Money creation and the revolution. Along the Path to Real Change

When you store your belongings in a private locker, does the owner of the locker pay you? On the contrary, you pay the owner, for he is providing you with a service called safe-keeping. In effect, the owner holds your belongings safe until you take them back. So, why is it that you accept money from a bank to hold your money for you? The obvious answer is that the bank is not holding your money; it is lending it out and rewarding you with a portion of what it collects in interest. If you are happy with this arrangement, you have likely sought out a bank in your neighborhood that provides you with the greatest return on your deposit. Unfor tunately, there are several things very wrong with this type of transaction. Most important is that you are engaging in a tran saction that is commercially unsound. You and your bank engage in a legally non-binding agreement when, on the one hand, your bank promises to return your deposit on demand, and on the other hand, loans a portion of it to others for a specified period of time. Contractually, these two acts are incompatible, as the same money cannot be both a de-mand deposit and a loan simultaneously. Either, you deposit your money, reserve the right to de-mand it back at any moment, and pay the bank for holding it on your behalf. This is called a demand deposit. Or, you surrender your right to your money for a specific period of time, permit your bank to lend it to others, and receive interest for your risk and sacrifice. This is called a time deposit. Commercially, treating your demand deposit as money that can be loaned to others is not an enforceable contract, for the law insists that there must be mutual assent when two parties enter into an agreement. You and the bank are simply at odds when you expect to retrieve your money at any moment on demand, and the bank lends a portion of it to others for a fixed period. Legally speaking, both parties to the transaction do not agree to the same contractual terms in the same sense.

How Are Bankers Paid?

We empirically examine bank CEOs’ compensation. We find that bank CEOs (a) are paid less than their nonfinancial counterparts, an effect driven by the CEOs of small bank; (b) experienced declining compensation during 2007–2009 (the hardest-hit banks cut compensation more) but pay is now 24% higher than precrisis levels; (c) are paid more at larger banks, those with less nonperforming loans, those with a higher proportion of noninterest income, and those with less demand-deposit dependence; and (d) have pay highly sensitive to ROA and ROE, but not stock returns. Tail risk is higher when compensation depends more on short-term measures of performance. (JEL, F34, G32, G33, G38, K42) Received July 3, 2019; editorial decision December 13, 2020 by Editor Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

EVALUASI PRAKTEK PERBANKAN SYARIAH DI INDONESIA : INTEREST RATE FREE?

The aim of this study is to evaluate Islamic Banking practice truly interest rate free on determining funding and financing pricing. The object of this study are Islamic and Conventional Banking in Indonesia 2014-2018. Variables used in the study consists of equivalent rate (interest rate) of demand deposit, saving deposit, time deposit, working capital financing (loan) and financing (loan) in Islamic and Conventional Banking. VAR / VECM Modelling and Granger Causality Test applied on these 5 Models. The evidence shows that at that time there are only Model 2 and Model 5 were Granger Cause at one way in the short run. On the other hand, pricing on funding and financing product at islamic banking were determined by its time lag of pricing on funding and financing products at islamic and conventional banking , vice and versa. The shocks at the short run will be adjusted as its shocks response into long run equilibrium. It means the practicing Islamic banking in Indonesia is not truly interest rate free. Keywords : Pricing on funding and financing products, Islamic Banking, Conventional Banking, VAR/VECM Modelling, Granger Causality.

MEKANISME PENERBITAN CEK DAN BILYET GIRO SEBAGAI ALAT PEMBAYARAN GIRAL PADA PT. BANK TABUNGAN NEGARA (Tbk) CABANG PADANG

Cheque are unconditionally warrant from the customer to the bank that maintains the customer's checking account, to pay some money to the parties mentioned therein or to the holder of the cheque. While the Giro is a warrant from the customer to the bank that maintains the customer's checking account to transfer a sum of money from the account in question to the recipients named in the same bank or another bank. Demand deposits (bank deposits) are funds or money held in checking accounts in commercial banks that can be used to perform a payment transaction through an intermediary cheque, giro, or orders to pay within a certain time. The purpose of the issuance of securities (cheque and demand deposits) is as fulfilling accomplishment in the form of payment of a sum of money in the form of demand deposits. Publishing mechanism checks and demand deposits at the State Savings Bank bnak together with other banks, because it is set by the central bank or Bank Indonesia Based on the analysis of the author, publishing mechanism and giro cheque above, the Issuer and the holders of the possibilities could be opened in the same bank or a different bank. Therefore, if a person does not have an account at a Bank Giro, the holder may act as recipients of cheque, but for Giro holder must have a checking account advance. Demand Deposit Account in payment by transferring funds is not an absolute requirement. Payment orders will be carried out by snagging when the issuer has a Giro account balances effective enough

