New US Economy Policy Message Board

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Strategies & Market Trends : New US Economy Policy

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To: Arthur Tang who wrote (27)	4/21/1997 10:30:00 AM
From: Arthur Tang	of 435

The new economy and USA banks The banks' revenues were mostly loans to large corporations for many a year. The new economy is now 4/5 consumers' demand side economy; 1/5 supply side economy. The new economy is now about $8 trillion going to $10 trillion, in a year or two. FEDS were unaware that the monetary policy has to be more accomodating to consumer credit. The old rules of bank reserve on deposits was stretched to the limit. The situation has to be relieved by consumers depositing compensating balance for their credit card allowed credit. The bank reserves has to be adjusted to the total allowed credit as far as deposits of consumers go. In the mean time the corporations are benefited by computer efficiency and loans are replaced by profits. Banks will no longer be able to rely on corporate loans. Such changes will be alarming to the banking commitee in Congress. Some regulation on interest rate change has to rein in the power of the independence of FEDS. And compensating balance on all credit card holders will be required either by credit card banks' rules or by law.

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