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Strategies & Market Trends : New US Economy Policy
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From: Arthur Tang10/14/2007 1:51:29 PM
   of 435
 
Simple explanation of economy bank reserve ratio and size of economy vs. population?

There are economy supported on exports, which is not sustainable, because of job export of customer nations. situation in Japan and China is being modified. Japan central bank has reserve requirement of 18 to 1 ratio. And their interest rate is 0.35% yearly. China is following Japan and the ratio is still around 8, interest rate is above 5%

Each nation must be self sustainable on job creation and reach a comfortable standard of living. US is going back to manufacturing with highly automated factories. Bank reserve ratio is about 12; interest rate has to be lowered from 5% to 4.5% or 4% in the immediate future. Reaching 1% when ratio goes near 18 to 1? Borrowing depends on profitability on top of interest payment.

Import nations have the need to have strong currency, until they find a preference of their population to begin manufacturing to support their standard of living. Europe is enjoying Strong EU dollar. and can do more importing until they start to be able to manufacture with highly automated equipment.

So, banks tempted to make money on stock investment failed. Banks with the support of central bank will survive with higher ratio of reserve and lower member bank overnight discount interest rates. In the case of Japan central bank, member banks may have to be nationalized for capital infusion.
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