| Improvement of banking system
What might be maximum neck in introduction of minus interest rate is position
of bank. In banking works, it is basic to collect deposits and to lend
it. Plus interest rate is applied to both cases (current system). Banks
ensure profits in such a way that interest rate on loans is higher than
interest rate on deposits.
If minus interest rate is introduced, it is difficult to collect deposits. Depositors must pay interest to bank with minus interest rate. So, considering this point only, it is improbable to deposit. It means that banks can’t collect funds. Therefore, it is necessary to establish funds collecting method of banks.
It may be most effective for the Bank of Japan to supply funds to banks
with minus interest rate. Looking on basic interest rate of Japan as minus,
it is no problem that interest rate on loans of Bank of Japan is minus.
Assuming interest rate on loans of banks to private company is a little
higher than interest rate on loans of Bank of Japan. Then, banks can ensure
profits just as much as difference of interest rates.
What should be considered is whether supplying money to private company
(bank) with minus interest rate is OK or not. Supplying money with minus
interest rate is to give money. Therefore, there may be opinion that “minus
interest rate should be introduced after banks are nationalized”. Sufficient
consideration will be necessary from now on.
If whole money in Japan is taxed as realization method of introduction of minus interest rate, deposit can be collected. It is to give merit like free of tax etc. to depositors. If interest paid by deposit is smaller than tax, Deposit has merit naturally.
Consideration of methodology of bad debt disposal is necessary. Bad debt
has been thought to be management responsibility, but it can be understood
it is not necessary so by the explanation of this book.
If interest rate on loans is higher than economic growth rate, bad debt increases as much as interest caused by the difference of both rates. It is theoretically concluded. Therefore, present economic system that doesn’t permit minus interest rate although economic growth rate is minus is root cause of increase of bad debt.
Nevertheless, that banks as private company are burdened all disposal
cost is essentially misplaced. After explanation of it to nation, it may
be time for government to disposes of bad debt directly.
Capital of banks decreases because banks are wholly burdened paradox of economic system failure. Though banks have responsibility of occurrence of bad debt just after bubble economy, the cause of recent new occurrence of bad debt has been control error of interest rate. Therefore, it can’t be helped that to thrust all bad debts upon banks is said to be shirk of government or the Bank of Japan.
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