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Samizdata quote of the day Who is it that benefits from clearing? The clearing houses like it, obviously, because they makes that basis point or two. But the people who really benefit – as with the bread – are the people who get their clearing done. Which is why they’re willing to pay to have it done of course. And, in the modern financial world, if you’re not getting your clearing done then you go bust.
So, the EU Commission has just graciously announced that the European banking system doesn’t have to go bust. Which is nice of them, of course it is, but it would be better to report it correctly, no?
– Tim Worstall pointing out that ‘European Union announces that EU Banks don’t all have to go bust because Brexit’.
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From the US.
Help me out here…..
In THIS context, what is the American dialect word/phrase for “clearing”, used here?
Does UK “clearing house” imply the same as the relitively obscure usage in US of “clearing house” ?
Clearing bank, DMO
https://www.wisegeek.com/what-is-a-clearing-bank.htm
CaptDMO, you can look up DTCC/NSCC, OCC, and ACH/EFT.
Yeah,nice bank you have there. It would be a shame if it went bust …
Mafia or EU quote? You decide.
@Phil B: It is the EU banks that would go bust if they lost clearing; so surely it’s the UK that has the ability to make that threat, but from the EU it would be a hollow threat, or just posturing, as has now been confirmed since they backed down.
No, the EU banks don’t have to go bust because of Brexit. But only because they are all already bust.
US equivilent is probably CHIPS or FEDWIRE
Chips etc are like Chaps in the UK, or Swift internationally. A payment system. Clearing – in this sense – is more about matching up margins on trades. So, you’ve got to leave a 1% margin as security on a trade in FX. Say, just imagine. Now you put on a hedge on that trade which also requires a margin. A clearing house can net off the risks of the two trades and net margin might sum to zero.
Or, more likley, a bank is putting on hte one FX trade for one customer and the hedge for another.
Clearing houses do direct all the money flow concerning the trades, yes. They also guarantee – by holding those margins. But to the trading houses the big benefit is net not gross margins as security against trades.
Of course, now I’ve said this someone who actually knows is going to come along and prove me entirely wrong…..
Banking may have been a, basically, honest business at one time (although even in the 19th century banks lent out more money than had actually been saved – i.e. they indulged in Credit Bubble blowing, which always eventually collapsed), but it certainly is not now.
Modern banks (and so on) are joined at the hip with government – the 19th century situation has been dramatically changed.
Then banks were mainly about Real Savings of cash money – although with lots of nasty cheating on top (cheating that always went wrong).
Now, whist people still put cash money into banks (although the cash is not actual gold or silver any more) banking is now MAINLY about Credit Bubbles.
To treat it as if it was a legitimate “capitalist” undertaking (like, say, making lawn mowers) is, therefore, a mistake.
“But Paul our economy depends on the modern financial industry”.
In which case “our economy” is doomed.
Places such as New York City do have a future – but it is an incredibly horrible future.
I repeat what I have often said in the past..
I have nothing against “usury” – lend out money for a million per cent interest for all I care.
But lend out actual cash money (not Credit Bubbles) and do not pretend you still have the Real Savings AFTER you have lent them out.
Not till when, and if, the cash money is paid back to you.
Electronic transfer of the ownership of money is fine – no one need go around with a bag of gold. But Bubble Blowing is not fine.
“But Paul the post was not about all this” – it is the elephant in the room when it comes to banking and the “financial economy” and pretending the elephant is not there, will not do.
By the way – I suspect that the leading bankers are so leftist (check what they support) because they actually know their business is not straight.
If your own personal wealth is dodgy – it is a defence mechanism to assume that all “capitalist” wealth is dodgy, and to say to yourself “I have to operate like this in this capitalist society – but when we create a Better Society (TM)”.
Saint-Simon appealed to some Credit Bubble bankers before Karl Marx had written a word.
On a more light hearted note.
There were many things about “Game of Thrones” (at least the last season) that I disliked – but I liked the “Iron Bank of Braavos” it lent out cash money and it, generally, made sure it was repaid with interest.
I just wish it had financed productive industry – not government spending.