NationStates Jolt Archive

Alright, I've been looking through the different political platforms of parties in Canada, becuase I decided it was high time I took a closer look at what every party wanted to do.

No I am slightly confused as to what this will do:

Replace Bank Credit with Currency; No Change in Number of Dollars
i.
Every dollar of bank-issued credit that is part of the Canadian money supply and that has been borrowed by persons or governments in Canada will be repaid with a dollar of Bank of Canada currency (because every dollar of credit will be replaced with a dollar of currency, there will be no change in the number of dollars constituting the Canadian money supply). Specifically, the chartered banks will be deemed to hold, at the Bank of Canada, additional currency in the exact quantity needed to pay off the those debts. The Bank of Canada will be required to provide notes to represent that currency if the notes are demanded by a chartered bank to whom they are owed.

Preventing Inflation: 100% Reserve Requirement to be Imposed
ii.
So that an increase in the money supply does not result from the issuance of the additional currency, a 100% reserve requirement will be imposed on all financial institutions in Canada: banks will no longer be permitted to increase the supply of Canadian dollars. Banks will still be permitted to lend out money deposited by their customers for that purpose, but only if the customer does not, at the same time, have use of, or access to, the money deposited by him or her.

Resultant Surplus Revenues First Used to Pay Down Remaining Debt
iii.
Steps 1 and 2 would leave the federal government with revenue that had previously been paid to banks as interest. The Freedom Party of Canada will dedicate that revenue to paying down any debt remaining after steps 1 and 2 are implemented (e.g., to pay off debts owing to foreign creditors and the federal civil service pension plan).

Now my questions about this are: is it possible?
and, if so,
then why hasent anyone else tried to do it?

I think I need someone to explain this to me in more... simpler terms.... or atleast explain how they would go about doing this. :confused:

And if you are interested you can see more of the Freedom Party's platform at:
http://www.freedomparty.ca/htm/en/policies.htm#health

At the moment form what I have read they are mostly concerned with the rich people...

Now my questions about this are: is it possible?


I'm sorry, John Q. Cutomer, but your Bank of America dollars only equate to 35 cents in Woodforest National Bank dollars. I'm afraid your transaction does not cover the fees necessary for exchange.

Bank Currency ... no ....

To be fair, your question is about Canada. I'm just letting you know how it would end up working in the US.

I'm sorry, John Q. Cutomer, but your Bank of America dollars only equate to 35 cents in Woodforest National Bank dollars. I'm afraid your transaction does not cover the fees necessary for exchange.

Bank Currency ... no ....

To be fair, your question is about Canada. I'm just letting you know how it would end up working in the US.

The Bank of Canada is not a commercial bank that you can walk into and open an account in. It is the central entity that controls Canadian monetary policy and functions as bank to the chartered banks.

http://www.bankofcanada.ca/en/about/are.html

The Bank of Canada is not a commercial bank that you can walk into and open an account in. It is the central entity that controls Canadian monetary policy and functions as bank to the chartered banks.

http://www.bankofcanada.ca/en/about/are.html

Is that a yes?

Is that a yes?
No, Keruvalia had the idea that the Bank of Canada was just another bank and that the policy you outlined would result in different banks valuing each others' currency differently. I am explaining that the Bank of Canada is the bank which issues all of Canada's currency, so when you speak of Bank of Canada dollars you are essentially saying "Canadian dollars". There would not be "Royal Bank of Canada dollars" and "Toronto Dominion dollars" and "Bank of Montreal dollars".

I imagine that policy could be implemented but it would have a stifling effect on growth and investment.

The Bank of Canada is not a commercial bank that you can walk into and open an account in. It is the central entity that controls Canadian monetary policy and functions as bank to the chartered banks.


Ok cool ... like I said ... I have no idea how banks work in Canada. :)

If it works for ya'll, great! More power to ya!

It will never work in the US. We're too greedy and short sighted.

Heh...heha...haha...HAHAHAHAHAHAHAHA.

/tear

Wow. Just wow.

I think a stream of consciousness style is best to describe my thoughts on the matter.

Replace Bank Credit with Currency; No Change in Number of Dollars

But... that will cause rampant inflation as banks lend out that money.

Preventing Inflation: 100% Reserve Requirement to be Imposed

Well, that solves the first problem but now banks won't be making any profits as they can't make anymore loans. So they will have to make all their revenue on fees.

Resultant Surplus Revenues First Used to Pay Down Remaining Debt

What surplus revenue? Given some time I will be able to buy your bank with my pocket change.

I think they are talking about "nationalizing" the national debt (and possibly all debt, I am not sure what they mean by persons and government, but that wouldn't make any sense), so they will no longer have to pay interest on it. Then imposing strict reserve requirements to prevent the banks lending out the windfall.

I would imagine that interest rates would probably go through the roof, at the very least. Most likely though, it would cause some complete form of financial meltdown.

(To be honest though, I am only speculating, their plan is not all that clear).

Edit: Yes, they are talking about retiring all debts public and private with "canada dollars". Then fixing the exact amount of dollars. I wonder how they expect to control the money supply after that though?

As things stand, commercial banks hold only a certain percentage of their total deposits in cash. Say you have a thousand customers who each have a thousand dollars in their account. The bank does not hold a million dollars in cash at all times in case every customer wants to empty their account at once. Rather, they know from experience that in most cases only 10% of their depositors will want their money on a given day, so they may hold only a hundred thousand dollars in cash. The other nine hundred thousand dollars they can lend out as mortgages, etc. and earn profits on it.

