Bank liquidity
Sir,—A report from Simon Louisson in Wellington (June 14) says that trading banks recently bought $224M of a Government stock tender because “the banks were faced with a surplus of cash.” Naive readers might imagine sacks of surplus “cash” being transferred to appropriate destinations. In fact, of course, trading banks deal mainly in cheques, credits and overdrafts and one does wonder to what extent that $224M really did consist of previously created "money” and to what extent it is made up of an increase in overdrafts which will cost the taxpayers tens of millions in interest a year at very little cost to the banks. — Yours, etc., MARK D. SADLER. June 16, 1986.
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Press, 19 June 1986, Page 20
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115Bank liquidity Press, 19 June 1986, Page 20
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