Over a month since I last wrote on this subject, and government and businesses are becoming increasingly desperate and concerned over the failure of banks to lend money, (which after all is what they’re in business for), and stimulate the economy. Now that the UK government (along with other countries) has guaranteed the balance sheets of banks, there is no excuse.
My suggestion to get things moving turns the normal rules of debt, saving & interest through 180 degrees. Instead of banks paying interest on money they borrow from one another, why doesn’t the government, (who owns the major share in many banks), pass an Act, perhaps with a sunshine clause that will lapse after say three years, and regulate that banks who hold money for more than a few days will be levied with an interest charge or tax on the level of their average cash balances over that period, and banks who increase their lending to companies or the mortgage market will receive interest on that part of their lending which is derived from borrowing from other banks..
This mechanism could be handled by central banks, who could no doubt make a small margin for their taxpayers on this trade.
Your suggestion will prove to be very plausible solution to current crisis.Money has to be put to use albeit at lower rate of interest for the time being. This will br good for both , the lender and borrower ie the saver and user.
Debts and Money Advice…
NEW DELHI, Nov 30 (Reu [...]…
[...] Over a month since I last wrote on this subject, and government and businesses are becoming increasingly desperate and concerned over the failure of banks to lend money, (which after all is what they’re in business for), and stimulate …[Continue Reading] [...]