Crossing the Rubicon – X



Big in Japan

(Things are easy when you’re big in Japan)

The case for Japan is a simple one or is it not? Stagnant for 20 years, the Japanese Government wants to believe their economy touched bottom. Now, all it needs is some stimulus to resume growth (is it a coincidence that the Spanish and Greek prime-ministers said exactly the same? And, at least, the Spanish premier, begs the ECB to do the same). If the Americans tried to stimulate their economy via QE – Quantitative Easing, the Europeans chose to keep their currency by performing QE – Qualitative Easing. The Japanese are going to try and be bolder and will go for QQE – Quantitative and Qualitative Easing, that is, doubling the size of their money offering while buying assets of less perceived quality. To be absolutely fair, the FED and the ECB also used both strategies. The FED did the twist while the ECB was never shy to increase the size of their balance sheet, before and after Draghi’s speech. Continue reading


On Banking Definitions

Peter Bruegel the Elder, The Tower of Babel (1563), Kunsthistoriches Museum, Vienna.

Peter Bruegel the Elder, The Tower of Babel (1563), Kunsthistoriches Museum, Vienna.

Whenever someone leaves something into the custody of another, usually but not necessarily against a fee, the contract between the two parties is said to be a deposit and that something must be surrendered on demand. The custodian cannot use the thing delivered or, if goods are fungible, must at all times keep the same quantity of the good under custody. When someting is delivered for another to use, usually but not necessarly against a fee, then the contract arising is called a loan. The loan is not callable on demand but has an agreed term for the delivery of the thing lended.

Regardless of definitions, whenever someone makes a bank deposit, it is actualy lending that money to the bank. He may feel this is unfair or incorrectly so. But it is unwise to treat the matter differently.