There is much of interest in the IMF’s Financial System Stability Assessment of Australia, published in November 2012. The following line in particular caught my eye, and is worthy of comment. The context is the IMF’s consideration of what are the “key risks” to our banking system (page 10-11):
Pressure on the net interest margin, which accounts for almost two-thirds of operating income, has the potential to encourage more risk-taking by banks in order to preserve profitability.
Thoughtful readers will observe that this statement unintentionally lends direct support to a fundamental argument your humble blogger has made — that usury is the root problem of the global monetary system, and that fractional reserve banking (or endogenous money creation) is only a secondary problem.
Consider again the conclusion to my recent post, IMF Economist Says Banks’ Key Function Is To CREATE Money:
As we have oft-repeated here at barnabyisright.com, while this power to “create money” ex nihilo (out of nothing) is a key problem, it is not THE root problem.
The power to create “money” (in the form of debt) out of nothing, simply gives banks leverage.
What they leverage, is Usury.
The “net interest income” — that is, the difference (or “spread” or “margin”) between the interest % they give on deposits, and the interest % they take on loans — is the heart of the banks’ profit (and power) business model.
The power to create more and more money (“credit”), simply allows them to magnify (or leverage) their “returns” (profits) on that difference between usury paid, and usury taken.
It deeply saddens your humble blogger that there are so many highly intelligent (far moreso than I), sincere, well-meaning, altruistic men and women in the world who are keenly interested in reforming the financial system for the betterment of humanity … and yet, almost none have yet recognised that usury is the root problem.
The IMF has directly admitted that the root of banks’ profit-making model is net interest income, and that pressure on the “margin” between what they charge in interest for loans, and must offer in interest on deposits, “has the potential to encourage more risk-taking by banks in order to preserve profitability”.
What exactly is meant by “more risk-taking”?
In the footnote (3) to the IMF’s comment, we are told that:
“Riskier activities could include, for example, loosening underwriting standards or expanding too quickly into new business or geographic regions.”
In other words, making it easier for more people to borrow more debt.
Using the leverage of increased fractional reserve / endogenous money creation.
Barnaby Is Right … is right.