Deposit rates - after the RBA decision

Firstly, the way banks introduce money into the economy is how it works, not any sort of theory.
Secondly, it is important to differentiate between real money as created by central banks such as the RBA, and credit money as created by banks with loans. What money is created ‘out of nothing’ as some think, is just the same destroyed when loans are repaid.

So banks do lend more than they have.

We’ve always found that when playing Monopoly with the children it helped to have some extra money from another game set. The ability of the bank to make infinite zero interest loans can avoid the pitfalls of bad luck or poor decision making along the way. It also enables a player to exit/retire from the game with dignity.

I likened it to a soft landing. The principle of quantitative easing. I expect those of great financial insight can offer some further pertinent observations and comparisons with the real world. The most obvious one is the planet is a bit like a game of monopoly. The resources of both are finite. Unfortunately the game of Monopoly never attached resource consumption or an environmental cost to assets and income. Something us grownups might also struggle with. :wink:

For the experts. Is the greater concern that inflation is used deliberately as a tool to decrease the relative value of debt? It’s a wealth making tool for those who can find ways to leverage borrowings.

Is size of the wealth pool determined by the apparent size of the permitted debt pool? The GFC and sub-prime lending market suggests this was/is how it works.

I agree that banks are not legally required to pass on RBA rate changes. But it is worthwhile to point out which ones pass on increases to their deposit rates when it is abundanty clear that all pass on rate increases to their borrowers.

To me the problem of poor banking behaviour stems from the lack of competition in the market where the Big 4 under their names or aliases eg Bank West (a CBA company); UBank (a NAB company), St George (a part of Westpac).

The lack of competition must be sheeted home to politicians who agreed to such concentration.