So what happens if the bank has lent out 90% of the deposits and suddenly everyone does try to withdraw the works? The Bank of Canada would have to cover the withdrawals through the commercial bank, and the result is that the original million dollars is now one million nine hundred thousand dollars in circulation (because the commercial bank cannot tell the people to whom it issued home mortgages "sorry, we thought we would have the money but now everyone has withdrawn their savings and so we need you all to give back the money we lent you to buy your home").

If you force the bank to hold a 100% reserve of all cash deposits, there is a greatly reduced pool of lendable funds. The commercial banks would be limited to lending out only funds that are "locked" such as term deposits, which depositors couldn't withdraw unexpectedly. Borrowing interest rates would skyrocket and nobody would be able to afford to take a loan or mortgage, etc.. I don't know how they would get around that problem.

That's what this policy seems to want to do.

Ignore my responce to the third part of the plan, I was still laughing from reading the first two parts and so I misread it.

Lacadaemon,

That's a very good analysis. That is excaclty what they are trying to do, and while I won't say 'meltdown', I think it's fair to say great harm.

I would imagine that interest rates would probably go through the roof, at the very least. Most likely though, it would cause some complete form of financial meltdown.

I don't know what would happen to interest rates. Fewer funds will be available so they should rise. But then, banks will have lost a significant portion of their revenue so that they couldn't offer much in interest rates to depositors.

But then, banks will have lost a significant portion of their revenue so that they couldn't offer much in interest rates to depositors.
They pay virtually no interest now anyway, curse them.

They pay virtually no interest now anyway, curse them.

Blame Greenspan, money is cheap nowadays.

(I know you live in Canada, and Greenspan doesn't determine Canada's Central Bank funding rate. But still, blame Greenspan, that's where I get my jollies).

Ignore my responce to the third part of the plan, I was still laughing from reading the first two parts and so I misread it.

Lacadaemon,

That's a very good analysis. That is excaclty what they are trying to do, and while I won't say 'meltdown', I think it's fair to say great harm.



I don't know what would happen to interest rates. Fewer funds will be available so they should rise. But then, banks will have lost a significant portion of their revenue so that they couldn't offer much in interest rates to depositors.

Well judging by the requirements for lending, they are going to require that any money that is loaned out will be 100% sequestered. So you'll end up with a two tiered system for deposits (most likely). Regular deposit accounts where the money can be easily accessed, but there is no interest paid (and almost certainly a service fee charged unless the depositor holds other "savings accounts" with the bank), and some type of certificate of deposit system where the deposit if for a fixed term, and the money cannot be accessed at all during the fixed period of the deposit.

Obviously in order to get people to put there money away for extended periods where they have no access to it will require a significant incentive, most likely in the form of higher interest rates.

At the same time, there will be far less money availble to borrow, thus driving the borrower's rates up.

At the very least it is going to wreck real property prices when no-one can get a mortage.

Moreover when you think about what this will do to the expected rate of return on capital for money loaned in Canada, it is bound to have an overall chilling effect.

But like I say, I am speculating idly. I am not at all sure that I understand this plan.

Blame Greenspan, money is cheap nowadays.

(I know you live in Canada, and Greenspan doesn't determine Canada's Central Bank funding rate. But still, blame Greenspan, that's where I get my jollies).

That man is a walking disaster. First off, no-one knows what the hell he is really saying, and secondly he seems bent on creating economic growth through bubble economies. The stock market fiasco was bad enough, that at least is an efficient capital market, but the dumbass has created a housing fiasco that could take decades to sort out.

Greenspan doesn't determine Canada's Central Bank funding rate. But still, blame Greenspan, that's where I get my jollies).
He does, really, just indirectly. Whatever he does affects U.S. spending which directs Canada's economy in a big way (it is Canada's largest foreign trade partner, naturally). So the Bank of Canada is very reactive to what goes on down south.

So I'm with you. I blame Greenspan.

I kinda figured this plan would not work, because seriously, the bank makes it's money form using our money... Stupid freedom party of Canada, you will never get this vote!!!!

Effectivly crosses freedom party off of list of possible candidates.

Possible Parties:
Liberal
COnservative
NDP (crappy web site)
Communism party of Canada
Communism (marxist/Lenninist) party of Canada
Canadian Action
Bloc (yeah right) :sniper:
Christian Heritage party :sniper:
Freedom party :sniper:
Green party
Grey party
libritarian
Marijuana
Progressive Canadian
Rino
Western Concept

(Federal Mind you)

That man is a walking disaster. First off, no-one knows what the hell he is really saying, and secondly he seems bent on creating economic growth through bubble economies. The stock market fiasco was bad enough, that at least is an efficient capital market, but the dumbass has created a housing fiasco that could take decades to sort out.

I'm not one for economic forecasting, I've always been more of a theory guy. But you know I have wondered how close he took us to a liquidity crisis.

So I'm with you. I blame Greenspan.

Mhuahahahaha! I grow in power every day. Your reign is at an end Greenspan, oh yes, soon enough, at an end.

(Hmmm... I should probably go to sleep before I go really crazy).

There are a couple of banks in Sweden that have savings accounts that would be legal under that system. They have about normal interest when lending (a little bit higher than normal banks, but they also lend to people with worse credit ratings and without security) but they pay an interest rate of 4-8% to their depositors. Normal banks give less than two, normally less than 1%. The lowest interest/shortest term state bonds have an interest rate of about 2%, so about half of the pure savings accounts. Only drawback is that you must give two bank days notice before withdrawing money, and you can only deposit when they have borrowers waiting for loans or depositors wanting to withdraw money.

As for checking accounts they would have a negative interest rate or storage fees. But they would only be used for transferring money, most of what you own you'd have in a savings account and get a lot more interest for than you get in a fractional reserve bank. I don't know of any banks that do this, but you can compare it to e-gold and other payment forms that are not related to bank accounts.