We have our next Melbourne Investment Club meeting tonight, Tuesday the 2nd of February (for details click here) and member Maria Hill will be speaking about how banks create money (or credit) out of thin air. This is especially topical given the announcement last Friday by the Bank of Japan (BOJ) saying that effective from February 16, it will charge “financial institutions a “Parking Fee” for placing their excess reserves with them.
Imagine that – a Bank CHARGING you to place funds with them??..
This move by Tokyo’s central bank to impose a 0.1% fee on selected current account deposits is an effort to stimulate Japan’s economy that is forecast to grow at just 1.7% in 2016.
You see, Japanese banks have about 250 trillion Yen in total parked with the central bank and the new system will divide the outstanding balance of each account at the BOJ into three tiers and a positive, zero or negative interest rate will be applied to each one.
Approximately 30 trillion yen will be subject to this “Parking Fee” via a negative interest rate
By effectively paying a negative rate of interest, the commercial banks will be “encouraged” to make more loans or create more credit.
It fails to amaze me how people think that they can win the game of investment when so few people even understand the rules? How can you win at a game when you don’t know what the rules are?
Banks, both lending and central have a mighty impact in the way our economy and investment markets operate – so understanding the rules and hence the outcomes of bankers actions is just so important.
It’s even more powerful (and profitable) if you can understand such actions within the context of the Real Estate & Credit Cycle. This is why we developed the Calnan Flack Economic Cycle Action Plan – to make more profitable investment decisions!
So please join us tonight as we explain one of the core rules for understanding and profiting within our economy.
As always, great investing, Ian & Jeremy