Thursday, November 29, 2012
There appear to be many misconceptions about banking out there. A gross one is that a 10% reserve requirement means that a bank can lend out ten times more money than it has on deposit from customers. The idea of a 10% reserve is that the bank is required to have that amount of money on hand to satisfy any depositors that might want to withdraw their deposits at any given time. That, in theory, should mean that the bank is authorized to lend out an amount equal to 90% of its deposits, withholding 10% to cover statistically predictable depositor demands with a safe margin in most circumstances, (except for a bank run).
That's the theory, and that's where it gets sneaky: A bank's consolidated balance sheet will show, as an example (for ATB Financial here in Alberta in 2008) outstanding loans as assets of $19,443,917 thousand ($19 billion) as against deposits (liabilities) of $21,175,716 thousand ($21 billion). This gives one the impression that from $21 billion in deposits an amount of $19 billion has been re-lent to borrowers. However, and this is important, double entry accounting used by the bank to generate its balance sheet records each loan made as both an asset and liability (i.e. deposit).
So, an average Joe, like me, looking at the balance sheet believes that a bunch of people dropped off $21 billion of their money in the bank so as to earn some interest, and that the bank re-lent $19 billion of those deposits to borrowers at a somewhat higher rate of interest, thus covering its costs and hopefully some profit for the shareholders on top of that. But as we can see, that's all smoke and mirrors.
In reality, the bank needs to have money-numbers recorded at the central bank to cover any transactions it makes with its customers because virtually all those transactions involve other banks. In reality, also, the "fractional reserve" idea only exists in textbooks and has never really been practiced. Rather, central banks have made money available to the banking system dependent upon demands from that system at any given time.
So, in times of economic slowdown, one would expect a bank to make less money than during boom times? Right?
Wrong!! These are today's numbers from the Royal Bank of Canada as per an article from CityNews in Toronto recorded here:
"The Royal Bank says it had a record annual profit in 2012, including $1.9 billion of net earnings in the fourth quarter. The quarterly profit amounted to $1.25 per share of net earnings, or $1.27 per share of adjusted diluted earnings. For the full-year ended Oct. 31, RBC had $7.5 billion of net earnings. That's up 17 per cent from 2011 and equal to $4.96 per share of net earnings or $5 per share on an adjusted basis."
What is going on here? The economy is stagnant and the bank is making a pile of money! The only explanation I can see is that the money is being made in the "paper" (financial) sector and is not generating any real wealth other than numbers in computers.
Posted by Helge at 12:28 PM
Tuesday, November 20, 2012
|November birthdays: Bob Hall, Maria Hall, Ruth Barrer, Ruby Scott, Rita Stewart, Cliff Stalwick|
Report and photos by Helge Nome
The Caroline Seniors Drop In Center was the venue for the monthly pot-luck supper and meeting on November 19, the third Monday of the month, at 6pm. Having enjoyed a hearty meal members settled down to the monthly meeting, chaired by Dwight Oliver, and discussed the issues of the day:
Members chose not to accept an offer from Clearwater County to go under its insurance umbrella, in spite of some cost savings compared to the existing insurance policy. It was felt that the deductible of $5000 under the proposed new insurance plan was rather high.
Members were made aware of the need for assistance to the Shepherd's Food Bank in Caroline where donations are made to needy individuals and families both at Christmas time and during the year.
So far, no one has come forwards to volunteer for the position of Trip Coordinator. A motion to cancel the contract for the $50/month phone line to the Drop In Center was carried as this phone never gets used. $5 membership fees for the new year are now due.
The annual Christmas dinner will be held at the Drop In Center in Caroline on Monday, December 17, at 6pm. It is a Pot Luck with the Drop-in supplying the turkey and ham. The cost is $5.00 to help with the purchases of meat and other expenses of the Drop-in. Food for the food bank would be appreciated.
On the 20th of December there will be a special social at the Drop-in for Seniors. It begins at 12 noon with a bowl of Friendship Soup, buns, bread and a tasty dessert. Games of choice begin at 1:30 p.m. If you just want to come and visit, you are welcome. A loonie covers coffee and a treat. Come for an enjoyable afternoon. If there is enough interest this program will continue in the new year.
Membership is open to anyone 50 years of age and over. Dues are $5.00 a year.
|The Bystrom Family Singers entertained at the Seniors Drop In: Sharmane, Sharlene, Shawna, Sheryle and mother Louise|
New Drop In members' program introduced by Barb Proudler:
On Thursday, November 22, members are invited to a noon bowl of beef stew and biscuit, cake, ice cream and strawberry topping. A variety of games will start at 1:30pm. Joan from Unicorn will demonstrate Swedish weaving. Come join in the fun or just come and visit. The coffee is always on.
