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The way things are cannot last for ever, but it can last for a while, as banks fund themselves mostly ia the Centrla Bank instead of via the interbank market.
This Forbes article gives an idea of the size of the respective markets:
If all the recent hysterical chatter about lending being "frozen" or "shut down" refers to anything real, it is not about banks loans (through Sept. 17) but about such arcane financial markets as asset-backed commercial paper or loans between banks. But this too is mainly about financial firms, not Main Street. Non-financial commercial paper increased from $156 billion at the start of the year to more than $204 billion from Sept. 3 to Sept. 17, dipping only modestly since then. Economic journalists seem oddly fascinated with the last column of the table--interbank loans from one to another (aside from fed funds). "Banks won't even lend to each other," said a TV reporter, "so how can we expect them to loan to business or consumers?" But interbank loans are obviously tiny, and banks rightly regard lending to other banks more risky than lending to Main Street. There is no reason to expect the minuscule flow of interbank loans to determine consumer and business loans. That little tail can't wag the big dog.
Economic journalists seem oddly fascinated with the last column of the table--interbank loans from one to another (aside from fed funds). "Banks won't even lend to each other," said a TV reporter, "so how can we expect them to loan to business or consumers?" But interbank loans are obviously tiny, and banks rightly regard lending to other banks more risky than lending to Main Street. There is no reason to expect the minuscule flow of interbank loans to determine consumer and business loans. That little tail can't wag the big dog.
That paragraph is slightly misleading, because the interbank market may be small, but it plays a vital role in ensuring that the whole things functions - exactly like the till in a store: the cash in the tills is only a small part of assets, but imagine what would happen to business if the cashier had no change whatsoever, or refused to give back what it had. In the long run, we're all dead. John Maynard Keynes
This deal has been in the works for quite a while, and given the egos and polish of the titans involved, it is amazing that any of them are allowing any of their peers to make any money. But it had to be done since, when it is over, the studios will jointly save over a billion dollars in duplication and distribution costs every year~!.
I guess a billion dollars and 8-10 years payout is not so much compared to wind farms and 25 year payouts...but it shows that there isn't a complete standstill in the markets. Never underestimate their intelligence, always underestimate their knowledge.
Frank Delaney ~ Ireland
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