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“In other words, the fractional reserve banking system is leveraged to interest rates. This works when rates are positive. Loans are made and securities bought because they will generate income for the bank. In a negative rate environment, the bank must pay to hold loans and securities. In other words, banks would be punished for providing credit, which is the lifeblood of an economy.”
USAGOLD note: Negative rates amount to some negative ramifications as Bianco goes to pains to point out – and uncharted waters for the financial system and the general economy.
Source: USA gold
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