Posted by Helge at 8:50 PM
Thursday, November 8, 2012
Under the official forecast, the economy will contract by a further 4.5pc next year, so it fair to assume that lots more people are going to lose their jobs. It is certainly not going to improve in any meaningful way for years to come.
This is what happens when you lock into the wrong currency and block the escape routes – or join a "burning building with no exits" in the words of William Hague.
Even if Greeks comply with all demands, public debt will reach 179pc of GDP next year. Perhaps there will be some sort of formula to cut debt service costs by shaving 50 basis points off interest on rescue loans, and persuading the ECB to forgo "profits" on its estimated €40 billion holdings of Greek bonds (though unrealised profits would seem be courting fate).
Yet it is hard to see how the salary and pension cuts, etc, pushed through the Greek parliament last night with enormous difficulty can do any more than buy a few months’ delay. The protests on Wednesday bordered on urban guerrilla warfare. It will not take much to cross that line.
Even if the EMU machine succeeds in keeping Greece in the system, is this any longer a remotely desirable goal? Has it not become a vicious and immoral policy in itself?
I agree with the IFO Institute’s Hans-Werner Sinn that upholding euro membership has by now become an act of cruelty. It not being done in the interests of Greeks. It is being done for the Project, by enforcers of the Project. Only by breaking free can Greece restore a minimum of economic vibrancy and national dignity.
Everything we know from labour studies is that the early twenties are crucial years, shaping lifelong career paths and earnings ten to fifteen years beyond. The worst economic crime you cannot commit is to leave 58pc of youth grinding away their days in frustration in cafés, if they can afford the coffee.
Premier Antonis Samaras issued hysterical warnings before the vote of what would happen if parliament refused to obey the EU-IMF Troika, talking of catastrophe and a collapse of Greek society. He has little credibility. His party was chiefly responsible for the grotesque mismanagement of Greece in the early EMU years. There is no necessary reason why Greece should spiral into collapse outside EMU, or why the Drachma would plummet to Third World levels.
This would happen only if the EU decided to make that happen. Why would the EU behave in such a fashion? It would have every reason to try to salvage what it could from the fiasco and demonstrate that EU solidarity is still worth something. Technically, the ECB could be instructed to defend a euro-drachma rate – let us say a 30pc devaluation – until the dust had settled.
The EIB and Commission could intervene with all kinds of investment and trade support to cushion the blow. An orderly transition is not beyond the wit of man. It would restore the basic competitiveness of the Greek economy at a stroke.
We all know the reason why this is not being done. The ideologues running monetary union cannot bring themselves to contemplate any step back in the Project, just as they would not admit yesterday in the Commission’s economic report that they have gravely misjudged the effects of fiscal tightening (the fiscal multiplier) and have therefore miscrafted their entire austerity strategy. We are not dealing with rational people. We are dealing with a religious order, and these monks are becoming an increasing danger to Europe’s societies and democracies.
Margaret Thatcher’s advisers were tagged Sado-Monetarists in the early 1980s but they never inflicted anything remotely close to this level of suffering. The strange silence of the Left on this is baffling. Sooner or later my Fabian friends will have make up their minds whether they are for the workers, or for the "bankers ramp" — as old Socialists like Peter Shore used to describe monetary union.
The Draghi Put has lifted the immediate financial threat, but this makes matters worse. The drip-drip of ugly economic data continues each day. The deeper structural crisis is still getting worse. Loan demand has crashed 50pc in Italy and France. Spain’s unemployment is 25.8pc and may reach 30pc next year.
Yet there is no longer any immediate catalyst or external umpire in the markets that can bring this mass civic abuse to an end. Unless the Bundestag comes to the rescue by refusing to pay for any more can-kicking, we may have to wait until internal devaluations in the Club Med bloc push jobless rates to such excruciating levels that the political system snaps.
It is the worst of all worlds.
Article source here
Posted by Helge at 9:29 AM
Sunday, November 4, 2012
|Crammond Community beef supper|
Photo and story by Helge Nome, Alberta West News
The Crammond Community Association hosted its annual beef supper on Saturday, November 3 in the Crammond Hall. This is a popular event that draws people from all over the west country and the proceeds help the community association volunteers maintain the hall and property on Highway 22 south east of Caroline.
The hall is a popular venue for meetings and community functions, such as the supper, and is also used by local local oil and gas companies for their functions. With ample RV parking available, the hall is used extensively for family reunions in the the summer. For more information about the hall and photos of it and the surrounding property, go here
Posted by Helge at 2:37 PM