Personal Finance

Why can't we borrow from the Bank of Canada?

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  • Nov 22nd, 2013 1:08 pm
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Dec 7, 2009
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Why can't we borrow from the Bank of Canada?

Is there a reason why we can't borrow from our own bank and pay interest to ourselves? Why isn't there a public option in banking?
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Apr 16, 2007
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Why can't you buy your next Honda right from Honda Canada from the Aliston plant

Why can't you buy your Apple products right from the Foxconn manufacturing plant in China


Besides offering loans the commercial banking system has to deal with all kinds of issues such as administrative, marketing, personnel, losses due to irrecoverable debts. and a whole lot more

Besides that, the Bank of Canada is not a commercial institution anyways.
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Syne wrote:
Nov 22nd, 2013 12:16 am
Is there a reason why we can't borrow from our own bank and pay interest to ourselves? Why isn't there a public option in banking?
The BoC requires that entities that borrow from it pledge collateral, namely, GoC bonds, and, in some limited cases, GoC-guaranteed mortgage backed securities.

Any profit earned by the BoC is remitted to the GoC.

Commercial/retail banks in Canada inherently match sources of funds with borrowers of funds. You can argue that the profits arising from banking are too high -- and perhaps they are. But you, as a member of the public, certainly have the opportunity to participate in such profits by purchasing either the equity securities of the banks, or starting your own. Neither of which is a particularly difficult thing to accomplish.
TodayHello wrote:
Oct 16th, 2012 9:06 pm
...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
[OP]
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So if private entities are borrowing from the BoC, and all that borrowing is secured (they have the securities to back up every dollar borrowed) then we must have a lot of money from interest coming in from these banks.

Is that right?
In a perfect system, corporations would fear the government and the government would fear the people. - David Wong

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Syne wrote:
Nov 22nd, 2013 8:55 am
we must have a lot of money from interest coming in from these banks.
Define "a lot" and I don't see where you're heading at.
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Jan 5, 2006
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Because it's not the BoC's mandate to do so.
[OP]
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alkizmo wrote:
Nov 22nd, 2013 9:59 am
Define "a lot" and I don't see where you're heading at.
I mean the banks must owe us (Canadians) a lot of money.
In a perfect system, corporations would fear the government and the government would fear the people. - David Wong

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Syne wrote:
Nov 22nd, 2013 11:44 am
I mean the banks must owe us (Canadians) a lot of money.
You mean the banks owe money to the BoC?
Or the BoC owes us money?
I really can't follow your train of thought.
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Syne wrote:
Nov 22nd, 2013 11:44 am
I mean the banks must owe us (Canadians) a lot of money.
Well sure. Most people have their money in a bank rather than in their mattress. But there's also plenty of mortgages and other debts to balance that out.
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alkizmo wrote:
Nov 22nd, 2013 11:55 am
You mean the banks owe money to the BoC?
Or the BoC owes us money?
I really can't follow your train of thought.
Private banks must owe interest to the BoC, since according to Mark, they borrow from it.

So here's how I understand it.

1.) BoC creates money and gives secured loans to private banks
2.) Private banks pay the BoC back with interest
3.) BoC gives the extra back to the public coffer to build roads, schools and pay firefighters.

This is preferable to borrowing directly from our own bank, because we don't want to take on the liability of hiring people to do the transactional things needed to administrate the process of lending and borrowing (basically what mikeymike said).

Is this right?
In a perfect system, corporations would fear the government and the government would fear the people. - David Wong

Check out caRpetbomBer's picks in this thread.
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Syne wrote:
Nov 22nd, 2013 11:58 am
This is preferable to borrowing directly from our own bank, because we don't want to take on the liability of hiring people to develop the software needed to track the money (basically what mikeymike said).
Are you suggesting that consumers should be able to borrow directly from the BoC?

BTW private banks don't like to borrow from the BoC, they like to borrow from each others, or from the market. The BoC only offers the option with a specific rate so that no private bank would try to lend to other banks at a higher rate, because if a bank would offer to lend at a higher rate than the BoC, then the borrower would simply not take the loan and go directly to the BoC.

Here, read this to understand how the BoC sets the variable rate in Canada.
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Yet another nonsense post from Syne.....
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Syne wrote:
Nov 22nd, 2013 11:58 am
Is this right?
The BoC is a complex entity that cannot be simply summed in such a manner. One important part you also missed is that the BoC allows deposits from institutions and pays out interest on that.
If you are interesting in learning about them, I would recommend contacting them.

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