> The central business problem for retail banks is how to earn more from deposits than they pay in interest, and to do so at a scale of billions of dollars.
Far from it. They are not deposit constrained, no matter how much mainstream economics likes to think so.
Your own link says this at the bottom of the introduction:
> In recent years, the discount rate has been approximately a percentage point above the federal funds rate (see Lombard credit). Because of this, it is a relatively unimportant factor in the control of the money supply and is only taken advantage of at large volume during emergencies.
If you want to learn more about the US system, this paper might be better. It is old (from the 90s), but I don't think things have changed all that much since then, at least as far as reserve requirements go: https://www.federalreserve.gov/monetarypolicy/0693lead.pdf
> Far from it. They are not deposit constrained, no matter how much mainstream economics likes to think so.
But there are important constraints - from the overview in the article you linked to:
"Although commercial banks create money through lending,
they cannot do so freely without limit. Banks are limited in how much they can lend if they are to remain profitable in a competitive banking system. Prudential regulation also acts as a constraint on banks’ activities in order to maintain the resilience of the financial system. "
The main constraint is called Capital Adequacy, and is based on the requirement for a bank to hold some of its own money in reserve compared to the amount of loans it issues. And importantly this money held in reserve must be money that is not pledged to anyone or anything else - i.e. cannot be money from depositors or from issued loans. The banks cannot easily increase this amount of unpledged money (which is called Tier 1 Capital) and hence it acts as a real limit on the amount they can lend.
Actually I think he's right. See page 18 (page 5 of the PDF), which explains what actually limits how much money banks can lend. Their need to earn more than they pay in interest is a fundamental part of it: in the longer term banks need to attract enough deposits to cover their loans, which may mean increasing the interest they pay to depositors, which in turn constrains their lending due to their need to earn more than they pay out in interest in order to cover their other costs and hopefully make a profit. (It's quite a lot more complicated than this summary, of course.)_
That's a really cool paper! I guess, to be precise: a commercial/retail bank needs to earn above its cost of FUNDING, which is actually lower than the rate it pays on its deposits because it only has to hold a fraction of that money in reserve (which is where the money creation comes in - they're lending out more than they're holding).
...either way, it still has nothing to do with anything that Apple does!
Far from it. They are not deposit constrained, no matter how much mainstream economics likes to think so.
http://www.bankofengland.co.uk/publications/Documents/quarte...
See page 2 onwards, "money creation in reality". And note that this is published by the Bank of England.