The downturn is characterized by a sudden rise in deposits an sudden expenses by government, plus government will increase its inflation tax. Swift banker see a rise in deposits beyond expected from government borrowing, and government sees a smaller congestion fee for its borrowing. . The first action of government is stabilize incomes, and that means immediate deposits in consumer accounts with less debt backing it up. But government is asynchronous to Swift, the central bank equally surprised by the arrival of transfer deposits. At first, more deposits then loans, government gets a break on interest charges. What happens after is determined by government efficiency, how long can it keep rank to restore the economy.
They are a partition, the private and government value chains are relatively prime. But Swift banks know this as well as any other bank. That is the point, to a large extent, if government fouls up, they pay no bigger price than any other ledgered banks. Government generally fouls these affairs up, and that is why we pay the 2% inflation tax.
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