Graeber in the Guardian

Graeber in the Guardian seiing on the reporthttp://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity The actual report can be read herehttp://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf “A bank’s business model relies on receiving a higher interest rate on the loans (or other assets) than the rate it pays out on its deposits (or other liabilities). Interest rates on both banks’ assets and liabilities depend on the policy rate set by the Bank of England, which acts as the ultimate constraint on money creation…But whether through deposits or other liabilities, the bank would need to make sure it was attracting and retaining some kind of funds in order to keep expanding lending…Competition for loans and deposits, and the desire to make a profit, therefore limit money creation by banks. Banks also need to manage the risks associated with making new loans. One way in which they do this is by making sure that they attract relatively stable deposits to match their newloans, that is, deposits that are unlikely or unable to be withdrawn in large amounts. ”

---

 —And of course they overlook the explanation that QE was not free money given to banks or that it is used for commercial lending – “the new reserves are not mechanically multiplied up into new loans and new deposits as predicted by the money multiplier theory. QE boosts broad money without directly leading to, or requiring, an increase in lending.” Those banks can use them to make payments to each other, but they cannot ‘lend’ them on to consumers in the economy, who do not hold reserves accounts. When banks make additional loans they are matched by extra deposits — the amount of reserves does not change.”