mario!<br /><br />Good point on the 9x let benchmark, Mr Rogue!<br /><br />Yes, a loss of faith or decurrency if that is more apt..<br /><br />Hyperinflation = a general and or systemic disruption to the economy; would be my definition, which could take numerous forms....Hanshttps://www.blogger.com/profile/05183141792723754273noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-76115178516071740092011-06-28T18:48:33.764-04:002011-06-28T18:48:33.764-04:00Hans, I don't even believe that 9x is even a u...Hans, I don't even believe that 9x is even a useful benchmark. Banks will lend when are willing and able, regardless of existing level of reserves. The ability comes from equity capital cushion and the wllingness comes from demand from creditworthy borrowers.<br /><br />With regard to 'hyperinflation', I think it only ever happens when there is a general loss of faith in a currency, which results in mass flights out of it. Bank reserves have nothing to do with this phenomenon. 'Helicopter drops' of money to the general populace is more likely to do it.Rogue Economisthttps://www.blogger.com/profile/03439817966760459091noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-47953564883414426612011-06-28T11:21:33.583-04:002011-06-28T11:21:33.583-04:00got it. thanks for the clarification rogue.got it. thanks for the clarification rogue.Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-76529728549824605662011-06-28T11:19:44.532-04:002011-06-28T11:19:44.532-04:00great point Hans.great point Hans.Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-66458145270234478232011-06-28T11:16:35.329-04:002011-06-28T11:16:35.329-04:00Mr Rouge, I am not sure that even a 9x let rate wo...Mr Rouge, I am not sure that even a 9x let rate would produce "hyperinflation." <br /><br />The past twenty years of credit expansion, has not lead us to any higher level of inflation...<br /><br />Does anyone remember, Jim Rogers' announcement of the coming hyperinflation; which after two years we are still waiting.. <br /><br />The call of hyperinflation from varies quarters, including Professor Higgs, has to date been nothing more than hype...Hanshttps://www.blogger.com/profile/05183141792723754273noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-41572080644195439982011-06-27T22:41:44.480-04:002011-06-27T22:41:44.480-04:00Negative rate of return likely refers to what main...Negative rate of return likely refers to what mainstream monetarists call 'expected future inflation', which convinces people to put investments in higher risk-return investments to compensate for the higher expected inflation.<br /><br />This most affects money managers, who are expected to achieve minimum hurdle rates of return, which are now impossible due to the longstanding zero bound for treasuries.<br /><br />So it's not the reserves of banks being put into high risk investments, but more likely the asset pools of money managers, which now have nowhere else to go (since the Fed has crowded them out of risk-free treasuries)Rogue Economisthttps://www.blogger.com/profile/03439817966760459091noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-23578775086135671542011-06-27T21:41:25.705-04:002011-06-27T21:41:25.705-04:00hey will likely lend too freely if capital standar...<i>hey will likely lend too freely if capital standards remain weak</i><br /><br />exactly. couldn't agree more. It's as obvious as the light of day but still for some reason people think "regulation" equals "inefficiency." ugh<br /><br /><i>Better to be worrying about deflation instead for now</i><br /><br />yup. why is this so difficult for people to grasp? <br /><br />Higgs states, "Second, I am not convinced that the banks will remain content forever with earning a negative real rate of return on their holdings"<br /><br />what is he referring to with "negative real rate of return here? Is that b/c the rate of interest on those bonds is lower than the current rate of inflation? <br /><br />My one concern with the excess reserves from QE2 is if plain jane banks are not considered separate from their investment bank divisions. I don't know the ins and outs of how banks can exercise their reserves (could they be both the lender and the lendee for example)...I'd imagine that such "loopholes" are out there and this could lead to a "legitimate leakage" of those reserves into various investment vehicles and just wreck havoc in our financials. I don't know but I thought that such asset allocations could happen now with these banks no (aka a carry trade type scenario or something like that)?<br /><br />Cheers!Mariohttps://www.blogger.com/profile/00905402431684735610noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-47349324950452556762011-06-27T17:58:21.518-04:002011-06-27T17:58:21.518-04:00Hans, these are excess reserves pushed into the ba...Hans, these are excess reserves pushed into the banks by the Fed via QE2. Fed bought Treasuries owned by banks in exchange for cash at the Fed. i.e., reserves.<br /><br />I can't be sure, but perhaps Prof. Higgs uses the fractional reserve banking framework, which believes every $1 of reserves can be relent 9x. If you already believe reserves BY THEMSELVES can cause inflation, there's no reason to not believe they cause hyperinflation. Of course, if you believe instaed that loans are caused by loan demand and banks' capital adequacy, then $1 lent by bank A does not mean that bank B, which gets it as a deposit, relends to the next person. Bank B may may capital-deficient, or may not focus all that much in loans (perhaps it likes to place money instead in commodities plays).Rogue Economisthttps://www.blogger.com/profile/03439817966760459091noreply@blogger.comtag:blogger.com,1999:blog-6948982521501107752.post-10931812810026599732011-06-27T09:50:16.114-04:002011-06-27T09:50:16.114-04:00I would like to know why, Professor Higgs, is usin...I would like to know why, Professor Higgs, is using the term "hyper-inflation," which has not happen since the civil war, if at all ?<br /><br />BTW, one definition is 50% inflation per year... <br /><br />Are these reserved required by the central bank or simply excess cash?Hanshttps://www.blogger.com/profile/05183141792723754273noreply@blogger.com