INDICATIONS OF WINDOW DRESSING ON COMMERCIAL BANKS IN INDONESIA

More than often, banks are ranked based on their total assets. The bigger its assets the higher its position in the rank. To maintain its position in a higher rank, a bank may take extra efforts, to maintain its total assets high, whether by increasing its performance or manipulating their financial statement like window dressing. The higher its position in the rank the more likely a bank to perform temporary banking activities at the year end to increase its assets. The examples of the such activities are increasing temporarily customer deposits in the year end. Those temporary activities in are tending toward a window dressing.This paper examines the possibilities of window dressing activities at the year end conducted by high ranked banks by temporarily pushed their assets up through extra efforts in gathering temporary customer deposits at the year end. If those window dressing activities really exist, researchers expect that data will show temporary increase in assets, customer deposits and also cost of funds of high ranked banks in Indonesia. Researcher uses the monthly data and started from January 2006 untill December 2011.This research shows an evidence that bank total assets increase significantly at the year-end and the increase is temporary. Further, the increase in total assets appears to be funded with purchased demand deposit, savings, and time deposits. This research also shows that larger banks are more likely than smaller banks to exhibit window dressing.Keywords: banks, window dressing, asset.

Effect of Deposit Mobilization on the Financial Sustainability of Rural Saving and Credit Cooperatives: Evidence from Ethiopia

Increasing institutional capital through deposit mobilization keeps the cost of capital low, thus leading to financial sustainability. However, little is known about how deposit mobilization affects financial sustainability. Using balanced panel data of 166 rural savings and credit cooperatives (RUSACCOs) from Ethiopia over the period of 2014–2016, we investigated the effect of deposit mobilization on financial sustainability. The results of the panel regression estimates showed that, among the deposits mobilization variables, the deposit to loan ratio, deposit to total asset ratio, the volume of deposits, and demand deposit ratio had a significant direct impact on financial sustainability. The fixed effect regression result for interest rate spread showed that an inverse relationship existed between the interest rate spread and financial sustainability. Furthermore, according to our robust fixed effect regression results, among the control variables, the age of the institution and inflation rate affects financial sustainability. Contrary to our expectations, the number of members and the percentage of woman members were not significant. This may be attributed to the fact that some members were inactive for a long period. We suggest that RUSACCOs should focus on deposit mobilization specifically on demand deposits and keep the interest rate spread narrower to ensure their sustainability.

Money Supply and Inflation: Disaggregated Time Series Evidence from Nigeria

This paper examined money supply and inflation in Nigeria. The objective was to examine the extent to which components of money supply affect Nigerian inflation rate. Time series data was sourced from Central Bank of Nigeria (CBN) statistical bulletin and Stock Exchange Factbook. Nigerian Real Inflation Rate was proxy for dependent (INFR) variables while Currency in Circulation (CR), Demand Deposit (DD), Time Deposit (TD), Savings Deposit (SD) and Net Foreign Asset (NFA) were used as independent variables. The Ordinary Least Square (OLS) method of cointegration, Augmented Dickey Fuller Unit Root, Granger Causality was used as data analysis techniques. Regression result in the study shows that Currency in Circulation, Demand Deposit and Savings Deposit has negative relationship while Net Foreign Asset and Time Deposit have positive relationship with inflation. The Augmented Dickey Fuller Test proved non stationarity of the variables at level except Net Foreign Asset but stationary at first difference. The Granger Causality Test reveals no casual relationship running through the variables. The cointegration proved no long run relationship between the dependent and independent variables. The study conclude that Money Supply have significant relationship with Nigerian Inflation Rate. It therefore recommends effective management of money supply by the monetary authorities to achieve the monetary policy objectives of price stability.

Informality and Economic Growth in Nigeria: 1980-2014

<p><em>The paper examines the impact of informal sector activities on economic growth in Nigeria between 1980-2014. The contributions of informal sector activities to the growth of Nigerian economy cannot be over emphasized. It is the source of livelihood to the majority of poor, unskilled, socially marginalized and female population and is the vital means of survival for the people in the country lacking proper safety nets and unemployment insurance especially those lacking skills from formal sector jobs. The relationship between informality and economic growth is not clear because the sector is not regulated by the law also there is no concrete evidence that this sector enhances growth because the sector’s contributions to growth is not measured. The use of endogenous growth model becomes relevant in this study. The theory emphasizes the role of production on the long-run via a higher rate of technological innovation. The variables that were tested are official economy nominal GDP, informal economy nominal GDP, currency in circulation, demand deposit, ratio of currency in circulation to demand deposit, narrow money, informal economy as percentage of official economy. ADF test was conducted to establish that the data series of all variables are stationary t levels. Having established the stationarity test we also, conducted causality test of the response of official economy nominal GDP to informal economy nominal GDP. In conclusion, the impact of informal sector economy on economic growth in Nigeria is quiet commendable. Even though, the relationship between informality and economic growth is not straight. The paper recommended thus, the need for the government to integrate the activities of the informal economy into formal sector and size of the sector is measured and regulated because their roles are commendable. As it will improve tax collection and enhance fiscal policy.</em></p>