Re: Re: Re: Current (heterodox) thinking oninterestrates?
CB: In general, I think of bankers wanting high interest rates for the obvious reason that it is the price of money ( which they "sell" in loans). I think they are this much "in your face" at one level, but I can see that this simple profitmaking would be contradicted by other factors effecting them in the context of recessions that high interest rates induce. again, they also borrow money, so they care about the _spread_. CB: The Fed sets the rate at which it lends to the ??? What is the relationship between the Fed rate and the spread ? Also, aren't most of the banks' revenues not from their borrowing ? The Fed sets the discount rate, the rate at which it lends to banks. It has enough power over money markets to keep the "Fed Funds" rate on the target they choose. (That's the rate on loans between banks for very short periods.) The "spread" can refer to any gap between two interest rates. Here I'm talking about the gap between deposit rates (close to zero these days) and loan rates. The spread can and does change over time. It mostly changes due to supply demand, specifically due to changes in expectations of future inflation, risks, etc. Banks make profits from other things, like from running trust accounts, underwriting investments, etc. I don't know the percent of profits that comes from such "off-balance-sheet activities," but Mishkin says that the income coming from these has doubled as a percentage of assets since 1979. CB: My contradiction on this is, don't monopolies foster inflationary pricing ? Monopoly power encourages inflationary persistence, as when inflation continued in the face of the early 1970s recession (that's just the clearest case). However, the US economy has become much more competitive during the last 20 years. Is this a contradiction between big banks and other big companies ? This is a big question, so I'll avoid it. Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
Re: Re: Re: Re: Current (heterodox) thinking oninterestrates?
Jim Devine wrote: Monopoly power encourages inflationary persistence, as when inflation continued in the face of the early 1970s recession (that's just the clearest case). However, the US economy has become much more competitive during the last 20 years. Interesting contrast with the Specter of one big company in our future? By Russell Mokhiber and Robert Weissman which Charles Brown just posted. My casual impression is that the US economy has and is becoming more concentrated. What's yours? Banks have merged, electric companies are merging, gas companies have merged with each other and are merging with the electircs. Oil, cars, Pentagon favorites, etc. etc. There is the cheap stuff from overseas weighing on prices, but domestically? And of course the shake-out in dot.coms is just beginning. Gene Coyle
Re: Re: Re: Re: Re: Current (heterodox) thinking oninterestrates?
My casual impression is that the US economy has and is becoming more concentrated. What's yours? it depends on one's time frame. Compared to the "good old daze" of the 1950s 1960s, the US economy is currently less monopolistic, not only due to globalization but also deregulation of trucking, airplanes, etc., and anti-trust (ATT), along with some technical change. But I think the long-term trend in the future is toward increased monopolization, as seen as the major world auto companies edge toward creating a world oligopoly. Banks have merged, electric companies are merging, gas companies have merged with each other and are merging with the electircs. Oil, cars, Pentagon favorites, etc. etc. right, but you should realize that a lot of banks had local monopoly power before they merged with out-of-state banks, etc. Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
Re: Re: Re: Re: Re: Re: Current (heterodox) thinking oninterestrates?
The airlines are highly concentrated. Deregulation caused a temporary dip in concentration which has now been overcome. They fix prices oligopolistically. Jim Devine wrote: My casual impression is that the US economy has and is becoming more concentrated. What's yours? it depends on one's time frame. Compared to the "good old daze" of the 1950s 1960s, the US economy is currently less monopolistic, not only due to globalization but also deregulation of trucking, airplanes, etc., and anti-trust (ATT), along with some technical change. But I think the long-term trend in the future is toward increased monopolization, as seen as the major world auto companies edge toward creating a world oligopoly. Banks have merged, electric companies are merging, gas companies have merged with each other and are merging with the electircs. Oil, cars, Pentagon favorites, etc. etc. right, but you should realize that a lot of banks had local monopoly power before they merged with out-of-state banks, etc. Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
