Fixed-rate Loans

In message , Tim writes

Yes, but a transient position, and it will effect the figures if it happens on the third Wednesday of the month. ( we are just sampling, after all)

True, but as people tend to get loans at a fairly constant rate it is of no consequence. and in any event, very few actually draw the loan, then dont use it.

You are correct that in the very short term it may seem of consequence (to you, anyway) but as the use of loans is generally constant it is if little consequence. It is the variance from month to month that matters.

In message , Fergus O'Rourke writes

Actually, in the days of green cards, grey record sheets and red pens, the records of limits approved maintained at branch level were superb and were balanced monthly. Also, debit balances were known daily. In the very old days, before my time, term loans from banks were unheard of ("Dont lend long and borrow short!") and so it was all on overdraft so it was a very simple exercise to fill in the form at the branch that carried the data that would eventually be sent to the BoE which included the total of 'limits granted' and the total of 'debit balances'. The day after every third Wednesday was always a busy day collating and sending the data required. Every clearing bank branch had to do this, it was called 'abstract day'. Even a full cash analysis of every note & coin denomination had to be advised to HO to send to the BoE together with lots of other data. Other Data, such a Bills of exchange held and segmented into period, forward currency contracts, contingent liabilities etc., had to be balanced and reported. Imagine a local branch doing that today!

Then computers came along and collected the data centrally, all that was needed from the humans was to advise Head Office of figures that might cause anomalies, such as offset balances of the type Tim keeps harping on about which occurred so infrequently on abstract day that I only know of one branch that ever had to fill in the required form.

Big ticket loans which have been drawn but not used are very rare. Who in their right minds draws large sums down before needed? In practice they are only drawn when the CHAPs order was made (or as in the old days, the cheque was presented).

In message , Tim writes

No, the act of borrowing only occurs when the dosh is drawn. Prior to that it is either an application to borrow, or an approved lending limit.

Thats right, at the point the dosh is used. But it doesnt matter in the big picture, as these things are relatively constant.

The main importance of the money supply measure is the rate of change, rather than the absolute measure (to some extent).

"John Boyle" wrote

No - it's being counted earlier than that for a loan. At the stage when there are both credit & debit balances, the borrower hasn't started to use it yet; s/he only begins to use it when they make a transfer from the credit balance to someone else.

"John Boyle" wrote

Really? Aren't people more likely to draw on **overdraft / credit cards** around November/December - in the run-up to Christmas?

Aren't people more likely to take out car *loans* around

1st March / 1st September, or in Summer rather than Winter?

Aren't people more likely to take out ("give"!) *mortgages* in the Spring and Autumn than over Christmas?

"John Boyle" wrote

But if the ratio of loans to other types of borrowing (overdrafts, credit cards) varies with the seasons as I've just suggested, then the rate of change of the money supply will also vary with the seasons

**even if** the underlying total level of borrowing is constant!

"John Boyle" wrote

Let's expand on your food analogy a little...

Let's imagine food on the shelves in the supermarket (not yet sold) as 'potential' credit (not yet approved). Food in people's fridges/freezers/store cupboards (not yet eaten) is "undrawn credit" (approved, but not yet used). Food eaten is credit "used".

Let's imagine "food (usually) eaten hot" as loans and "food (usually) eaten cold" as overdrafts. [The stage of cooking can then be compared to the stage where both credit & debit balances are created, after a loan is approved but before it is "used".]

Now, in our "health measure", we count any food being cooked from the start of cooking (when credit/debit balances are created for loan), and don't count any cold food until it actually enters someone's mouth...

Are fish & chips being cooked *already* affecting the health of the nation? [They *are* being counted.]

Are packets of crisps and salted peanuts, being placed in bowls ready for a party, *already* affecting the health of the nation? [They *aren't* being counted.]

[snip]

Wow ! That was good.

I am pretty sure that in my days as a banker (let's just say that they were pre-1990), the Irish clearers' systems were not as good as that.

In message , Tim writes

See my other post. Loans are generally drawn when needed, not when granted.

Yes, thats why the figures are seasonally adjusted.

Yes. Its called 'seasonal adjustment'. I thought you would have heard of such a thing.

Is that because death statistics are also seasonally adjusted and it's thus something which has-bean counters should be familiar with?

In message , Tim writes

This is a faulty analogy. As mentioned ad nauseam, loans arent generally drawn until just before use, so I would say the fish & chips arent counted at the immersed in hot oil stage, but at the being stuck on a fork stage. After all, you are forgetting the obvious, i.e. that a stolen army tank crashes into the chip shop AFTER Harry Ramsden has cooked them but before the eater has started eating them. This is as likely example as everybody taking loans and not using them all at the same time.

Re Nobby's wedding equipment, they most certainly arent being counted yet. Again you are forgetting the obvious, that you have mistakenly thrown the party on 'Nuts in need day' when everybody knows that you must not eat a nut, let alone one belonging to Nobby. At a second past midnight, when the embargo is lifted, the nuts will be counted in small handfuls as they are thrown down the drinkers' throats.

IIRC the major seasonal influence is pre-Christmas retail spending. The central banks tend to allow the lending banks more leeway on their reserves in Advent to allow for the sales.

"John Boyle" wrote

There will always be some time (however short) while both the debit & credit balances exist. My point is solely that this has an (undesirable) effect on the money supply figures (however small that effect might be), which could be easily avoided.

You and I both should know that seasonal adjustment is only an approximation - unless the impact is the same this year as in previous years (or on trend line), there will still be some impact from these variations.

"John Boyle" wrote

Just as food isn't generally cooked until just before eating!

"John Boyle" wrote

Actually, no I'm not!

"John Boyle" wrote

Exactly. The similarities make it a good analogy.

In message , Tim writes

But as already said, it is a relatively constant 'error', if it were an error at all.

Yes, it must by its very nature be an estimate. But the measure is good enough for the purpose.

Pre-Christmas retail spending is the major influence on death statistics? By Jove, talk about "shop till you drop"!

He did say they do things differently in Donegal. Similar to Scotland, I'd imagine.

And in view of some recent Irish Bank 'scandals' I winder if they are the same now!