Banking

It's the RBA. It's statistics.

This Article works to debunk the myth of finance as intermediated scarce private capital and offers an alternative, more up-to-date theoretical framework for understanding the structure and operation of our financial system. We argue that, contrary to contemporary orthodoxy, modern finance is not primarily scarce, privately provided, and intermediated, but is, in its most consequential respects, indefinitely extensible, publicly supplied, and publicly disseminated. At its core, the modern financial system is effectively a public-private partnership that is most accurately, if unavoidably metaphorically, interpreted as a franchise arrangement. Pursuant to this arrangement, the sovereign public, as franchisor, effectively licenses private financial institutions, as franchisees, to dispense a vital and indefinitely extensible public resource: the sovereign’s full faith and credit.

Future access to physical cash is now under a cloud, according to Australia’s primary cash transit company, amid a sharp decline in the use of notes and coins.

The Linfox-owned Armaguard has warned that its distribution operations are unsustainable due to falling demand, sparking emergency meetings with Australia’s major banks. The Reserve Bank, which prints and issues currency, is also involved in the discussions.

The concern is that if Armaguard, which has a near monopoly over physical cash distribution in Australia, were to reduce or cease deliveries, there would be an immediate shortage.

This would impact its major clients, including banks, post offices, supermarkets and other major retailers, which would curtail the availability of cash for the community.

If demand for storefronts is down, why don't landlords just lower the rent and get a tenant in there? That's supposed to be the magic of capitalism — its ability to auto-adjust to anything the world throws at it. But that's not what is happening with vacant shops. Even before the pandemic, one study found, street-level retail spaces in Manhattan were remaining vacant for an average of 16 months.

So if COVID isn't to blame for all the shuttered stores, what is? Well, when a landlord doesn't lower the rent to get a new retail tenant, it's because that landlord can't. The market that sets retail rents isn't only between tenants and landlords. It's also between landlords and the banks that finance the buildings. And the banks, in many cases, won't let property owners lower their rents enough to fill their properties. The pandemic may have emptied out America's storefronts, but it's banks that are keeping them that way.

 Arrayed around a long mahogany table in the White House state dining room last week, the CEOs of the most powerful financial institutions in the world offered several explanations for paying high salaries to their employees — and, by extension, to themselves.

“These are complicated companies,” one CEO said. Offered another: “We’re competing for talent on an international market.”

But President Barack Obama wasn’t in a mood to hear them out. He stopped the conversation and offered a blunt reminder of the public’s reaction to such explanations. “Be careful how you make those statements, gentlemen. The public isn’t buying that.”

“My administration,” the president added, “is the only thing between you and the pitchforks.”